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UPDATE 4-Jones Soda to sell in Wal-Mart stores; shares soar
* Product to be in nearly all Wal-Mart US stores by May end
* Says deal will expand retail distribution by 10 pct
* Shares surge 84 percent (Adds more comments, updates share movement)
By Abhishek Takle
BANGALORE, May 27 (Reuters) - Struggling US soft drinks maker Jones Soda Co JSDA.O said it would sell some of its more popular drinks at Wal-Mart Stores Inc's (WMT.N) outlets, sending its shares surging 84 percent Thursday morning.
The deal will see Jones Soda expand its retail distribution by 10 percent as its Green Apple, Berry Lemonade and Cream Soda drinks are sold in nearly all of the 3,800 United States-based stores run by the world's largest retailer.
The Wal-Mart deal comes at a time when the company has put itself on the block and has been struggling with slackening sales in a market dominated by giants like Coca Cola Co (KO.N), PepsiCo Inc (PEP.N) and Dr Pepper Snapple Group Inc (DPS.N). "It's hard for a small beverage company to get very wide and pervasive distribution. In the beverage business, distribution and display are very important, so this would be a big help for Jones," John Sicher, publisher of industry publication Beverage Digest, told Reuters.
Wal-Mart has given Jones three shelf facings for six-packs that will include each of the three flavors and plans to have the products rolled out to its stores by the end of this month, Jones Soda said
Jones Soda, known for its unusual flavors like Bubblegum and Mashed Potato, has struggled with falling sales and has not posted a profit since the quarter ended June 2007.
Sicher said it was too early to tell how much the company's sales, which slumped 45 percent in the first quarter, would benefit from the Wal-Mart deal.
A BETTER DEAL?
After hawking itself for almost a year, Jones got a buyout offer from Reed's Inc REED.O in March at a deep discount of 56 percent. Jones, however, ended its provision for exclusivity with Reed's later in the month, saying it was exploring an unsolicited bid from a third party.
In such a case, the Wal-Mart deal works well for the company, Areeb Pirani, risk analyst with IBISWorld said, adding that this will help the company's visibility in the market, and might even improve its volumes.
That definitely puts Jones in a better position to seek a higher bid, Pirani said.
While the deal might will help Jones get more visibility in a crowded US soft-drinks market, Consumer Edge Research analyst Bill Pecoriello said he didn't think the news would make Jones a more attractive take-over target.
"Distribution deals come and go. I don't think someone's going to make a merger decision based on a distribution deal," Pecoriello said.
Shares of the company -- which have plunged from a high of $32 in 2007 -- closed up 62 percent at $1.10 Thursday on Nasdaq, off an intra-day high of $1.25. (Additional reporting by Nivedita Bhattacharjee in Bangalore and Martinne Geller in New York; Editing by Aradhana Aravindan, Unnikrishnan Nair)
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