Coca Cola 2015 Annual Report Download - page 8

restrictions on bottlers vary in some cases in accordance with local law), and (3) to handle certain key accounts (accounts that cover multiple territories).
While under most of our Bottler's Agreements we generally have complete flexibility to determine the price and other terms of sale of the concentrates and
syrups we sell to our bottlers, 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 is subject, both outside and within the United States, to competitive market conditions. In addition, 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. Also,
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.
Under our Bottler's Agreements, 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.
As further discussed below, our Bottler's Agreements for territories outside of the United States differ in some respects from our Bottler's Agreements for
territories within the United States.
Bottler's Agreements Outside the United States
The Bottler's Agreements between us and our authorized bottlers outside the United States generally are of stated duration, subject in some cases to possible
extensions or renewals of the term of the contract. Generally, these contracts are subject to termination by the Company following the occurrence of certain
designated events. These events include defined events of default and certain changes in ownership or control of the bottler. Most of the Bottler's Agreements
in force between us and bottlers outside the United States authorize the bottlers to manufacture and distribute fountain syrups, usually on a nonexclusive
basis.
In certain parts of the world outside the United States, we have not granted comprehensive beverage production rights to the bottlers. In such instances, we or
our authorized suppliers sell Company Trademark Beverages to the bottlers for sale and distribution throughout the designated territory, often on a
nonexclusive basis.
Bottler's Agreements Within the United States
During the year ended December 31, 2015, our Company-owned operations manufactured, sold and distributed 82 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 Company-owned operations.
In the United States, certain 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 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 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 6.9 percent of U.S. unit case volume in 2015
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 U.S. unit case volume in 2015
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.
6