Coca Cola 2008 Annual Report Download - page 9

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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. concentrate 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 a bottler with respect to concentrate pricing on a prospective
basis for specified time periods. Bottlers operating under the 1987 Contract accounted for approximately
94.4 percent of our Company’s total U.S. concentrate sales for bottled and canned beverages in 2008, excluding
direct sales by the Company of juice and juice-drink products and other finished beverages (‘‘U.S. bottle/can
concentrate 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
5.3 percent of U.S. bottle/can concentrate sales in 2008 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 0.3 percent of U.S. bottle/can concentrate sales in 2008
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.
In 2008, bottling operations in which we had no ownership interest produced and distributed approximately
24 percent of our worldwide unit case volume. We have equity positions in 43 unconsolidated bottling, canning
and distribution operations for our products worldwide. These cost or equity method investees produced and
distributed approximately 54 percent of our worldwide unit case volume in 2008. Controlled and consolidated
7