The Coca-Cola Company
Announces Plans to Significantly Accelerate Bottler Refranchising
By: The Coca-Cola
Company | Feb 9, 2016
•
All Remaining North American Territories Will Be
Refranchised By End of 2017, Three Years Earlier Than Previously Expected
Plans Include the Sale of 39 Remaining North America
Cold-Fill Production Facilities; Latest Agreements Include Letters of
Intent for Territories in Five States
Company Announces Non-Binding Letter of Intent to
Refranchise Company-Owned Bottling Operations in China
ATLANTA, Feb. 9, 2016 – The
Coca-Cola Company today announced that it is accelerating the pace and scale of
its bottler refranchising efforts with plans to refranchise 100% of
Company-owned North America bottling territories by the end of 2017, including
all cold-fill production facilities. The Company has also entered into a
non-binding letter of intent to refranchise Company-owned bottling operations
in China to existing partners China Foods Limited, part of COFCO Limited, and
Swire Beverage Holdings Limited, building on other recent global refranchising
initiatives in Europe and Africa.
The Company’s progress and success in transitioning
bottling territories to date has provided the confidence to increase the pace
of transition.
“We have made significant progress on our North American
refranchising initiatives,” said Muhtar Kent, Chairman and CEO, The Coca-Cola
Company. “We continue to negotiate additional agreements and we are in constant
discussion with potential partners who are excited about investing in the
future of the Coca-Cola system in our flagship market as well as in other markets
around the world.”
Added Kent: “The acceleration of our global
refranchising marks a step change in our efforts to refocus The Coca-Cola
Company on its core business of building strong, valuable brands and leading a
system of strong bottling partners.”
The franchise system is a cornerstone of the Company’s
21st Century Beverage Partnership Model in North America, a broad initiative
aimed at building on system capabilities to sustain success. The first letters
of intent in the refranchising process were announced in 2013.
“This has been an important, strategic process that
positions the Coca-Cola system in its flagship market for a great future,” said
J. Alexander “Sandy” Douglas Jr., President,
Coca-Cola North America. “The North American market
presents an opportunity to blend the strengths of a locally focused franchise
bottling system with national production efficiencies and large customer
account management.”
So far, the Company has reached definitive agreements or
signed letters of intent to refranchise territories that account for more than
40% of bottler-delivered distribution volume in the United States. The
Company’s Coca-Cola Refreshments unit continues to operate Company-owned
territories in North America and will work to ensure a smooth transition to
aligned, new and existing bottling partners going forward.
As part of this accelerated refranchising effort, the
Company now plans to sell the remainder of its Company-owned cold-fill
production facilities by the end of 2017. These facilities produce sparkling
beverages, such as Coca-Cola trademark brands and Sprite, along with still
brands such as Dasani. The Company expects to maintain ownership of its
hot-fill facilities, which produce brands such as Powerade and Minute Maid
juices. Company-owned hot-fill operations will supply the entire North America
Coca-Cola system.
Today, the Company announced several deals that
represent additional progress in the overall North America refranchising
process.
New letters of intent provide that:
•
Coca-Cola Bottling Co. Consolidated,
based in Charlotte, N.C., will assume additional territory in portions of Ohio
and West Virginia, along with a production facility in Twinsburg, Ohio.
•
Coca-Cola Bottling Company of
Roseburg, based in Roseburg, Ore., will assume territory in the
Pacific Northwest, primarily in southern Oregon and a small portion of northern
California.
•
ABARTA, Inc., based in Pittsburgh,
will assume territory in Pennsylvania.
The letters of intent announced today are subject to the
parties reaching definitive agreements. Financial terms are not being
disclosed.
The Company has also closed its previously announced
Definitive Agreement with Coca-Cola Bottling Co. Consolidated and
successfully transitioned additional territory in Maryland and Virginia, along
with a production facility in Sandston, Va.
International Refranchising
Today,
the Company is also announcing that it has entered into a non-binding letter of
intent to refranchise Company-owned bottling operations in China to existing
partners China Foods Limited, part of COFCO Limited, and Swire
Beverage Holdings Limited.
Coca-Cola’s third-largest market by volume, China
represents a significant long-term growth opportunity for The Coca-Cola Company
and its bottling system. The system recently opened its 45th local plant and is
currently investing $4 billion in China for future growth, building on $9
billion of investments made in the market since 1979.
Elsewhere, the Company is also focused on refranchising
in markets such as Europe and Africa. This includes the planned creation of
Coca-Cola European Partners in Western Europe and Coca-Cola Beverages Africa in
Southern and Eastern Africa.
History of North America Refranchising
North
America is Coca-Cola’s oldest and largest market in the world. Historically,
the Coca-Cola system in the United States and Canada was comprised of a significant
number of small, local bottlers. Through decades of consolidation, the system
evolved to be comprised of a much smaller number of bottlers. By the early
2000s, the majority of North American bottling territories were owned by
Coca-Cola Enterprises.
A decade ago, The Coca-Cola Company began working with
its bottling partners on plans to develop a model that would evolve the way the
system serves a changing customer and consumer landscape, with a focus on
creating stronger system alignment. A critical step was the Company’s
acquisition of the North American territories of Coca-Cola Enterprises in 2010.
In the five years since the deal was closed, The
Coca-Cola Company has accelerated the implementation of the new model by
strategically addressing the franchise system, customer service, product supply
and a common information technology platform.
Ultimately, the Coca-Cola system in North America will
be comprised of economically aligned bottling partners that have the capability
to serve major customers, coupled with the ability to maintain strong, local
ties across diverse markets in the United States and Canada.
The system also includes a new structure for production
of finished beverages, with cold-fill production being owned by select,
regional producing bottlers and hot-fill and syrup production remaining under
ownership of Coca-Cola North America. The National Product Supply Group, or
NPSG, which has a board comprised of representatives from Coca-Cola North
America, Coca-Cola Refreshments, Coca-Cola Bottling Co. Consolidated, Coca-Cola
Bottling Company UNITED and Swire Coca-Cola USA, will administer key activities
for NPSG-member bottlers. The board currently represents approximately 95% of
U.S.-produced volume.
