Coca Cola 2010 Annual Report Download - page 10

Our Company generally has complete flexibility to determine the price and other terms of sale of the concentrates and
syrups we sell to bottlers outside the United States. In some instances, however, 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. In some
markets, in an effort to allow our Company and our bottling partners to grow together through shared value, aligned
incentives and the flexibility necessary to meet consumers’ always changing needs and tastes, we worked with our
bottling partners to develop and implement an incidence-based pricing model for sparkling and still beverages. Under
this model, the concentrate price we charge is impacted by a number of factors, including, but not limited to, bottler
pricing, the channels in which the finished products are sold and package mix. Outside the United States, in most cases,
we have no obligation to provide marketing support to the bottlers. Nevertheless, we may, at our discretion, contribute
toward bottler expenditures for advertising and marketing. We may also elect to undertake independent or cooperative
advertising and marketing activities.
Bottler’s Agreements Within the United States
Based on unit case volume for the fourth quarter ended December 31, 2010 (the first quarter of operation following
our acquisition of CCE’s North American business), CCR, our bottling and customer service organization for North
America, manufactures, sells and distributes approximately 88 percent of our unit case volume in the United States.
The discussion below regarding the terms of Bottler’s Agreements and other contracts relates to Bottler’s Agreements
and contracts for territories in the United States that are not covered by CCR.
In the United States, with certain very limited exceptions, the Bottler’s Agreements for Trademark Coca-Cola Beverages
and other cola-flavored beverages have no stated expiration date. Our standard contracts for other sparkling beverage
flavors and for still beverages are of stated duration, subject to bottler renewal rights. The Bottler’s Agreements in the
United States are subject to termination by the Company for nonperformance or upon the occurrence of certain
defined events of default that may vary from contract to contract.
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, in the United States, 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.
Certain of the Bottler’s Agreements for cola-flavored sparkling beverages in effect in the United States give 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. Certain Bottler’s Agreements, entered into prior to 1987,
provide for concentrates or syrups for certain Trademark Coca-Cola Beverages and other cola-flavored Company
Trademark Beverages to be priced pursuant to a stated formula. In 2010, bottlers accounting for approximately
3.6 percent of total unit case volume in the United States have contracts for certain Trademark Coca-Cola 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. In 2010, bottlers accounting
for approximately 0.1 percent of total unit case volume in the United States 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.
In an effort to allow our Company and our bottling partners to grow together through shared value, aligned incentives
and the flexibility necessary to meet consumers’ always changing needs and tastes, we worked with bottling partners that
produce and distribute most of our non-CCR unit case volume in the United States to develop and implement an
incidence-based pricing model, primarily for sparkling beverages. Under this model, the concentrate price we charge is
impacted by a number of factors, including, but not limited to, bottler pricing, the channels in which the finished
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