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A New Face in the Cola Wars?

July 2, 1986

ATLANTA (AP) _ Government intervention against acquisitions by The Coca-Cola Co. and Pepsico Inc. may open the soft drink battlefield for a third major warrior through a merger of Dr Pepper Co., Royal Crown Co. and Seven-Up, according to industry analysts.

″I look for RC, as probably being the most aggressive of the three, as being the prime mover, and I think RC has probably had discussions with the others about a merger,″ said David Goldman, an analyst for Dean Witter Reynolds Inc. in New York on Wednesday.

Royal Crown will not comment on possible mergers because of its lawsuit in federal court in Columbus, Ga., against the proposed Coca Cola-Dr Pepper merger, said Ethel Smason of Smason Public Relations, a Chicago firm which represents Royal Crown.

Jim Ball, a Dr Pepper spokesman in Dallas, also declined comment. A call to a Seven-Up spokesman in St. Louis was not returned Wednesday.

Atlanta-based Coke has a court date July 16 to fight a Federal Trade Commission ruling that the Dr Pepper deal would hurt competition in the industry. After a similar FTC decision, Philip Morris Cos. Inc. called off its plans to sell Seven-Up to Pepsico.

Coca-Cola spokesman Randy Donaldson declined comment on any other mergers, saying, ″We’re still proceeding with our plans...in an effort to acquire Dr Pepper.″

″Coke is playing a lottery,″ Goldman said. ″There’s very little chance they will win and get Dr Pepper, but there’s very little cost involved.″

Meanwhile, potential buyers are lining up for Dr Pepper as well as Royal Crown and Seven-Up, according to Beverage Digest, an industry newsletter edited by longtime soft drink observer Jesse Meyers.

The newsletter’s Wednesday edition said there is a ″distinct possibility″ that the three smaller companies could be combined into a ″third industry flagship.″

The newsletter said breweries, liquor companies and bottling groups are believed to be interested in acquiring all three companies, but Goldman said it is more likely the companies will merge without an outside bidder.

″It’s being talked about a lot,″ Goldman said. ″Many view it as the only way that some of these second sisters can survive.″

The smaller companies do not have ″critical mass″ in markets or bottling capacity, he said.

According to Beverage Digest’s latest estimates, the market shares of the companies total 17.5 percent - 6.7 percent for SevenUp, 6.5 percent for Dr Pepper and 4.3 percent for Royal Crown.

Coca-Cola had a 39 percent share, with Pepsi at 29 percent, the newsletter said.

Small companies such as Shasta, with a 1 percent share, also could join in a Royal Crown-Dr Pepper-Seven-Up combination, Goldman said.

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