Coke Plans to Reshape Bottling Industry After Posting Positive First-Quarter

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Coca-Cola took one step back a few years ago by acquiring large pieces of its bottling operations. Now the company plans to take two steps forward by handing back big chunks of its bottling system to selected independent bottlers as part of Coke’s overall creation of a national bottling and distribution system that will give it far more control over sales, distribution and balancing of its brands.

Specifically, Coke disclosed a rough framework for handing off distribution in certain geographic areas to five established, independent bottlers either through an outright sale, a swap of territory or other arrangements. Closings, after more negotiations, are expected by year-end.

“We are intent to make the necessary changes in the format and architecture of production to achieve … a coast-to-coast, nationally run production system,” Coke CEO Muhtar Kent said on Tuesday’s earnings call, according to the Wall Street Journal.

Under the new arrangements, the bottlers will be able to take part in that model by purchasing trucks, coolers and other equipment to distribute the products in their territories, the newspaper said. The national model also will enable Coke to be more responsive to large customers like Walmart because the company can make centralized sales and marketing decisions. PepsiCo similarly concentrated its bottling operations three years ago but Coke has moved first on the next step.[more]

“We believe that unique competitive advantage lies in a US 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,” Steve Cahillane, president of Coca-Cola Americas, said in a press release.

Meanwhile, Coke also reported first-quarter financial results that pleased investors, sending Coca-Cola shares by mid-day Tuesday to a new 15-year high. Coke reported a 4 percent global volume growth for the period, including a 3 percent increase for the Coca-Cola brand. Net revenues, after currency corrections and structural changes, grew by 2 percent despite two fewer “selling days” in the quarter, a Coke statement said.

The company noted that activation of its “Crazy for Good” marketing campaign in many markets around the world helped boost Coke volume as well as promotions centered on “Coke with Meals.” Innovation in sweeteners and new marketing campaigns drove better results for Fanta and Sprite brands.

Ready-to-drink tea brands including Gold Peak and Honest Tea, in North America, continued burgeoning sales, as well as Fuze Tea, which Coke expanded across multiple markets worldwide during the quarter.

Still, Kent said in the statement, Coke remains “constructively discontent as we seek to make the most of the vast growth opportunities we continue to see around the world.”

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