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Coca-Cola HBC seeks water acquisitions in Russia

Coca-Cola Hellenic Bottling Co., the world's second-largest bottler of Coke beverages, aims to buy Russian and Ukrainian water companies to capitalize on consumers' changing tastes.

The company also wants to acquire juice makers in Ukraine, Italy and central European countries such as Poland and Hungary, CEO Doros Constantinou said today in an interview. In addition, Athens-based Coca-Cola HBC could fill a hole in its product range with a Czech water company, he said. „We are actively seeking acquisitions in certain countries to plug in gaps in our portfolio,” the CEO told journalists in Crete today as he spoke at the opening of a new production plant. The beverage maker is seeking more purchases in former Soviet countries so it can tap growth that's stronger than in western Europe and become less dependent on sodas. Coca-Cola HBC bought six water and juice companies in the last two years including Russian juice maker Multon, acquired in 2005 with Coca-Cola Co., to expand in countries including Bulgaria. „As Russian consumers are becoming more sophisticated and the market evolves, we are looking at source water companies there,” said George Toulantas, a spokesman for the Greek company. „Consumers in Russia are adopting more Western consumption patterns and are hungry for more types and variety of products.”

Pressure on prices of commodities such as aluminum will continue to weigh on earnings in 2007 and will be „similar” to last year, Constantinou said. The company may give more information on the effect of commodity prices on its business when it releases annual results on February 14. Coca-Cola HBC, which operates in 28 countries, made five of its six 2005 and 2006 acquisitions with Atlanta-based Coca-Cola, the world's biggest soft-drink company and owner of a 24% stake in the Greek bottler. Coca-Cola HBC spent €12.5 million ($16 million) on the new plant, which is slated to become a distribution center for many of the Greek islands. It's one of four sites scheduled to open by June as part of a plan to lower expenses. The bottler opened a Nigerian plant in December and aims to add new production lines in Bulgaria by March and a new plant in Belfast in Northern Ireland in June. „The investment in Crete is part of a wider cost-cutting effort,” Constantinou said. „We are shifting production, moving it around and benefiting from cost efficiencies.”

The company's shares slipped 10 cents, or 0.3%, to €31.90 at 1:58 p.m. in Athens. They advanced 19% in 2006, the fourth climb in a row, and have more than doubled since the end of 2002. Coca-Cola HBC spent about €50 million in 2006 to pare the number of plants it runs and build larger facilities with broader geographic distribution to save on operational and staff costs. The bottler took about €65 million in charges in the prior year for similar steps in countries including Austria. The company reduced its Greek workforce by 6% in March with the closing of a factory and three warehouses in the country. In July, Coca-Cola HBC said it would shut two plants in Nigeria and cut its local staffing by 1,350. Some of the new plants are intended as distribution points for other countries to take advantage of abolition of cross-border taxes in countries that have recently joined the European Union such as Bulgaria and Romania, Toulantas said. That lets the company operate fewer plants at lower cost. Money spent to close older factories and open new ones would be recouped in two to 3 1/2 years, CFO Nik Jhangiani said in August. (Bloomberg)