Coca-Cola Creates National Product Supply System

ATLANTA -- Coca-Cola Co. said it has formed a new National Product Supply System to build a stronger, more streamlined production system in the U.S. The beverage giant said the mission of its NPSS will be to facilitate optimal operation of the U.S. product supply system for Coca-Cola bottlers in order to achieve the lowest manufactured and delivered cost; enable system investment to build sustainable capability and competitive advantage; and prioritize quality, service and innovation in order to meet customer and consumer requirements.

Three existing independent bottlers -- Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Co. United and Swire Coca-Cola USA -- along with company-owned Coca-Cola Refreshments and Coca-Cola North America will be members of Coca-Cola's National Product Supply Group. The NPSG will administer national product supply activities for these NPSS bottlers, which currently represent approximately 95% of the U.S.-produced volume.

"Our U.S. operating model continues to become stronger, more aligned and more competitive. Today we are taking further action to enable profitable growth for our entire U.S. system," said Coca-Cola chairman and chief executive Muhtar Kent. "We will leverage the strengths and capabilities of the four largest producing bottlers in our U.S. system, CCR, Consolidated, United and Swire to operate as one highly aligned and highly competitive national product supply system."

Under the initial terms of the letters of intent, each NPSS bottler will acquire certain production facilities from CCR within their transitioning distribution territories. Initially, CCR will divest nine production facilities with an estimated net book value of $380 million:

Coke Consolidated will acquire production facilities in Sandston, VA, Baltimore and Silver Spring, MD; Indianapolis and Portland, IN; and Cincinnati, OH. Coke United will acquire the production facility in New Orleans. Swire will acquire production facilities in Phoenix and Denver.

The transition of these facilities from CCR to NPSS bottlers is expected to take place between 2016 and 2018. CCR's territories will continue to be refranchised as previously announced, and decisions on any remaining production facilities in those territories will be considered at that time.

"The National Product Supply System will benefit all of our U.S. bottling partners by driving our production system to manufacture products at the lowest optimal cost," said Sandy Douglas, Coca-Cola North America executive vice-president and Coca-Cola North America president. "Importantly, we believe the NPSS structure allows us to leverage our significant system scale with the unique competitive advantage of being able to act with speed. This will be enabled by the outstanding commercial capabilities of a strong local bottling system."