Independent Bottlers to play larger role at Coke

In an announcement timed to coincide with their first-quarter earnings results, Coke said yesterday that it is going to increase the role (Download article:  Download Coca-Cola Unveils New U.S. Bottler Deal - WSJ) played by independent bottlers in distributing its beverages. This was seen as the first step towards ceding greater control to its franchisee bottlers, which would allow Coke to reduce the impact of the asset-intensive bottling business on its financials.

As we had discussed in class, recall that Coke (and Pepsi) had purchased their biggest bottlers just over a couple of years ago. The reasoning behind that move was to re-consolidate the bottling business which had become inefficient over the years, and to present a more unified front while bargaining against retailers. Also, the existing bottling franchise system was ill-equipped to handle the distribution of newer non-carbonated beverages (which have registered the strongest growth in the recent past) forcing Coke to use other third-party producers to handle them. Over the years, Coke has been working on bringing those drinks in-house as well and is now on the path towards eventually giving independent bottlers control of distribution again. 

Thanks to Manish, Erika and David for forwarding this article!

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