The Coca-Cola Co. announced that it has taken a significant step toward its 2020 vision by commencing implementation of a 21st century beverage partnership model in the U.S.
Under the new model, The Coca-Cola Co. and five U.S. bottlers have agreed in principle to take the next step in creating a stronger U.S. business model through the granting of new, expanded territories. The five bottlers are Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Co. United Inc., Swire Coca-Cola USA, Coca-Cola Bottling Co. High Country and Corinth Coca-Cola Bottling Works Inc. As the model continues to evolve, the company anticipates pursuing additional steps with these bottlers in the future.
“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,” said Muhtar Kent, chairman and chief executive officer, The Coca-Cola Co. in a prepared statement. “What began with the acquisition of Coca-Cola Enterprises’ North American operations in October 2010 continues with the steps we are announcing today. 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.”
In the newly granted territories, The Coca-Cola Co. and these bottlers will work collaboratively to implement key elements of this evolving U.S. operating model, including: ore 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, which would 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.”
Depending on the situation, transactions might 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). Financial terms were not disclosed.
These new territories will include some of the largest cities in the geographies that border these bottlers’ existing territories, allowing each bottler to better service local customers and provide more efficient execution.
- 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;
- Corinth Coca-Cola will assume territories in the Jackson and Paris, Tenn., markets to expand its presence in west Tennessee.
The transactions announced are subject to the parties reaching definitive agreements by the end of 2013, with closings expected during 2014. The parties are committed to working together to implement a smooth transition with minimal disruption for customers, consumers and system associates.