Coca Cola 2015 Annual Report Download - page 9

In conjunction with implementing a new beverage partnership model in North America, the Company has entered into comprehensive beverage agreements
("CBAs") with certain bottling partners pursuant to which we granted to these bottlers certain exclusive territory rights for the distribution, promotion,
marketing and sale of Company-owned and licensed beverage products as defined by the CBA. In some cases, the Company has entered into, or agreed to
enter into, manufacturing agreements that authorize certain bottlers that have executed CBAs to manufacture certain beverage products. If a bottler has not
entered into a specific manufacturing agreement, then under the CBA for the applicable territories, CCR retains the rights to produce these beverage products
and the bottlers will purchase from CCR (or other Company-authorized manufacturing bottlers) substantially all of the related finished products needed in
order to service the customers in these territories. Each CBA generally has a term of 10 years and is renewable, in most cases by the bottler and in some cases
by the Company, indefinitely for successive additional terms of 10 years each. Under the CBA, each bottler will make ongoing quarterly payments to CCR
based on its gross profit in the refranchised territories throughout the term of the CBA, including renewals, in exchange for the grant of the exclusive territory
rights. For more information about the North America refranchising transactions, refer to Note 2 of Notes to Consolidated Financial Statements set forth in
Part II, "Item 8. Financial Statements and Supplementary Data" of this report.
Promotions and Marketing Programs
In addition to conducting our own independent advertising and marketing activities, we may provide promotional and marketing services and/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 $6.8 billion in 2015.
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Most of our branded beverage products are manufactured, sold and distributed by independent bottling partners. However, from time to time we acquire or
take control of bottling 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, typically
by selling our interest in a particular bottling operation to an independent bottler to improve Coca-Cola system efficiency. When we sell our interest in a
bottling operation to one of our other bottling partners in which we have an equity method investment, our Company continues to participate in the bottler's
results of operations through our share of the equity method investee's earnings or losses.
In addition, from time to time we make equity investments representing noncontrolling interests in selected bottling operations with the intention of
maximizing the strength and efficiency of the Coca-Cola system's production, marketing, sales and distribution capabilities around the world by providing
expertise and resources to strengthen those businesses. 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 and improved cash flows. When our equity investment provides us with the ability to exercise
significant influence over the investee bottler's operating and financial policies, we account for the investment under the equity method, and we sometimes
refer to such a bottler as an "equity method investee bottler" or "equity method investee."
Our equity method investee bottlers include Coca-Cola FEMSA, in which as of December 31, 2015, we had an equity ownership interest of 28 percent, Coca-
Cola Hellenic, in which as of December 31, 2015, we had an equity ownership interest of 24 percent, and Coca-Cola İçecek A.Ş., in which as of December 31,
2015, we had an equity ownership interest of 20 percent.
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