The Coca-Cola Company Announces Plans to Significantly Accelerate Bottler Refranchising
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–(BUSINESS WIRE)–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.
About The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is the world’s largest beverage
company, refreshing consumers with more than 500 sparkling and still
brands. Led by Coca-Cola, one of the world’s most valuable and
recognizable brands, our Company’s portfolio features 20 billion-dollar
brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater,
Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, we are
the No. 1 provider of sparkling beverages, ready-to-drink coffees, and
juices and juice drinks. Through the world’s largest beverage
distribution system, consumers in more than 200 countries enjoy our
beverages at a rate of more than 1.9 billion servings a day. With an
enduring commitment to building sustainable communities, our Company is
focused on initiatives that reduce our environmental footprint, support
active, healthy living, create a safe, inclusive work environment for
our associates, and enhance the economic development of the communities
where we operate. Together with our bottling partners, we rank among the
world’s top 10 private employers with more than 700,000 system
associates. For more information, visit Coca-Cola Journey at www.coca-colacompany.com,
follow us on Twitter at twitter.com/CocaColaCo, visit our blog,
Coca-Cola Unbottled, at www.coca-colablog.com
or find us on LinkedIn at www.linkedin.com/company/the-coca-cola-company.
Forward-Looking Statements
This press release may contain statements, estimates or projections
that constitute “forward-looking statements” as defined under U.S.
federal securities laws. Generally, the words “believe,” “expect,”
“intend,” “estimate,” “anticipate,” “project,” “will” and similar
expressions identify forward-looking statements, which generally are not
historical in nature. Forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ
materially from The Company’s historical experience and our present
expectations or projections. These risks include, but are not limited
to, obesity concerns; water scarcity and poor quality; evolving consumer
preferences; increased competition and capabilities in the marketplace;
product safety and quality concerns; perceived negative health
consequences of certain ingredients, such as non-nutritive sweeteners
and biotechnology-derived substances, and of other substances present in
our beverage products or packaging materials; increased demand for food
products and decreased agricultural productivity; changes in the retail
landscape or the loss of key retail or foodservice customers; an
inability to expand operations in emerging and developing markets;
fluctuations in foreign currency exchange rates; interest rate
increases; an inability to maintain good relationships with our bottling
partners; a deterioration in our bottling partners’ financial condition;
increases in income tax rates, changes in income tax laws or unfavorable
resolution of tax matters; increased or new indirect taxes in the United
States or in other major markets; increased cost, disruption of supply
or shortage of energy or fuels; increased cost, disruption of supply or
shortage of ingredients, other raw materials or packaging materials;
changes in laws and regulations relating to beverage containers and
packaging; significant additional labeling or warning requirements or
limitations on the availability of our products; an inability to protect
our information systems against service interruption, misappropriation
of data or breaches of security; unfavorable general economic conditions
in the United States; unfavorable economic and political conditions in
international markets; litigation or legal proceedings; adverse weather
conditions; climate change; damage to our brand image and corporate
reputation from negative publicity, even if unwarranted, related to
product safety or quality, human and workplace rights, obesity or other
issues; changes in, or failure to comply with, the laws and regulations
applicable to our products or our business operations; changes in
accounting standards; an inability to achieve our overall long-term
growth objectives; deterioration of global credit market conditions;
default by or failure of one or more of our counterparty financial
institutions; an inability to timely implement our previously announced
actions to reinvigorate growth, or to realize the economic benefits we
anticipate from these actions; failure to realize a significant portion
of the anticipated benefits of our strategic relationships with Keurig
Green Mountain, Inc. and Monster Beverage Corporation; an inability to
renew collective bargaining agreements on satisfactory terms, or we or
our bottling partners experience strikes, work stoppages or labor
unrest; future impairment charges; multi-employer plan withdrawal
liabilities in the future; an inability to successfully integrate and
manage our Company-owned or -controlled bottling operations; an
inability to successfully manage the possible negative consequences of
our productivity initiatives; global or regional catastrophic events;
and other risks discussed in our Company’s filings with the Securities
and Exchange Commission (SEC), including our Annual Report on Form 10-K
for the year ended December 31, 2014 and our subsequently filed
Quarterly Reports on Form 10-Q, which filings are available from the
SEC. You should not place undue reliance on forward-looking statements,
which speak only as of the date they are made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements.
Contacts
The Coca-Cola Company
Investor Contact:
Tim
Leveridge, +01-404-676-7563
or
Media Contacts:
Scott
Williamson, +01-404-676-2683
or
Kent Landers, +01-404-676-2683
