Coca-Cola M&A Activity: Company Strategic Objectives (2)

During several points over the company’s century-plus long history, the need has arisen to reorganize the system of franchisees. Essentially, as international demand for Coke products grew, so did the number of bottling partners Coke did business with. Most recently, the company encouraged bottlers to combine during the 1980s, and Coca-Cola successfully narrowed its network of roughly 400 independent partners down to just 180 franchise ownerships.[ Ibid.] This is how the company has managed overhead expenses in the past, and ended up with massive worldwide bottling partners as a result. Take CCE, for example, which in 2006 distributed approximately 2 billion cases of product to retail locations in a half-dozen countries, including 46 US states.[ Ibid. ] The franchise model has been Coke’s lifeline for more than a century as it has allowed expansion of many products into emerging markets without serious capital commitment.

While bottling partner consolidation will continue to happen on its own, the prospect of reducing overhead via this tactic faces limited prospect at this time. Coca-Cola and PepsiCo both have realized that the inability to make bottling partners more efficient can be overcome by acquiring those partners. By acquiring bottling partners, the world’s largest beverage companies can eliminate a layer of management and an entire set of profit-hungry shareholders at the same time. In this way, Coca-Cola hopes to maintain its status as the largest beverage company in the world by consumption.
Figure 3[ Ibid.]

Figure 3 illustrates the market penetration that CCE has accomplished. Coca-Cola’s acquisition of CCE’s North American operations will result in the transfer of all the market share seen below. On the contrary, the new CCE, which will be focused solely on distribution in Europe, will gain operations in Norway, Sweden, and eventually Germany (under an option exercisable 18-36 months post-acquisition), as an updated market map on the new CCE website reveals (Figure 4).

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List