Coca Cola 2003 Annual Report Download - page 9

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in force between us and bottlers outside the United States authorize the bottler to manufacture and distribute
fountain syrups, usually on a non-exclusive basis.
Our Company generally has complete flexibility to determine the price and other terms of sale of the
concentrates and syrups we sell to bottlers outside the United States. In some instances, however, we have
agreed or may in the future agree with the bottler with respect to concentrate pricing on a prospective basis for
specified time periods. Outside the United States, in most cases we have no obligation to provide marketing
support to the bottlers. Nevertheless, we may, in our discretion, contribute towards bottler expenditures for
advertising and marketing. We may also elect to undertake independent or cooperative advertising and
marketing activities.
Within the United States. In the United States, with certain very limited exceptions, the Bottler’s Agreements
for Coca-Cola and other cola-flavored beverages have no stated expiration date. Our standard contracts for
other soft drink flavors and for noncarbonated beverages are of stated duration, subject to bottler renewal rights.
The Bottler’s Agreements in the United States are subject to termination by the Company for nonperformance
or upon the occurrence of certain defined events of default which may vary from contract to contract. The
so-called ‘‘1987 Contract,’’ described below, is terminable by the Company upon the occurrence of certain events
including:
• the bottler’s insolvency, dissolution, receivership or the like;
• any disposition by the bottler or any of its subsidiaries of any voting securities of any bottler subsidiary
without the consent of the Company;
• any material breach of any obligation of the bottler under the 1987 Contract; or
• except in the case of certain bottlers, if a person or affiliated group acquires or obtains any right to
acquire beneficial ownership of more than 10% of any class or series of voting securities of the bottler
without authorization by the Company.
Under the terms of the Bottler’s Agreements, bottlers in the United States are authorized to manufacture
and distribute Company Trademark Beverages in bottles and cans. However, these bottlers generally are not
authorized to manufacture fountain syrups. Rather, as described above, our Company manufactures and sells
fountain syrups to authorized fountain wholesalers (including certain authorized bottlers) and some fountain
retailers. These wholesalers in turn sell the syrups or deliver them on our behalf to restaurants and
other retailers.
In the United States, the form of Bottler’s Agreement for cola-flavored soft drinks that covers the largest
amount of U.S. volume (the ‘‘1987 Contract’’) gives us complete flexibility to determine the price and other
terms of sale of soft drink concentrates and syrups for cola-flavored Company Trademark Beverages
(‘‘Coca-Cola Trademark Beverages’’) and other Company Trademark Beverages. In some instances, we have
agreed or may in the future agree with the bottler with respect to concentrate pricing on a prospective basis for
specified time periods. Bottlers operating under the 1987 Contract accounted for approximately 88% of our
Company’s total United States gallon sales for bottled and canned beverages, excluding direct sales by the
Company of juice and juice-drink products and other finished beverages (‘‘U.S. bottle/can gallon sales’’) in 2003.
Certain other forms of U.S. Bottler’s Agreements, entered into prior to 1987, provide for soft drink concentrates
or syrups for certain Coca-Cola Trademark Beverages to be priced pursuant to a stated formula. The oldest such
form of contract, applicable to bottlers accounting for approximately 1% of U.S. bottle/can gallon sales in 2003,
provides for a fixed price for Coca-Cola syrup used in bottles and cans. This price is subject to quarterly
adjustments to reflect changes in the quoted price of sugar. Bottlers accounting for the remaining approximately
11% of U.S. bottle/can gallon sales in 2003 have contracts for certain Coca-Cola Trademark Beverages with
pricing formulas generally providing for a baseline price. This baseline price may be adjusted periodically by the
Company, up to a maximum indexed ceiling price, and is adjusted quarterly based upon changes in certain sugar
or sweetener prices, as applicable.
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