Coca-Cola and Proctor & Gamble Form Joint Venture To Produce Juices and Snacks.

Coca-Cola and Procter & Gamble (P&G) formed a juice and snacks company that is expected to generate annual sales of about $4 billion. The new joint venture company, as yet unnamed, will bring together about 40 brands including Coca-Cola's Minute Maid and P&G's Pringles and Sunny Delight, an orange flavored drink. It will have 6,000 employees and 15 manufacturing facilities and predicts yearly sales could grow to $5 billion within two years.

Both Coke and P&G have suffered sales slumps in recent months. In February, Coke admitted volumes in the United States and Germany, its two key markets, had been disappointing. It blamed substantial U.S. price increases for the problems as well as poor domestic marketing efforts. P&G is also trying to recover from a turbulent 2000, which saw its chief executive excused and share price collapse amid numerous earnings warnings.

P&G is expected to benefit from Coca-Cola's massive global distribution system of 16 million outlets around the world. In the United States alone, that represents a 10-fold increase for Pringles, from the current 150,000 points of distribution to at least 1.5 million. Coke, which has seen slowing sales of its core, carbonated soft drinks, gains access to P&G's research expertise. The company holds more patents on food and beverage technology than the three largest U.S. food companies combined.

The deal, which may face regulatory hurdles, is a direct challenge to PepsiCo, which dominates the market for juices and salty snacks. Coke's soft drinks' rival owns Tropicana juice and the Frito-Lay brand that outsell both Minute Maid and Pringles.

The competition heated up late last year after Pepsi announced it would acquire Quaker Oats, which owns the sports drink Gatorade, for $14 billion after Coke tried to pursue the transaction. Coke responded by acquiring Planet Java's line of specialty coffees.