Coca-Cola to accelerate bottler refranchising plans as full year results disappoints

The Coca-Cola Company released its fourth quarter and full year results on Tuesday, with sales declining 4%. However, organic sales grew 4%, while global volume grew by 2%.

Muhtar Kent, Chairman and CEO of Coca-Cola, said sales growth was led by the company’s flagship North American market, which had its strongest performance in three years. The company saw growths in Coca-Cola Zero, Sprite and Fanta, but a decline in Diet Coke in the fourth quarter.

Globally, the Coca-Cola brand grew a measly 1%; sprite saw a 3% growth, followed by Coca-Cola Zero, which posted a 6% growth over the year. However, Diet Coke / Coke light declined 6%.

Kent added that the company will speed up its refranchising plans as part of its effort to focus on ‘building strong, valuable brands and leading a system of strong bottling partners.’

He said that the company will refranchise 100% of the company-owned North American bottling operations by the end of 2017, including all cold-fill production facilities.

Kent indicated that Coca-Cola had entered into a non-binding letter of intent to refranchise its bottling operation in China to existing Chinese partners, China Foods Limited (part of COFCO Ltd) and Swire Beverage Holdings Ltd.

“Expanding Coca-Cola bottlers in various regions will grow in terms of revenue, employment and reach as we transition company owned operations to the franchise system. The Coca-Cola company will return to its focus as a higher margin, higher return and less capital intensive operation,” Kent said.

Under the new refranchising plan, the Coca-Cola Company will move from the current system, where around 18% of the bottling is done by the company to a new plan where it holds only 3% ownership of the bottling operations.

The Coca-Cola system consists of the company at the center, which produces and sells concentrates, beverage bases and syrups to bottling partners, who manufacture, bottle and distribute the beverages.

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