Coca Cola 2004 Annual Report Download - page 9

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 percent of U.S. bottle/can gallon sales in
2004, 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
10 percent of U.S. bottle/can gallon sales in 2004 have contracts for certain Coca-Cola Trademark Beverages
with pricing formulas that generally provide 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.
We have standard contracts with bottlers in the United States for the sale of concentrates and syrups for
non-cola-flavored soft drinks and certain noncarbonated beverages in bottles and cans; and in certain cases for
the sale of finished noncarbonated beverages in bottles and cans. All of these standard contracts give the
Company complete flexibility to determine the price and other terms of sale.
Under the 1987 Contract and most of our other standard soft drink and noncarbonated beverage contracts
with bottlers in the United States, our Company has no obligation to participate with bottlers in expenditures for
advertising and marketing. Nevertheless, at our discretion we may contribute toward such expenditures and
undertake independent or cooperative advertising and marketing activities. Some U.S. Bottler’s Agreements
that predate the 1987 Contract impose certain marketing obligations on us with respect to certain Company
Trademark Beverages.
The Company’s ability to exercise its contractual flexibility to determine the price and other terms of sale of
its syrups, concentrates and finished beverages under various agreements described above is subject, both
outside and within the United States, to competitive market conditions.
Significant Equity Investments and Company Bottling Operations
Our Company maintains business relationships with three types of bottlers:
• independently owned bottlers, in which the Company has no ownership interest;
• bottlers in which the Company has invested and has a noncontrolling ownership interest; and
• bottlers in which the Company has invested and has a controlling ownership interest.
In 2004, independently owned bottling operations produced and distributed approximately 25 percent of our
worldwide unit case volume. We have equity positions in 48 unconsolidated bottling, canning and distribution
operations for our products worldwide. These cost or equity method investees produced and distributed
approximately 58 percent of our worldwide unit case volume in 2004. Controlled and consolidated bottling
operations produced and distributed approximately 7 percent of our worldwide unit case volume in 2004. The
remaining approximately 10 percent of our worldwide unit case volume in 2004 was produced and distributed by
our fountain operations plus our juice, juice drink, sports drink and other finished beverage operations.
We make equity investments in selected bottling operations with the intention of maximizing the strength
and efficiency of the Coca-Cola system’s production, distribution and marketing systems around the world.
These investments are intended to result in increases in unit case volume, net revenues and profits at the bottler
level, which in turn generate increased gallon sales for our Company’s concentrate business. When this occurs,
both we and our bottling partners benefit from long-term growth in volume, improved cash flows and increased
shareowner value.
The level of our investment generally depends on the bottler’s capital structure and its available resources
at the time of the investment. Historically, in certain situations, we have viewed it as advantageous to acquire a
controlling interest in a bottling operation, often on a temporary basis. Owning such a controlling interest has
allowed us to compensate for limited local resources and has enabled us to help focus the bottler’s sales and
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