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Coke plays down Woolies' water blow

Morningstar with AAP  |  25 Jul 2017Text size  Decrease  Increase  |  

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MELBOURNE [Morningstar with AAP] - Shares in battling bottler Cola-Cola Amatil (ASX: CCL) have taken a further dive following news Woolworths (ASX: WOW) will pull all but two of the beverage giant's Mount Franklin water products from shelves.

Woolies will only stock the two most popular Mount Franklin products--20 and six-bottle still water packs--from August, and single bottles will still be available at the front of stores.

Investors reacted to the news, with Coca-Cola Amatil shares down 4.4 per cent to $8.19 by 1353 AEST on Tuesday--taking the stock to a new 12-month low.

A Coca-Cola Amatil spokesman said Woolworths was not targeting the beverage giant but simply reducing availability of multiple brands across several manufacturers, while expanding Woolies' own private label water range.

He noted the Coca-Cola Amatil's most popular grocery water products will remain on Woolworths' shelves.

"This decision will have minimal effect on Coca-Cola Amatil," the spokesman said.

"Our water strategy isn't about just one brand, it is about a full portfolio including Mount Franklin, Pump, Neverfail and others with a strong focus on immediate consumption channels.

"Grocery water sales are important to us but are only one part of the strategy."

It is understood bottled water sales are around 20 per cent stronger than at the same time last year.

A Woolworths spokesman said the move was designed to meet customers' growing thirst for a variety of water options.

"Our customers are purchasing a wide variety of water options--both branded and non-branded--and as the category continues to increase in popularity we will respond to meet our customers' demands in the space," he said.

The Mount Franklin announcement is the latest in a string of bad news for Coca-Cola Amatil, with Woolworths earlier this month confirming it won't stock the new Coca-Cola No Sugar and pizza giant Domino's awarding a supply contract to Coke's bitter rival, Pepsi.

Morningstar director of equity research Adam Fleck played down the actual economic damage the announcements made in early July would have on Coke Amatil.

He pointed out that Woolworths is the only major retailer that has opted to not stock No Sugar, and that Domino's sells less than a million total cases of beverages annually, versus Coke's total volume of nearly 320 million cases sold in Australia in fiscal 2016.

"That said, we think these incidents highlight our view Amatil is facing diminishing brand intangible assets in its core Australian business, particularly within carbonated soft drinks," he said in a note.


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