Coca-Cola Implements New Partnership Model
Coca-Cola and five U.S. bottlers agreed to create a stronger business model through the granting of new, expanded territories. Participating bottlers are Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Company United Inc., Swire Coca-Cola USA, Coca-Cola Bottling Company High Country and Corinth Coca-Cola Bottling Works Inc.
"A strong franchise system has always been the competitive advantage of the Coca-Cola business globally, and today we are accelerating the transformation of our U.S. system in ways that will establish a clear path to achieve our 2020 Vision," stated Muhtar Kent, chairman and CEO of The Coca-Cola Co.
Coca-Cola anticipates pursuing additional steps with these bottlers in the future as the model evolves, according to a company announcement.
"What began with the acquisition of Coca-Cola Enterprises' North American operations in October 2010 continues with the steps we are announcing today," continued Kent. "These actions are being taken ahead of our previously stated timeline. The result will be further progress toward a more agile, modern, customer-focused franchise business partnership model unique to the United States."
Coca-Cola stated that in newly granted territories, the company and the five bottlers will collaborate to implement key elements of the new model, including:
- More rational and contiguous operating territories;
- A grant of exclusive territory rights and the sale by Coca-Cola Refreshments of distribution assets and cold drink equipment;
- A finished goods model under which production assets will remain with Coca-Cola Refreshments to facilitate future implementation of a national product supply system;
- An improved, more integrated information technology platform; and
- A new beverage agreement that supports the evolving operating model.
"We believe that unique competitive advantage lies in a U.S. system that can act with the speed of an integrated, lower cost national business enabled by deep local knowledge, community connections and the outstanding commercial capabilities of a strong local bottling system," said Steve Cahillane, president, Coca-Cola Americas. "This new architecture that we are beginning to implement ensures a meaningful role for current and future aligned bottling partners in the U.S."
Transactions may include an outright territory sale, a territory swap or a sub-bottling arrangement, under which the bottler would make ongoing payments in exchange for exclusive territory operating rights. The company did not disclose any financial terms.
The new territories will include some of the largest cities in areas that border the bottlers' existing territories in order to allow them to better service local customers and provide more efficient execution, the company said.
Of the new territories:
- Coca-Cola Consolidated will assume territories in Tennessee, including the Knoxville market; and Kentucky, including the Louisville and Lexington markets;
- Coca-Cola United will assume territories in Alabama including the Montgomery market; and portions of northwest Florida, north and west Georgia and southeast Tennessee;
- Swire Coca-Cola will assume territories in the Denver and Colorado Springs, Colo., markets;
- Coca-Cola High Country will assume territories in the Sheridan, Wyo., and Billings, Mont., markets; and
- Corinth Coca-Cola will assume territories in the Jackson and Paris, Tenn., markets to expand its presence in west Tennessee.
The transactions are subject to the parties reaching definitive agreements by the end of 2013. Closings are expected to take place by 2014.