New drinks, acquisitions to drive beverage industry

By Martinne Geller

NEW YORK (Reuters) - U.S. beverage industry executives said on Monday that new drinks and acquisitions would be among the growth drivers in 2008, as they faced higher commodity costs, a shrinking number of retailer outlets and more demanding consumers.

Speaking at a conference sponsored by industry newsletter Beverage Digest, PepsiCo Inc (PEP.N), said it plans to launch Tava, a new soft drink during the first half of 2008. The calorie- and caffeine-free carbonated drink is to contain vitamins and minerals, according to an earlier announcement.

Pepsi, like rival Coca-Cola Co (KO.N), has seen its U.S. sales volume of traditional soft drinks decline as health-conscious consumers opt for bottled waters and teas.

Tava, like Coke's recent introduction of Coke Zero, is an attempt to revitalize carbonated soft drink sales.

"We've been investing in innovation, and I think you'll see some of that coming down the pipeline," Coca-Cola Chief Executive Neville Isdell said. He added that the company would continue to make "bolt-on acquisitions."

Isdell said another purchase like this year's $4.1 billion acquisition of vitaminwater maker Glaceau, would be unlikely from a regulatory standpoint, given the company's large market share.

Industry watchers expect Coke to expand its bottled tea offerings, since it recently revised a joint venture it has with Nestle (NESN.VX), to allow both companies more freedom to develop their own products. Isdell told Reuters earlier this year, Coke was evaluating whether to bid for Snapple, the iced tea owned by Cadbury Schweppes PLC (CBRY.L).

Coke currently owns the Fuze and Gold Peak tea brands, and sells other tea drinks under the Nestea and Enviga brands.

While the joint venture's revision was meant to allow for more development in teas, Kim Jeffery, chief executive of Nestle Waters North America, said that since the joint venture's fate had been in limbo for a significant period of time last year, Nestle's plans were slowed.

"As a result of that we found some things we think are more interesting for us," Jeffery said. "It's unlikely that tea is the first thing we're going to do. You'll see some stuff from us in 2009, not in 2008. They're not going to be me-too type of products.

"We would like to make an acquisition," Jeffery added. "It's a question of finding the right thing that is scalable for us. I don't see anything large out there frankly, that I want to own today."

(Reporting by Martinne Geller, editing by Leslie Gevirtz)