Coca Cola 2006 Annual Report Download - page 46

by an industrywide temporary shortage in the supply of carbon dioxide in South Africa in the fourth quarter
of 2006.
Unit case volume in East, South Asia and Pacific Rim decreased 5 percent in 2006 versus 2005, primarily
due to a double-digit decline in the Philippines, which was mainly driven by the continued impact of affordability
and availability issues. In December 2006, the Company and SMC entered into an agreement for the Company
to acquire, subject to the fulfillment of certain conditions, the 65 percent ownership interest in CCBPI held by
SMC. Upon the closing of the acquisition, the Company will own 100 percent of the issued and outstanding
capital stock of CCBPI. The transaction is expected to close during the first quarter of 2007. The Company
expects performance in the Philippines to remain weak during 2007. Performance in this operating segment was
also impacted by a 5 percent decline in India primarily due to price increases in the second half of 2005 and steps
taken to drive revenue growth and improve operating and working capital efficiency. The results in India
reflected high single-digit declines in sparkling beverages which was partially offset by growth in still beverages.
Continued investment in marketing initiatives around the quality and safety of our products and focus on
execution in the consolidated bottling operations delivered positive results during the second half of 2006,
despite the renewed unfounded allegations of unsafe pesticide levels in the Company’s products.
Unit case volume in the European Union increased 6 percent in 2006 compared to 2005, primarily due to
solid growth across all divisions driven by successful marketing campaigns, launches of Coca-Cola Zero in nine
countries and favorable weather in the second half of 2006. In addition, the acquisition of Apollinaris GmbH, a
German premium source water brand (‘‘Apollinaris’’), and the joint acquisition of Fonti del Vulture S.r.l., also
known as Traficante, an Italian mineral water company, with Coca-Cola HBC during 2006 contributed
approximately 2 percentage points of unit case volume growth in 2006. Unit case volume in Germany increased
5 percent in 2006 versus 2005, and reflected strong growth of Trademark Coca-Cola in 2006 compared to 2005.
The results were driven by improved marketplace execution capabilities, the launch of Coca-Cola Zero in
July 2006, increased availability in the discounter channel and generally favorable weather. As mentioned above,
the acquisition of Apollinaris also contributed to unit case volume growth in Germany. The Company expects
stabilizing trends in Germany to continue during 2007. Unit case volume in Northwest Europe increased
3 percent in 2006 versus 2005 as performance stabilized. The results reflected 3 percent unit case volume growth
in sparkling beverages, led by growth of Trademark Coca-Cola, and solid growth in still beverages. In addition,
the successful launch of Coca-Cola Zero in Great Britain at the end of June 2006 and generally favorable
weather during the second half of the year contributed to the performance. Unit case volume in Iberia increased
6 percent in 2006 versus 2005, led by strong growth in Spain.
In Latin America, unit case volume increased 7 percent in 2006 versus 2005, primarily due to growth in
sparkling beverages led by growth of Trademark Coca-Cola. This performance was seen in all key markets,
especially Brazil, Mexico and Argentina. In Mexico, the increase in unit case volume was driven by strong growth
in Trademark Coca-Cola. In Brazil, strong marketing and bottler execution led to unit case volume growth in
sparkling beverages. In Argentina, consumer marketing activities and bottler execution drove unit case volume
growth. Additionally, in December 2006, the Company and Coca-Cola FEMSA entered into an agreement to
jointly acquire Jugos del Valle, S.A.B. de C.V., the second largest producer of packaged juices, nectars and fruit-
flavored beverages in Mexico and the largest producer of such products in Brazil.
Unit case volume in North America was even in 2006 versus 2005. Foodservice and Hospitality unit case
volume increased 1 percent in 2006, reflecting growth in all key beverage categories. Unit case volume in Retail
decreased 1 percent primarily driven by weak sparkling beverage trends in the second half of 2006, declines in
the warehouse-delivered water business resulting from the strategic decision to refocus resources behind the
more profitable Dasani business and declines in the warehouse-delivered juice business as a result of price
increases to cover higher ingredient costs. These declines in Retail were partially offset by the continued success
of Dasani, Coca-Cola Zero and Powerade, as well as the introduction of Black Cherry Vanilla Coca-Cola and the
national rollout of Vault. In February 2007, our Company entered into an agreement to purchase Fuze
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