Coca-Cola to hand back US distribution networks under refranchising strategy

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Muhtar kent, The coca-cola company

Coca-Cola to hand back US distribution networks
Coca-Cola has revealed plans to begin handing back some of its US distribution network to independent bottlers – a move that is expected to improve the company’s profitability in North America.

Under the strategy, Coca-Cola intends to return some of its North American distribution networks to five independent bottlers - Coca-Cola Bottling Co Consolidated, Coca-Cola Bottling Company United, Swire Coca-Cola USA, Coca-Cola Bottling Company High Country, and Corinth Coca-Cola Bottling Works.

Coca-Cola bought the North America operations of bottler Coca-Cola Enterprises in October 2010 in an attempt to cut costs and streamline its distribution operations. It appears, however, that Coca-Cola is keen to return to a franchise model in the US after just three years.

“Under the new model, The Coca-Cola Company and five US bottlers have agreed in principle to take the next step in creating a stronger US business model though the grating of new, expanded territories.”

The transactions are subject to definitive agreements between the parties by the end of the year. Coca-Cola expects the transactions to close in 2014.

Q1 revenue and profits decrease

Coca-Cola revealed its US distribution plans alongside its financial results for the first quarter of 2013.

The company reported attributable net income of $1.75bn (€1.33bn) for the three months ended 29 March 2013 – a 15% decrease on the $2.05bn (€1.56bn) it reported for Q1 2012.

Net revenue fell by 1% - from $11.137bn (€8.46bn) in Q1 2012 to $11.035bn (€8.4bn) for the period.

Despite the falls in revenue and profit, Coca-Cola achieved worldwide volume growth of 4% for the quarter – a result it has attributed to growth in key developed and emerging markets.

“The Company reported solid volume growth in key developed markets, including Germany (3%), North America (1%), and Japan (1%),” ​said Coca-Cola.

“The Company also delivered strong volume growth during the quarter in key emerging markets, including Thailand (18%), India (8%), Russia (8%), Mexico (3%) and Brazil (3%).”

Meanwhile, overall European growth was flat for the period “despite ongoing uncertain macroeconomic conditions and unseasonably cold weather.”

C​oca-Cola chairman and CEO, Muhtar Kent, has praised the company’s Q1 performance.

“I am pleased with our first quarter performance results, having once again delivered solid growth against the backdrop of a still uncertain global economy,”​ said Kent.

“I am proud of all we are achieving alongside our customers, bottlers and other partners. Even so, we remain constructively discontent as we seek to make the most of the vast growth opportunities we continue to see around the world,” ​added Kent.

Related topics: Coca-Cola, Soft Drinks & Water

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