Coke: No Deal with Quaker

A T L A N T A, Nov. 21 -- Coca-Cola’s board of directors late Tuesdaydecided not to buy Quaker Oats Inc, ending its pursuit of thenation's dominant sports beverage, Gatorade.

The board expressed enthusiasm for the “current strategiccourse” under chairman and chief executive Douglas Daft, callingit the best means for enhancing shareholder value.

Industry observers had questioned whether the soft drink giantwould be able to effectively manage Quaker’s lineup of food brands,which include Rice-A-Roni, Cap’n Crunch and Life cereals and AuntJemima pancake products.

‘King of the Mountain’

Earlier this month, Quaker Oats rejected a $14.8 billion offerfrom Pepsi.

Quaker Oats’ Gatorade, with a commanding 83 percent share of thesport-drink market, is a premium brand in one of the few beveragesegments that has grown consistently worldwide.

A third, comparably smaller company, French-based Danone SA,which sells Evian bottled water, was seen as a distant bidderbecause of the price Quaker Oats is seeking — reportedly more than$15 billion.

“Whoever gets it is not just king of the mountain but king ofthe mountain range of sports drinks,” said ING Barings beverageanalyst Manny Goldman. “You almost never see anything this clearcut, where you have Gatorade that would fit beautifully in bothcompanies.”

Trend: Healthier Drinks

Cola sales, which have long constituted Coke’s core business,have been flat in recent years as more health-conscious consumersturn to waters, teas and other non-carbonated drinks.

Despite its North American popularity, Gatorade has had littleintroduction elsewhere. Coke would have brought a potentdistribution network to the brand, analysts said.

“I think Gatorade has very interesting global growthpotential,” said John Sicher, editor of the industry publicationBeverage Digest.

Before the announcement, Coke shares fell $1.19 Tuesday, to$55.375. Quaker Oats shares fell $1.062 to $94.438, while Pepsi wasup $1.50 to $46.50.