Charlotte’s Coca-Cola bottler to buy manufacturing sites in 4 states

Coca-Cola Bottling Co. Consolidated, the Charlotte-based bottler, said Thursday it plans to purchase manufacturing facilities in four states from the Coca-Cola Co. and also intends to expand its franchise distribution territory.

The purchase is part of a larger plan by Atlanta-based Coca-Cola Co. to cut costs and streamline operations by selling nine U.S. production facilities with a combined book value of about $380 million to three bottling companies.

In a statement, the Charlotte-based bottler said it will purchase facilities in Virginia, Maryland, Indiana and Ohio. It will also expand its franchise distribution territory to include parts of Delaware, the District of Columbia, Maryland, North Carolina, Pennsylvania, Virginia and West Virginia.

Other bottlers purchasing production facilities from Coca-Cola Co. are Swire Coca-Cola U.S., and Coca-Cola Bottling Company United.

The deals with the three bottlers, expected to take effect from 2016 to 2018, are subject to the companies reaching definitive agreements, Coca-Cola said Thursday in a statement.

Muhtar Kent, chief executive of the Atlanta-based beverage giant, has been working to cut $3 billion in annual expenses as changing consumer tastes in the U.S. hurt soda sales. Divesting the bottling operations lets Coca-Cola focus on the more profitable business of selling concentrates and syrups to the companies that manufacture, package and distribute the drinks.

“Bottling is a lower margin, capital-intensive business,” said Jack Russo, an analyst at Edward Jones. Coca-Cola “will continue to sell bottling assets to focus more on its higher-margin concentrate model.”

Production System

Coca-Cola also said Thursday that it will start a National Product Supply System with its bottlers. The organization will work on infrastructure planning, sourcing and cost controls, giving Coca-Cola the benefit of centralized bottling operations without the expense of actually owning them.

The latest move marks a reversal from Coca-Cola’s strategy five years ago. Coca-Cola acquired North American bottling businesses in 2010, figuring it could improve operations if it owned them. In 2013, Kent began working to return those operations to franchise bottlers.

“The thought there was to bring the underperforming bottlers under their wings so they could improve performance of the bottlers and the entire Coca-Cola network,” Russo said. “They did tell us that once the bottlers were nursed back to health, they would sell them off.”

The new supply system Coca-Cola announced Thursday will be led by a group that includes Coca-Cola North America, the company’s Coca-Cola Refreshments in-house bottling unit, as well as the three bottlers that are buying the facilities ticketed for divestiture. The group’s members account for about 95 percent of Coca-Cola’s U.S. production volume.

‘System Scale’

“The NPSS structure allows us to leverage our significant system scale with the unique competitive advantage of being able to act with speed,” Sandy Douglas, executive vice president and president of Coca-Cola North America, said in the statement. “This will be enabled by the outstanding commercial capabilities of a strong local bottling system.”

Coca-Cola Bottling Co. Consolidated, the largest independent Coke bottler in the U.S., employs about 550 people at its SouthPark headquarters. The company recently said it had outgrown those facilities and will open a new call center on W.T. Harris Boulevard this October and add 140 new employees over the next three years.

Bloomberg News and Observer staff writer Katherine Peralta contributed.

This story was originally published September 24, 2015 at 11:11 AM with the headline "Charlotte’s Coca-Cola bottler to buy manufacturing sites in 4 states."