Coca-Cola Quickens Pace Of Bottler Refranchising In North America Unveils Similar Initiatives In China And Other Countries

ATLANTA -- The Coca-Cola Co. has announced a speedup in the pace and scope of its bottler refranchising program. Plans now call for refranchising all company-owned North America bottling territories and all cold-fill production facilities by the end of next year.

Coke also has entered into a nonbinding letter of intent to refranchise its company-owned bottling operations in China to existing partners China Foods Ltd., part of COFCO Ltd., and Swire Beverage Holdings Ltd. This move builds on refranchising initiatives in Europe and Africa.

"The acceleration of our global refranchising marks a step change in our efforts to refocus the Coca-Cola Co. on its core business of building strong, valuable brands and leading a system of strong bottling partners," according to Coca-Cola chairman and chief executive Muhtar Kent.

The franchise system is a cornerstone of Coke's 21st Century Beverage Partnership Model in North America. The first letters of intent in the refranchising process were announced in 2013.

"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," said Coca-Cola North America president J. Alexander (Sandy) Douglas Jr.

To date, Coke has reached definitive agreements or signed letters of intent to refranchise territories accounting for more than 40% of U.S. bottler-delivered distribution volume. The Coca-Cola Refreshments unit, which continues to operate company-owned territories in North America, will work to ensure a smooth transition to aligned, new and existing bottling partners.

As part of the accelerated refranchising effort, Coke plans to sell the remainder of its company-owned cold-fill production facilities by the end of 2017. These facilities produce such sparkling beverages as Coca-Cola trademark brands and Sprite, along with still brands, including Dasani. The company plans to retain ownership of its hot-fill facilities for brands like Powerade and Minute Maid juices, to supply the entire North America Coca-Cola system.

Agreements reflecting the progress of the North America refranchising process include a pact under which Coca-Cola Bottling Co. Consolidated (Charlotte, NC) will take on additional territory in portions of Ohio and West Virginia, as well as a production facility in Twinsburg, OH. Moreover, Coca-Cola Bottling Co. of Roseburg (OR) has agreed to assume territory in the Pacific Northwest, primarily southern Oregon plus a small portion of northern California. And ABARTA Inc. (Pittsburgh) is slated to assume territory in Pennsylvania. The letters of intent for these plans are subject to the parties reaching definitive agreements.

Coca-Cola also has closed its previously announced definitive agreement with Coca-Cola Bottling Co. Consolidated, and transitioned additional territory in Maryland and Virginia, along with a production facility in Sandston, VA.

On the international front, Coca-Cola reports that its nonbinding letter of intent with partners China Foods Ltd. and Swire Beverage Holdings Ltd. positions the organization to benefit from a substantial long-term growth opportunity. China is Coca-Cola's third-largest market by volume. The bottling system there recently opened its 45th local plant, and is investing $4 billion for future growth, building on $9 billion of investments made since 1979.

Coca-Cola also is focused on refranchising in Europe and Africa. That focus includes the planned creation of Coca-Cola European Partners in Western Europe and Coca-Cola Beverages Africa in Southern and Eastern Africa.

Historically, the Coca-Cola system in the United States and Canada was comprised of a significant number of small, local bottlers. Over the years, the system consolidated into a much smaller number of bottlers. By the early 2000s, the majority of North American bottling territories was owned by Coca-Cola Enterprises.

A decade ago, Coca-Cola Co. began working with its bottling partners to develop a new model for serving a changing customer and consumer landscape. A critical step was its acquisition of the North American territories of Coca-Cola Enterprises in 2010.

In the five years since that deal was closed, Coca-Cola Co. worked to implement the new model by strategically addressing the franchise system, customer service, product supply and a common information technology platform. In the future, Coca-Cola's North American system will be comprised of economically aligned bottling partners able to serve major customers and to maintain strong, local ties across diverse markets.

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. | READ MORE