Prepared Foods July 25, 2005 enewsletter

Coca-Cola's biggest bottler is getting into milk. Coca-Cola Enterprises (CCE) announced plans to spend $38 million to acquire a majority stake in Bravo Foods International, which makes flavored milk drinks called Slammers.

Both Coke and CCE are eager to expand into new niches, as consumption of carbonated soft drinks declines. The Coke system so far has had little success in dairy in the United States. Coke has previously launched flavored milk-based beverages Choglit and Swerve -- neither of which made much of a splash.

Bravo's hook is to strike licensing deals with well-known brands. Its Slammers drinks feature Marvel Comics superheroes like Spider-Man, as well as skateboarding stars and other well-known food brands such as Moon Pie and Starburst.

The flavored milk niche is small but growing. Flavored milk sales grew 10.2% in 2004, even as the overall milk category slipped 1.2%, according to the Department of Agriculture. The flavored milk category includes regular milk that has to be refrigerated, as well as products like Slammers that are milk-based but do not have to refrigerated.

CCE disclosed that it intends to acquire a stake in Bravo of just more than 50%. CCE also is negotiating with Bravo's management team for master distribution rights for the company's products.

The deal is unique because the bottler itself, not big brother Coca-Cola, is poised to be the buyer of a brand. The normal pattern is for Coke to do the buying, or for CCE and Coke to combine on a deal. Coke could potentially still end up involved before the deal closes.

Coke spokesman Dan Schafer declined to say whether Coke could eventually be involved, but noted the company still finds the milk category appealing.

"As a system, we have long expressed interest in the milk category," he said.

John Downs, senior vice president for public affairs and communications at CCE, said the company did the deal on its own partly to make it happen more quickly. "We were presented with this, and we wanted to move quickly, and right now, it is more of a distribution opportunity than a brand opportunity," he said.

In other Bravo-related news, under a written agreement with Bravo!, Tabatchnick will distribute Bravo!'s Slammers through a co- packaging agreement with Farmland Dairy of New Jersey.

Bravo! CEO Roy Warren said, "We are excited to introduce this latest formulation of Slammers nationwide. While we have been developing ways to sell our quality Slammers to schools for some time through a-la-carte and vending, a relationship with Tabatchnick allows Bravo! to introduce our high-quality milk drinks to hot lunch programs nationwide using an established vendor with the USDA, state commodity food programs and the School Nutrition Association in an immediate and cost-effective way."

This version of Bravo!'s Slammers 100% milk drinks will be packaged in an 8oz. Tetra Pak shelf-stable box and meets USDA nutritional guidelines for school systems nationwide.

Bravo!'s most popular Slammers 100% milk drinks will be available for government school hot lunch programs in seven different formulations and five flavors, including lactose-free and lowfat white milk lines. Slammers for schools are low fat, reduced sugar, and vitamin fortified and come in chocolate, strawberry, vanilla, orange creme and banana as well as white milk.

Ben Tabatchnick, president of Tabatchnick Fine Foods, said, "Our goal has always been to provide healthy, nutritious food to school hot lunch programs nationwide that are branded, packaged, and formulated in ways that encourage kids to eat and drink nourishing foods."

Tabatchnick continued, "Bravo!'s unique Slammers exceed our expectations, providing a nutritious alternative to traditional dairy products that have limited shelf-life and require extended refrigeration. We look forward to the successful introduction of Bravo!'s Slammers at the School Nutrition Association's annual conference."

Last season, Tabatchnick Fine Foods sold 200 truck loads, or 14 million units of its previous milk brand. The company has already pre-sold three million units of the specially packaged Slammer -- or about 43 truck loads.