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Coca-Cola Buys Planet Java Maker

January 12, 2001

ATLANTA (AP) _ Coca-Cola Co. entered the battle of the bottled coffees Friday, buying the maker of Planet Java coffee with plans to expand it nationwide.

Planet Java, which is currently distributed only in New York and New Jersey, is made by privately held P.J. Bean Co., founded in 1996 by Larry Trachtenbroit in Long Island, N.Y.

The purchase gives Coke its first U.S. coffee brand and pits it against Frappuccino, a venture between Pepsi-Cola Co. and Starbucks Corp., which currently faces no significant competition in the category.

``Planet Java is a great way for us to get into the market,″ said Susan McDermott, a spokeswoman for Coca-Cola North America. ``It’s got a distinctive brand personality and it’s performing well in areas where it’s available.″

Planet Java also sells roasted coffees and supplies coffee to about 450 Subway restaurants, but Coke is expected to sell or license that business.

Terms of the transaction were not disclosed, but a source familiar with the deal said the purchase price was less than $10 million.

``Coca-Cola offered us the opportunity to take Planet Java to the next level while maintaining the entrepreneurial spirit in which it was created,″ Trachtenbroit said.

Planet Java sells for $1.29 to $1.39 in 9.5-ounce bottles and has been distributed since August by Coke’s largest bottler, Coca-Cola Enterprises Inc. It comes in three brands: Tremble, with added caffeine; Javachino; and Milky Wave, which combines coffee, chocolate and caramel flavors.

ING Barings analyst Manny Goldman said the acquisition gives Coke a coffee with proven ``product acceptance,″ allowing it to skip the development and focus group costs associated with developing a new brand. Coke already sells a bottled coffee in Japan.

The deal also gives CCE a coffee product after seeing Frappuccino gobble up market share unimpeded, Goldman said.

``Coca-Cola Enterprises couldn’t sit around and wait for a coffee product when they saw Pepsi selling it,″ he said. ``Coke was surprisingly slow in the noncarbonated area.″

Pepsi sold about 13.6 million cases of coffee last year and sales are growing about 15 percent annually, said John Sicher, editor and publisher of Beverage Digest. Planet Java sold about 100,000 cases.

``Pepsi has done a very good job with Frappuccino and it’s becoming an important product in a number of markets,″ Sicher said. ``So this deal makes absolute sense for Coke.″

The purchase follows Coke’s failed bids last year for Quaker Oats Co. and its powerhouse Gatorade brand and for South Beach Beverage Co., which makes the SoBe line of herbal and nutrient-enhanced drinks.

Shares of Coca-Cola were down 37.5 cents to $57, while shares of CCE were up 37.5 cents to $17, both on the New York Stock Exchange.


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