Coca-Cola steps up North American refranchising efforts

The Coca-Cola Company will increase efforts to refranchise all of the North American bottling territories under its ownership by the end of 2017 – three years earlier than initially expected.

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 US. The North American territories owned by Coca-Cola are operated by its Coca-Cola Refreshments unit – but the soft drinks manufacturer will redouble its efforts to hand these over to new and existing bottling partners.

The plans include the sale of 39 remaining North American cold-fill production facilities, which produce sparkling beverage brands such as Coca-Cola and Sprite, as well as still ranges like Dasani.

Coca-Cola expects to retain ownership of its hot-fill facilities, used to produce brands such as Powerade and Minute Maid juices and supply the whole North American Coca-Cola system.

“We have made significant progress on our North American refranchising initiatives,” said Coca-Cola chairman and CEO Muhtar Kent. “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.”

“The North American market presents an opportunity to blend the strengths of a locally focussed franchise bottling system with national production efficiencies and large customer account management,” Coca-Cola North America president Sandy Douglas Jr claimed.

New letters of intent provide that Coca-Cola Bottling Co Consolidated, based in Charlotte, North Carolina, will assume additional territory in parts of Ohio and West Virginia, along with a production facility in Twinsburg, Ohio; Coca-Cola Bottling Company of Roseburg, Oregon will assume territory in the Pacific Northwest, particularly southern Oregon and some parts of northern California; and Pittsburgh-based Abarta Inc will assume further territory in the state of Pennsylvania.

The letters of intent are subject to all involved parties reaching definitive agreements, though financial terms have not been disclosed by Coca-Cola.

The company has also entered into a non-binding letter of intent to refranchise its bottling operations in China to existing partners China Foods Limited – part of Cofco Limited – and Swire Beverage Holdings Limited, building on earlier global refranchising initiatives in Europe and Africa.

Kent continued: “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.”

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.

Elsewhere, the company is also focussed on refranchising in markets such as Europe and Africa, including the planned creation of Coca-Cola European Partners in Western Europe and Coca-Cola Beverages Africa in Southern and Eastern Africa.