Coca Cola 2005 Annual Report Download - page 9

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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. gallon sales (the ‘‘1987 Contract’’) gives us complete flexibility to determine the price and other
terms of sale of concentrates and syrups for 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 89 percent of our
Company’s total U.S. gallon sales for bottled and canned beverages in 2005, excluding direct sales by the
Company of juice and juice-drink products and other finished beverages (‘‘U.S. bottle/can gallon sales’’). Certain
other forms of U.S. Bottler’s Agreements, entered into prior to 1987, provide for concentrates or syrups for
certain Coca-Cola Trademark Beverages and other cola-flavored Company Trademark Beverages to be priced
pursuant to a stated formula. Bottlers accounting for approximately 10 percent of U.S. bottle/can gallon sales in
2005 have contracts for certain Coca-Cola Trademark Beverages and other cola-flavored Company 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. Bottlers accounting for the remaining (less than
1 percent) U.S. bottle/can gallon sales in 2005 operate under our oldest form of contract, which 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.
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.
As a practical matter, our 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 Method Investments and Company Bottling Operations
Our Company maintains business relationships with three types of bottlers:
• 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 2005, bottling operations in which we had no ownership interest produced and distributed approximately
25 percent of our worldwide unit case volume. We have equity positions in 51 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 2005. Controlled and consolidated
bottling operations produced and distributed approximately 7 percent of our worldwide unit case volume in
2005. The remaining approximately 10 percent of our worldwide unit case volume in 2005 was produced and
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