Coke To Buy Largest Bottler
Coke is about to partially reverse its traditional strategy of using large franchisees to bottle, distribute and sell its products to local consumers. It is working out plans to buy up its largest independent franchisee, Coca-Cola Enterprises Inc.’s North American operations.
That bottling system allowed Coke to build a network of anchor bottlers around the globe, maintain a powerful influence with large stakes, and generate an additional profit stream by buying up small bottlers and then selling them to the new anchor bottlers. But by the late 1990s, some of the big bottlers also became a problem for Coke, saddled with debt from acquiring small bottlers and new equipment.
Broader changes in consumer habits have also put pressure on the bottling system in the U.S., which was traditionally geared toward manufacturing and selling carbonated soft drinks rather than the types of drinks that are growing faster these days, like "enhanced water," or bottled water with vitamins and flavors.
For Coke's everyday consumers, the deal potentially could mean lower prices, with some costs of distribution eliminated, and a wider variety of drinks, including niche products, in stores as the company gains greater distribution flexibility, according to industry experts. – WSJ ($$$)
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