Coca-Cola plans to sell nine U.S. production facilities with a combined book value of about $380 million to three bottling companies that help make its drinks, part of a plan to cut costs and streamline operations.
The beverage company said it has preliminary agreements to sell the plants to Coca-Cola Bottling Co. Consolidated, Swire Coca-Cola U.S., and Coca-Cola Bottling Company United. The deals, expected to take effect from 2016 to 2018, are subject to the companies reaching definitive agreements, Atlanta-based Coca-Cola said Thursday in a statement.
Coca-Cola chief executive officer Muhtar Kent 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.”
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.
Bloomberg News, edited by ESM
