The Coca-Cola Company KO announced that it has closed the previously announced agreements to grant new distribution territories to two new bottling partners as part of its beverage partnership model in the U.S.
Per a definitive agreement announced in November last year, Coca-Cola has now officially granted its territories in the greater Chicago area and Northwest Indiana to Great Lakes Coca-Cola Distribution, L.L.C., a wholly-owned subsidiary of Reyes Holdings, L.L.C. Reyes Holdings is one of the largest global food and beverage distributor.
Moreover, it has granted territories of Central Florida, including Tampa/St. Petersburg, Ft. Myers, Ft. Pierce, Lakeland and Sarasota, to a new bottler, Coca-Cola Bottling Company of Central Florida, per a definitive deal entered into in Sep 2014.
Coca-Cola had signed letters of intent with both the bottlers in February last year.
Coca-Cola is re-franchising the majority of its company-owned North American bottling territories to create a more efficient system. It closed several transactions in 2014 and plans to complete two-thirds of the re-franchising by 2017-end which should improve margins and drive growth.
Coca-Cola is undergoing several changes — which includes the re-franchising of bottling territories — to improve its growth prospects. Management expects 2015 to be a “transition year” — a time to start implementing changes to create a new operating model.
In Oct 2014, Coca-Cola unveiled strategic actions to drive better profit growth in 2015. Other than aggressively cutting costs, the plan includes making disciplined brand and growth investments as well as aligning incentive plans.
Moreover, Coca-Cola is buying stakes in growing companies. It owns 16% stake in Keurig Green Mountain, Inc. GMCR.Coca-Cola also has an innovative partnership deal with the specialty coffee retailer under which the latter will exclusively make Coca-Cola branded single-serve pods for use on its upcoming Keurig Cold at-home beverage system. The deal opens up an exciting new packaging format for Coca-Cola’s brands.
Coca-Cola is also in the process of purchasing a 16.7% stake in energy drink maker, Monster Beverage Corporation MNST, for $2.15 billion. The transaction is expected to close in the latter half of the second quarter. Under the deal, Coca-Cola is swapping its global energy drink business with Monster’s non-energy drink business.
These strategic investments will help Coca-Cola adapt to the changing consumer trends, while accelerating innovation.
Though these initiatives benefited the first-quarter results to some extent, management, however, warned that the restructuring and strategic initiatives will take time to deliver the desired results amid challenging global macro conditions and significant changes at the company.
Stocks to Consider
Coca-Cola carries a Zacks Rank #3 (Hold). A better-ranked beverage stock is The WhiteWave Foods Company WWAV with a Zacks Rank #2 (Buy).
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