Coca Cola 2006 Annual Report Download - page 9

• 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 percent 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 sparkling beverages 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 90 percent of
our Company’s total U.S. gallon sales for bottled and canned beverages in 2006, 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 9.8 percent of U.S. bottle/can gallon sales in
2006 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 approximately
0.2 percent of U.S. bottle/can gallon sales in 2006 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 sparkling beverages and certain still beverages in bottles and cans; and, in certain cases, for
the sale of finished still 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 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.
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