Coca Cola 2011 Annual Report Download - page 9

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. Bottlers
that accounted for approximately 3.7 percent of total unit case volume in the United States in 2011 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. Bottlers that accounted for
approximately 0.1 percent of total unit case volume in the United States in 2011 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 products are sold and package mix. We expect to
use an incidence-based pricing model in 2012 with bottlers that produce and distribute most of our non-CCR unit case volume in
the United States.
Under most of our Bottler’s Agreements and 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 entered into prior to 1987 impose certain marketing obligations on us with respect to certain Company
Trademark Beverages.
Promotions and Marketing Programs
In addition to conducting our own independent advertising and marketing activities, we may provide promotional and marketing
services or funds to our bottlers. In most cases, we do this on a discretionary basis under the terms of commitment letters or
agreements, even though we are not obligated to do so under the terms of the bottling or distribution agreements between our
Company and the bottlers. Also, on a discretionary basis in most cases, our Company may develop and introduce new products,
packages and equipment to assist its bottlers. Likewise, in many instances, we provide promotional and marketing services and/or
funds and/or dispensing equipment and repair services to fountain and bottle/can retailers, typically pursuant to marketing
agreements. The aggregate amount of funds provided by our Company to bottlers, resellers or other customers of our Company’s
products, principally for participation in promotional and marketing programs, was $5.8 billion in 2011.
Significant Equity Method Investments
We make equity investments in selected bottling operations with the intention of maximizing the strength and efficiency of the
Coca-Cola system’s production, distribution and marketing capabilities around the world. These investments are intended to
result in increases in unit case volume, net revenues and profits at the bottler level, which in turn generate increased concentrate
sales for our Company’s concentrate and syrup business. When this occurs, both we and our bottling partners benefit from
long-term growth in volume, improved cash flows and increased shareowner value. In cases where our investments in bottlers
represent noncontrolling interests, our intention is to provide expertise and resources to strengthen those businesses. When our
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