This is really it for Coca-Cola Amatil, says former boss Terry Davis

Terry Davis, who ran the Australian business for 12 years, expects Coca-Cola’s Australian empire would do well by becoming part of the larger global company.

Coca-Cola Amatil managing director Terry Davis pictured at the company offices in North Sydney.

Former Coca-Cola Amatil chief executive Terry Davis has expressed his disappointment that the $9.8bn sale of the company will see yet another local food company lose its Australian ownership with the sale of the ASX-listed company to its European associate.

But in an interview with The Australian, Davis, who ran the Australian business for 12 years to 2014, said he expected that Coca-Cola’s Australian business would do well by becoming part of the larger global company which takes in Coca-Cola distributors in Britain and Europe.

Coca-Cola Amatil shareholders are expected to vote in favour of a scheme of arrangement on Friday morning that will see the Sydney based drinks conglomerate taken over by London-based Coca-Cola European Partners, with a sweetened offer of $13.50 a share.

The move will bring to an end local ownership of a nearly 120-year-ld company that started out as a tobacco distributor. Its move into soft drinks was relatively recent with the acquisition of the Perth-based Coca-Cola bottling business. Over time it consolidated all the Australian bottlers. Coca-Cola Amatil still ranks as one of Australia’s more international manufacturers with operations in New Zealand, Indonesia and Papua New Guinea. At one point Coca-Cola Amatil controlled a string of Eastern European coke bottlers, but this was spun off in 1998 as part of an asset swap which saw the Australian business inherit the South Korean bottler. (This business was sold a decade later.)

Coca Cola Amatil Ceo Alison Watkins at the Coca Cola factory in Northmead, Sydney.

“I’m sad to see the company being sold and going out of Australian ownership,” Mr Davis said from Byron Bay, where he is now based.

“But I am excited that it is going to new owners who know the business and will be very committed to it.

“They know the business well and will bring their own intellectual property to it.”

Mr Davis said Coca-Cola European Partners chief executive Irishman Damian Gammell — a career Coca-Cola Europe executive who worked under Mr Davis in Australia in 2004 and 2005, before moving back to Europe to run its German operations — was “smart and capable”.

“He knows his stuff and works very hard,” Mr Davis said.

“CCA under his leadership will grow stronger with the potential introduction of European Coca-Cola products and consumer ­programs,” he said. The Australia-based company manufactures and distributes soft drinks, water, sports and energy drinks, fruit juice, flavoured milk and coffee with brands including Coca-Cola, diet Coke, Coke Zero, Fanta, Sprite, Powerade, Mount Franklin, Glaceau and Pump.

Mr Davis was chief executive from 2001 to 2014, overseeing a strategy of expanding the company into Australian food company SPC Ardmona and the alcoholic beverage market — buying John Singleton’s Blue­tongue brewery on the NSW Central Coast — and doing distribution deals with global drinks companies.

Mr Davis said the Australian business pioneered a number of new products, including Coke Zero, which were later adopted by the global company.

“We were very market-driven, with the launch of Cola Zero and Vanilla Coke and a range of other successful products,” he said.

But his ambitious deal to expand into the fruit business, with a $700m purchase of Ardmona in 2005, proved to be a major challenge for the company given the high cost base of Australian manufacturing and fierce competition from cheaper overseas products.

Mr Davis’ successor, Alison Watkins, sold the business to private investors for $40m in 2019.

Mr Davis said the company had expanded into SPC Ardmona as a way of getting into the local fruit business and to create a local fruit juice brand, given the increasing focus on health consciousness by consumers.

Terry Davis formerly of Coca-Cola Amatil. Picture: Adam Knott

But he said it was a fact that cheaper goods from overseas, including Italian tomatoes and overseas fruit juices, were often preferred by Australian customers given the price differential.

“Australia has a much higher cost base and customers were not prepared to pay the premium for Australian products,” he said.

Coca-Cola Amatil shareholders are expected to make a historic vote on Friday, accepting the offer by the London-based company.

The deal is the latest in a series of sales of Australian food companies to offshore investors.

But observers say that the deal could end years of differing interests between the Sydney-based company — which was looking at ways to diversify beyond the basic Coke products and move into other locally based food companies — and Coke headquarters in Atlanta, whose major goal was to push more Coke products.

The move comes at a time when the global market for soft drinks is also softening, as consumers look for healthier drinking options.

Australian Shareholders’ Association monitor on the company, Roger Ashley, said the company’s Australian shareholders did not have much alternative but to vote in favour of the bid, given its strong support by the US arm, which owns just over 30 per cent of the company.

“There is probably no option considering the holding of Coca-Cola in the US and the fact that it is supporting the offer,” he said.

“Coca-Cola holds all the cards.”

He said Coca-Cola’s Australian business had struggled for performance given the global concern about soft drinks and obesity and competition from other drinks brands.

“They have not performed very well in recent years,” he said.

“Alison Watkins has done pretty well in the circumstances, but they haven’t had a stellar performance.”