Coca Cola 2013 Annual Report Download - page 9

Bottler’s Agreements Within the United States
During the year ended December 31, 2013, CCR, our bottling and customer service organization for North America,
manufactured, sold and distributed 88 percent of our U.S. unit case volume. The discussion below relates to Bottler’s Agreements
and other 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 such 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 5.6 percent of total unit case volume in the United States in 2013 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
0.3 percent of total unit case volume in the United States in 2013 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.
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 the 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 $6.9 billion in 2013.
Investments in Bottling Operations
Most of our branded beverage products outside of North America are manufactured, sold and distributed by independent bottling
partners. However, from time to time we acquire or take control of bottling or canning operations, often in underperforming
markets where we believe we can use our resources and expertise to improve performance. Owning such a controlling interest
enables us to compensate for limited local resources; help focus the bottler’s sales and marketing programs; assist in the
development of the bottler’s business and information systems; and establish an appropriate capital structure for the bottler. In
line with our long-term bottling strategy, we may periodically consider options for divesting or reducing our ownership interest in
a Company-owned or -controlled bottler. One such option is to combine our interest in a particular bottler with the interests of
others to form strategic business alliances. Another option is to sell our interest in a bottling operation to one of our other
bottling partners in which we have an equity method investment. In both of these situations, our Company continues to participate
in the bottler’s results of operations through our share of the strategic business alliance’s or equity method investee’s earnings or
losses.
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