CCA expecting no redundancies, dismisses claims Atlanta exerting too much influence
Coca-Cola Amatil (CCA) Chief Executive, Terry Davis, has refuted claims that their major shareholder is exerting too much pressure in the wake of the failed Lion Nathan bid and advised that they are yet to see signs of an Australian recession.
The Coke bottler in Australia and Australia’s largest soft drink producer recently saw a bid from Lion Nathan fail due to a lack of support from their Board and a failure of Lion Nathan to come to terms with Atlanta-based TCCC (The Coca-Cola Company) – which has a 30% stake in CCA. TCCC terminated discussions last week, prompting suggestions that CCA had failed to give their non-TCCC shareholders an opportunity to gain a premium on their shares. “I wouldn’t look at it that way,” Mr Davis told ABC’s Inside Business program. “At the very outset the pricing was unacceptable to the CCA Board and to TCCC. And there is no doubt that what TCCC said was that if Kirin wanted them to revisit the proposal then there would be a series of other conditions that they would seek.”
“Not all of those were price related but they were certainly about ongoing relations… and I think that’s fair enough.”
Mr Davis said there was “too much conditionality” with the proposal. “A lot of it was underdone,” he claimed. “The ACCC issues and NZCC (New Zealand Commerce Commission) were just some of those… The proposal put to us by Lion Nathan was just not capable of being accepted.”
The CCA boss was disappointed with the accusation that TCCC controls CCA. “I don’t think that’s right,” he said. “In fact, we’d certainly take some offence at that to even suggest it. We’ve got a very independent Board and I’m the first CEO that came from outside of the Coke system.”
He was also keen to point out that Amatil couldn’t say they had been hard done by with regard to their relationship with TCCC based on the results they’ve achieved since he took the role of CEO in 2001. “The fact is that they’ve got better at what they do. (And) we’ve got better at what we do,” he suggested. “There is no other beverage company (in Australia) that has even come close to (12% EPS growth on average for the past seven years). And we’d be one of the best performing beverage companies in the world.”
Mr Davis spoke of a “healthy tension” in the ongoing relationship with TCCC – who supply them with the concentrate to produce many of their beverages. “We can’t control what they do as a shareholder, this is a shareholder matter not an operational matter. At an operational level we have a very strong relationship. They’ve been very supportive pre and post this bid,” Mr Davis explained.
“We have a healthy tension. We’d like them to spend more on marketing, they’d like us to be more aggressive on sales. I think that’s fantastic.”
CCA was not planning any major acquisitions, preferring to focus on organic growth as Japanese companies like Kirin and Suntory pay P/E multiples of up to 15 for Australian and New Zealand beverage businesses.
Mr Davis added that the company was still not picking up on any major signs of a downturn. “I keep waiting for it,” he told Inside Business. “(But) we just haven’t seen it yet. We’re seeing a little bit in upmarket restaurants… but in quick service restaurants we’re selling a lot more; in food stores we’re selling a lot more.”
Aside from a “manufacturing revision” at SPC last year, CCA had yet to make any workers redundant and planned to keep it that way. “We’ve actually said to our staff this year we don’t want to have one redundancy,” Mr Davis advised. “We’re going to try pretty hard for that.”