Cadbury Schweppes has raised concerns over PepsiCo's proposed acquisition of Quaker Oats.

London, May 31st, 2001 (CommentWire) - Cadbury Schweppes has warned the US Federal Trade Commission that the acquisition could lead to rivals being shut out of retail outlets. However, the FTC is still expected to authorize the acquisition, possibly as early as the end of June 2001. Despite this, the fears over distribution control may have some merit and the FTC may have to become stricter in the future.

PepsiCo's proposed acquisition of Quaker was announced in December. Since then Cadbury Schweppes, the UK's chocolate and soft drinks group, has kept a low profile, but it voiced its concern when required to comment by the FTC.

The FTC, currently in the latter stages of determining its position on the proposal, has also approached other players in the industry for their opinions prior to reaching a conclusion on the deal sometime this summer.

Coca-Cola, which was interested in purchasing Quaker until the move was vetoed by its board, has also been vocal in its concerns.

However, it seems likely that the FTC will not resist the acquisition, a move that will not only expand PepsiCo's position in the market but will enhance its distribution influence, potentially giving it greater power to negotiate exclusive supply contracts.

If approved, PepsiCo will add a number of top brands, including Gatorade, to its product portfolio, which already boasts Tropicana orange juice, SoBe drinks and Frito Lay snacks. Gatorade has an 80 per cent share of the US sports drink market and its addition will allow PepsiCo to gain the foothold in a significant growth market that its own Allsport brand was unable to achieve.

Concerns over monopoly control are often cited by competitors when major acquisitions are announced. However, the relative silence over the Quaker acquisition during the early stages of the proposal suggests the industry is not genuinely trying to halt the deal. However, fears over monopoly control of distribution channels may have some validity. Further consolidation in the sector may well result in the FTC preventing similar moves or imposing tighter restrictions on companies that appear to be growing in monopolistic power in the future.

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