Coca-Cola Co. is bringing in a Mexican partner to handle bottling in parts of the U.S. as the beverage giant boosts its reliance on franchise operators to make and distribute its drinks.
Arca Continental SAB, Latin America’s second-biggest Coca-Cola bottler, will help oversee territories in Texas and parts of Oklahoma, New Mexico and Arkansas, the companies said in a statement Wednesday. Another bottler, Coca-Cola Bottling Co. United, will become a partner in a U.S. venture in which Arca Continental is set to hold a majority stake.
With this deal, Coca-Cola Chief Executive Officer Muhtar Kent is about 60 percent done with his plan to sell asset-heavy U.S. bottling operations in an effort to focus on the more profitable business of selling concentrates and syrups to outside companies. Arca adds a major U.S. footprint to a portfolio that includes territories from Mexico to Argentina. The company, based about 150 miles from the Texas border in Monterrey, already ships sugar-sweetened Mexican Coke and Topo Chico mineral water to the U.S.
"The transaction offers multiple advantages for Arca, expanding its operations to territories it already knows, like Texas, where it exports beverages," wrote Banorte-Ixe analyst Marisol Huerta. "The Coca-Cola Company is showing it trusts Arca as one of its best operators."
Terms of the transactions weren’t disclosed. The announcement is subject to the ability of the companies involved to reach definitive agreements. Arca Continental’s snack business isn’t affected by the agreement.
“Arca Continental will be a tremendous partner with United in serving a major region of the United States,” Sandy Douglas, president of Coca-Cola North America, said in the statement. “The companies will benefit from having contiguous borders for their territories.”
Coca-Cola’s North American refranchising initiative is expected to be completed by the end of 2017, the Atlanta-based company said.
Arca Continental shares rose as much as 3.5 percent, the biggest gain on Mexico’s benchmark index on Thursday. The venture won’t dilute the Monterrey-based company’s shares outstanding, Huerta said.
Coca-Cola will hold a 20 percent stake in AC Beverages, which will also encompass Arca Continental’s existing Latin American soft-drink operations. In the U.S., the venture between AC Beverages and United will own 11 cold-fill production facilities, including nine in Texas.
Arca Continental has bottling operations in Mexico, Ecuador, Peru and Argentina.
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