Magnum casualty in ‘Cola wars’

Press, 22 June 1989, Page 28

Magnum casualty in ‘Cola wars’

Magnum Corporation has quit the “Cola wars” in New Zealand, selling its franchise for Pepsi-Cola back to its United States brand owner, PepsiCo, Inc. The Auckland-based brewing, liquor, wines, and hotel group has been battling the Coca Cola company of the United States for soft drink market in New Zealand since it took up the Pepsi-Cola franchise almost two years ago. Magnum’s. managing director, Mr Lindsay Fergusson, said yesterday that it was in the best interests of both companies that PepsiCo took complete control of the business in New Zealand. Although PepsiCo and Magnum had successfully worked together . since 1987 to achieve a significant share position for the PepsiCo brands, the margins and profit outlook for Pepsi-Cola Bottlers New Zealand had been beneath Magnum’s objectives because of intense price competition.

The Coca Cola network, holding about 75 per cent of the market principally through the Lion Nathan subsidiary Oasis Industries, had endeavoured to block Pepsi’s growth “at all costs,” Mr Fergusson said.

PepsiCo, based in New York state, said it had acquired from Magnum all the assets of PepsiCola Bottlers New Zealand, including its modern plant at Wiri in South

Auckland, for cash. The company markets a full range of PepsiCo brands: Pepsi-Cola, Diet Pepsi, 7Up, Diet 7UP and Mirinda. It also markets the Canada Dry range and is a significant participant in the private branded soft drinks business. Mr Fergusson said PepsiCo was determined to build a strong presence for its brands and was optimistic about its long term potential in New Zealand. PepsiCo had decided to trade in New Zealand on its own account. “We know that PepsiCo intends to inject further capital to improve the competitiveness of the business .and to expand distribution. They are definitely here to stay,” he said.

The transaction is conditional on approvals from the Overseas Investment Commission and the Commerce Commission. Arrangements have been made for the continued employment of current staff.