Coke to Consolidate U.S. Bottlers in New Supply System

Dow Jones Newswires

Coca-Cola Co. said Thursday that it plans to bring some of its top U.S. bottlers together under a new supply system, the soda giant's latest move to cut costs amid tepid sales. Coke said the new national supply group will include independent bottlers Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Company United, Swire Coca-Cola USA and the company-owned Coca-Cola Refreshments and Coca-Cola North America. Together, the bottlers account for 95% of the volume produced in the U.S. The initial terms of the agreement call for Coca-Cola Refreshments, which is owned by Coke, to divest nine production facilities valued at about $380 million to the other bottlers between 2016 and 2018. Coke Chief Executive Muhtar Kent said the company will tap the strengths of the four biggest-producing bottlers in its system to operate a streamlined, "highly competitive" national supply system. Coke has been working to restructure its North American manufacturing operations and speed up its refranchising efforts. It has said it is looking to refranchise the majority of its distribution in the next few years. The changes come as the beverage giant has seen its soda volumes slip as health-conscious consumers scale back. The company has also been hurt by turbulence in emerging markets, which formerly supplied much of its growth. In July, Coke reported improving results in its second quarter as noncarbonated drinks like tea, bottled water and ultra-filtered nutrient-rich milk showed growth. Coke has said it is aiming for $3 billion in cost-cutting for the year, and is redirecting savings into marketing like its "Share a Coke" campaign. Coke has already made moves to consolidate its global bottling operations. In August, three Coca-Cola Co. bottlers agreed to a merger combining $12 billion in revenue across 13 European countries. Publicly traded bottler Coca-Cola Enterprises Inc., or CCE, also would relocate its headquarters to the U.K. from the U.S. in the planned tie-up with Spain's privately held Coca-Cola Iberian Partners SA and Germany's Coca-Cola Erfrischungsgetränke AG, the latter owned by Atlanta-based Coke.

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