Lion flicks unprofitable Pepsi NZ on to Frucor

By Dita De Boni

Lion Nathan has finally offloaded its loss-making Pepsi Cola Bottlers NZ business to juice and energy drink-maker Frucor Beverages.

Lion has been trying to divest itself of Pepsi in both New Zealand and Australia for almost five years and is still looking for a buyer for its barely-profitable Australian operation.

Frucor would not disclose what it had ultimately agreed to pay on Friday night, but Lion's investor relations director Warwick Bryan said there would be a "slight loss on book value" - estimated at $30 million late last year.

Frucor will absorb some Pepsi NZ staff while others will be retained at the current bottling plant in Wiri under contract, but the remainder of the 100 workers were expected to lose their jobs following the sale.

The transferral of the Pepsi franchise, refrigeration units, and some of the Wiri bottling plant from November 5 will still leave Lion to settle with debtors and dispose of most of the bottling line.

As part of the deal, Frucor will also acquire Lion's H2GO mineral water brand.

Lion Nathan has owned 83.54 per cent of Pepsi Bottlers NZ in a joint venture with PepsiCo since 1992, but has not managed to make a profit for nine years. It bought into the Pepsi venture two years after selling the New Zealand Coca-Cola franchise for $240 million.

The joint venture also closely followed a similar deal in 1989 when Lion sunk $A200 million into the Australian Pepsi operation.

Both businesses were expected to break even by the mid-90s, but made their first profit of $300,000 only last year, after losing $11 million for the company in the 1997/98 year.

Mr Bryan said while Lion was very pleased to have sold the franchise, he believed money could be made selling Pepsi to New Zealand consumers despite Coca-Cola's 90 per cent market dominance here.

Frucor chief executive Mark Cowsill said negotiations had been "longer than we had wanted them to be" and he was relieved Frucor could finally start managing the business.

He said the Australian operation, with a book value of $90 million, was unlikely to net Lion more than $45 million and it was possible Lion would have to walk away altogether.

Lion Nathan closed down 8c at 434c.