From: FoodBev

Coca-Cola has reached a definitive agreement with its bottlers in China to refranchise all existing company-owned bottling territory in the country.

The rights will be divided between Coca-Cola Bottling Investments Group China, which a subsidiary of Cofco Corp; and Swire Beverages Holdings. When the transaction is complete, Cofco will own and operate 18 bottling plants in mainland China, and Swire will own and operate 17.

As Coca-Cola’s third largest market by volume, China represents ‘a significant long-term growth opportunity’ for Coca-Cola and its bottling partner, the company said. The Coca-Cola system in China is currently investing $4 billion in supporting growth, building on $9 billion of investments made in the market since 1979.

The agreement follows the decision by Coca-Cola to step up its refranchising efforts in North America, as it looks to offload bottling territory that remains under the company’s own control. It has since agreed to refranchise territory in the Midwest, North Carolina and Pacific Northwest, where Swire Beverages added to its existing Coca-Cola territory back in February.

Coca-Cola CEO and chairman Muhtar Kent said: “This announcement marks the latest important chapter in the ongoing transformation of our business to refocus on our core strengths of building great brands and leading a strong, global franchise system. By refranchising all our company-owned bottling operations in China to strong local partners, we position these companies to leverage greater scale, capability and efficiency throughout China to invest for growth and deliver improved service to customers and consumers in a fast-changing marketplace.

“We remain excited about our long-term growth prospects in China and see today’s announcement as a key milestone in our nearly three decades of continuous investment in the world’s second-largest economy.”

Kent also noted that the announcement demonstrated the strategic role that Coca-Cola Bottling Investments Group had played in strengthening bottling operations in key growth markets like China.

“This transaction demonstrates Bottling Investments Group’s role in supporting long-term investment and building the right culture to ensure a sustainable healthy business,” he added. “BIG’s ownership of bottling operations in China was a transitional process that allowed us to position the system for long-term sustainable growth, now under the leadership of strong local partners.”

Cofco chairman Zhao Shuanglian continued: “This transaction marks a new milestone in the history of Cofco and Coca-Cola cooperation, and opens a new era of two franchise partners bisecting Coca-Cola’s marketplace in China. Global refranchising, refocusing on brands and markets are strategic decisions in Coca-Cola’s century-long history, and coincide with Cofco’s long-term vision of improving quality and efficiency, and building a market-oriented, specialised modern enterprise.

“China’s long and stable economic growth provides great opportunity for sustainable development of the beverages industry. And the scale effect, regional synergy and cost optimisation that the new initiative brings will certainly boost Coca-Cola and its partners to achieve a new leap forward in China. The future is set by what we decide and act on today. I believe this restructure will create greater value for shareholders and society.”

And John Slosar, chairman of Swire Pacific, added: “We are happy to sign an agreement that will lead to a stronger, more efficient Coca-Cola bottling system in China. We remain very optimistic about the long-term growth prospects for our beverages business in China, and we are convinced that this realignment will optimise the Coca-Cola system, accelerating growth and enabling us to win in the market.”