ABC Beverage Corp., f.k.a. Beverage America, Inc. - Page 3

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          two-tiered in the sense that there were independent concentrate             
          makers and independent bottling facilities, each usually owned              
          separately yet dependent upon one another.                                  
          Economic Landscape                                                          
               The bottling industry began to realign fundamentally around            
          1986 as Coke and Pepsi vertically integrated their bottling                 
          businesses by buying their bottling facilities.  Coke and Pepsi             
          could then produce, bottle, and distribute their own beverages              
          without independent bottlers.                                               
               This marked an important departure from the bottling                   
          business of the past when bottling facilities could contract with           
          Coke or Pepsi to exclusively bottle and distribute their drinks             
          in a given geographic region.  Independent bottling companies               
          lost that resource after Coke and Pepsi vertically integrated and           
          pressured the independent bottling companies to sell their                  
          franchise rights to Coke or Pepsi.                                          
               In addition, 1986 was the heyday of the leveraged buyout               
          (LBO) era, in which investors were scouring the country for high            
          cashflow industries.  The bottling industry with its fairly high            
          cashflow business was an attractive industry for an LBO.                    
               One LBO opportunity in the bottling industry arose when                
          Philip Morris, Inc. chose to exit the soft drink bottling                   
          business.  The managers of this bottling business (the management           

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Last modified: May 25, 2011