The Coca-Cola Company is the world's leading owner and marketer of nonalcoholic beverage brands and the world's largest manufacturer, distributor and marketer of concentrates and syrups used to produce nonalcoholic beverages. We own or license and market more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing our trademarks, sold in the United States since 1886, are now sold in more than 200 countries. Along with Coca-Cola, which is recognized as the world's most valuable brand, we own and market four of the world's top five nonalcoholic sparkling beverage brands, including Diet Coke, Fanta and Sprite.
We manufacture beverage concentrates and syrups, which we sell to authorized bottling and canning operations (to which we typically refer as our "bottlers" or our "bottling partners") who use the concentrates and syrups to produce finished beverage products. We also manufacture, or authorize bottling partners to manufacture, fountain syrups, which we sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce finished beverages for immediate consumption, or to fountain wholesalers or bottlers, which in turn sell and distribute the fountain syrups to fountain retailers. In addition, we manufacture certain finished beverages, such as juices and juice drinks and water products, which we sell to retailers directly or through wholesalers or other distributors, including bottling partners.
While most of our branded beverage products are manufactured, sold and distributed by independently owned and managed bottling partners, from time to time we do acquire or take control of bottling or canning operations, often, but not always, in underperforming markets where we believe we can use our resources and expertise to improve performance. In addition, we have noncontrolling ownership interests in numerous beverage joint ventures, bottling partners and emerging beverage companies.
We make our branded beverage products available to consumers throughout the world through our network of bottling partners, distributors, wholesalers and retailers — the world's largest beverage distribution system.
We were incorporated in September 1919 under the laws of the State of Delaware and succeeded to the business of a Georgia corporation with the same name that had been organized in 1892.
Our Company is one of numerous competitors in the commercial beverages market. Of the approximately 54 billion beverage servings of all types consumed worldwide every day, beverages bearing trademarks owned by or licensed to us account for approximately 1.6 billion.
We believe that our success depends on our ability to connect with consumers by providing them with a wide variety of choices to meet their desires, needs and lifestyle choices. Our success further depends on the ability of our people to execute effectively, every day.
Our goal is to use our Company's assets — our brands, financial strength, unrivaled distribution system, global reach and the talent and strong commitment of our management and associates — to become more competitive and to accelerate growth in a manner that creates value for our shareowners.
The Company's operating structure is the basis for our internal financial reporting. As of December 31, 2009, our operating structure included the following operating segments, the first six of which are sometimes referred to as "operating groups" or "groups":
• Eurasia and Africa
• Latin America
• North America
• Bottling Investments
Except to the extent that differences among operating segments are material to an understanding of our business taken as a whole, the description of our business in this report is presented on a consolidated basis.
For financial information about our operating segments and geographic areas, refer to Note 18 of Notes to Consolidated Financial Statements set forth in Part II, "Item 8. Financial Statements and Supplementary Data" of this report, incorporated herein by reference. For certain risks attendant to our non-U.S. operations, refer to "Item 1A. Risk Factors," below.
Products and Distribution
Our Company manufactures and sells beverage concentrates, sometimes referred to as "beverage bases," syrups, including fountain syrups, and finished beverages.
As used in this report:
• "concentrates" means flavoring ingredients and, depending on the product, sweeteners used to prepare syrups or finished beverages, and includes powders for purified water products such as Dasani;
• "syrups" means beverage ingredients produced by combining concentrates and, depending on the product, sweeteners and added water;
• "fountain syrups" means syrups that are sold to fountain retailers, such as restaurants and convenience stores, which use dispensing equipment to mix the syrups with sparkling or still water at the time of purchase to produce finished beverages that are served in cups or glasses for immediate consumption;
• "sparkling beverages" means nonalcoholic ready-to-drink beverages with carbonation, including carbonated energy drinks and carbonated waters and flavored waters;
• "still beverages" means nonalcoholic beverages without carbonation, including noncarbonated waters, flavored waters and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees and sports drinks;
• "Company Trademark Beverages" means beverages bearing our trademarks and certain other beverage products bearing trademarks licensed to us by third parties for which we provide marketing support and from the sale of which we derive economic benefit; and
• "Trademark Coca-Cola Beverages" or "Trademark Coca-Cola" means beverages bearing the trademark Coca-Cola or any trademark that includes Coca-Cola or Coke (that is, Coca-Cola, Diet Coke and Coca-Cola Zero and all their variations and line extensions, including Coca-Cola Light, Coke Zero, Diet Coke with Lemon, Cherry Coke, etc.). Likewise, when we use the capitalized word "Trademark" together with the name of one of our other beverage products (such as "Trademark Fanta," "Trademark Sprite" or "Trademark Simply"), we mean beverages bearing the indicated trademark (that is, Fanta, Sprite or Simply, respectively) and all its variations and line extensions (such that "Trademark Fanta" includes Fanta Orange, Fanta Zero Orange and Fanta Apple; "Trademark Sprite" includes Sprite, Diet Sprite, Sprite Zero and Sprite Light; and "Trademark Simply" includes Simply Orange, Simply Apple and Simply Grapefruit).
We sell the concentrates and syrups for bottled and canned sparkling and flavored still beverages to authorized bottling and canning operations. Our bottling partners either combine our syrups with sparkling water or combine our concentrates with sweeteners (depending on the product), still water and/or sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers bearing our trademarks or trademarks licensed to us — such as cans and refillable and nonrefillable glass and plastic bottles — and are then sold to retailers directly or, in some cases, through wholesalers or bottlers.
For our fountain products in the United States, we manufacture fountain syrups and sell them to fountain retailers or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. In the United States, we authorize wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States. Outside the United States, fountain syrups typically are manufactured by authorized bottlers from concentrates sold to them by the Company. The bottlers then typically sell the fountain syrups to wholesalers or directly to fountain retailers.
We also manufacture a variety of still beverages, such as juices and juice drinks and certain water products, which we sell to retailers and wholesalers in the United States and numerous other countries, both directly and through a network of business partners, including certain bottling partners. In addition, our Company-owned or consolidated bottling operations manufacture finished products, primarily sparkling beverages, which they sell to other bottlers, distributors or wholesalers, or directly to retailers.
Our beverage products include Coca-Cola, caffeine free Coca-Cola, Cherry Coke, Diet Coke (sold as Coca-Cola Light in many countries other than the United States), caffeine free Diet Coke, Diet Coke Sweetened with Splenda, Diet Coke with Lime, Diet Cherry Coke, Coca-Cola Zero (sold as Coke Zero in some countries), Fanta, Sprite, Diet Sprite/Sprite Zero (sold as Sprite Light in many countries other than the United States), Pibb Xtra, Mello Yello, Tab, Fresca and Barq's sparkling beverages, Powerade, Aquarius, Sokenbicha, Ciel, Bonaqa/Bonaqua, Dasani, Dasani flavored waters, Georgia ready-to-drink coffees (sold primarily in Japan), Lift, Thums Up, Kinley, Eight O'Clock, Qoo, Mother, Vault, NOS, Full Throttle and other products developed for specific countries. Our beverage products also include enhanced water products such as glacéau vitaminwater and smartwater, Fuze fortified beverages, tea-flavored beverages and fruit drinks sold in the United States, and Matte Leao herbal beverages sold in Brazil. In many countries (excluding the United States, among others), our Company's beverage products also include Schweppes, Canada Dry, Dr Pepper and Crush. Our Company produces, distributes and markets juice and juice-drink products, including Minute Maid juices and juice drinks, Simply juices and juice drinks, Cappy juices, Odwalla nourishing health beverages, Five Alive refreshment beverages and Bacardi mixers concentrate (manufactured and marketed under license agreements from Bacardi & Company Limited). We have a license to manufacture and sell concentrates for Seagram's mixers, a line of sparkling beverages, in the United States and certain other countries. In addition, in the United States we market Nestea and Enviga products under a sublicense agreement with a subsidiary of Nestlé S.A. ("Nestlé"). Multon, a Russian juice business ("Multon") operated as a joint venture with Coca-Cola Hellenic Bottling Company S.A. ("Coca-Cola Hellenic"), manufactures, markets and sells juice products under various trademarks, including Dobriy, Rich and Nico Biotime, in Russia, Ukraine and Belarus. Beverage Partners Worldwide ("BPW"), the Company's joint venture with Nestlé, markets ready-to-drink tea products under various trademarks, including Nestea, Enviga, Yang Guang, Nagomi, Frestea, Ten Ren, Yuan Ye, Tian Yu Di (Heaven & Earth), Nestea Vitao and Nestea Cool, in various markets worldwide, other than the United States and Japan. We manufacture, market and sell packaged juices, nectars and fruit-flavored beverages under the del Valle trademark through joint ventures with our bottling partners in Mexico and Brazil. Ilko Coffee International, S.r.l. ("Ilko"), a joint venture with illycaffè S.p.A., and Ilko Hellenic Partners GmbH, a joint venture between Ilko and Coca-Cola Hellenic, manufacture, market and sell ready-to-drink coffees under the illy issimo brand.
Consumer demand determines the optimal menu of Company product offerings. Consumer demand can vary from one locale to another and can change over time within a single locale. Employing our business strategy, and with special focus on core brands, our Company seeks to build its existing brands and, at the same time, to broaden its historical family of brands, products and services in order to create and satisfy consumer demand locale by locale.
During 2009, our Company introduced a variety of new brands, brand extensions and new beverage products. Among numerous examples, in North America, we launched Cascal, a fermented fruit beverage, in the United States, and glacéau smartwater in Canada. In Latin America, we launched Hugo, a combination of fruit juice and milk protein offered in several flavors, in Chile, and Valle Frut, a fruit pulp juice beverage in Mango, Guayaba, Strawberry, Tamarindo, Orange and Citrus Punch flavors, in Brazil, Colombia, Ecuador, Costa Rica, Mexico, Nicaragua and Panama. In addition, during 2009, we expanded our water product offerings in Latin America by acquiring, jointly with Coca-Cola FEMSA S.A.B. de C.V. ("Coca-Cola FEMSA"), the Brisa water business in Colombia and by acquiring two water brands, Mineragua and Vital, from our bottling partner in Bolivia. In Europe, we launched a new sparkling beverage, Schuss Gaseosa, in Spain, and Lift Pear, a sparkling beverage with real fruit juice, in Poland and Bulgaria. In Africa and Eurasia, new launches included Schweppes Dark Malt Beverage in Ghana; four new Mazoe dilutable juice drinks (in Orange, Naartjie, Peach and Lime) in South Africa; Cappy Lemonade, a premium lemonade, in Turkey; and Dobry Lemonade, a line of sparkling beverages with traditional Russian flavors, in Russia. In Pacific, we launched a new water brand in Japan, I LOHAS, which is available in a polyethylene terephthalate ("PET") bottle that can be twisted and crushed easily into a compact size for recycling; and in China, we launched Minute Maid Pulpy Super Milky, which fuses fruit juice, milk powder, whey protein and coconut bits. We also expanded our glacéau brands internationally in 2009 with the launch of vitaminwater in South Africa, France, South Korea, Japan, Belgium, Portugal, Hong Kong, China, Sweden and Macau.
In keeping with our commitment to sustainability, during 2009, we launched our innovative PlantBottle packaging, a PET bottle made partially from plants. The PlantBottle packaging, like our existing PET bottles, is 100 percent recyclable. Coca-Cola, Coca-Cola Light and Coca-Cola Zero in 500 milliliter and 2 liter sizes are now available in PlantBottle packaging to consumers in Denmark, and certain products are available in PlantBottle packaging in selected markets in Western Canada and Western United States. In addition, in 2009, we unveiled our new Coca-Cola Freestyle fountain dispenser in selected locations in the United States. Coca-Cola Freestyle allows consumers to select from more than 100 different regular and low-calorie branded beverages, including a variety of still beverages.
We measure the volume of Company beverage products sold in two ways: (1) unit cases of finished products and (2) concentrate sales. As used in this report, "unit case" means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings); and "unit case volume" means the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Company and its bottling partners (the "Coca-Cola system") to customers. Unit case volume primarily consists of beverage products bearing Company trademarks. Also included in unit case volume are certain products licensed to, or distributed by, our Company, and brands owned by Coca-Cola system bottlers for which our Company provides marketing support and from the sale of which we derive economic benefit. Such products licensed to, or distributed by, our Company and brands owned by Coca-Cola system bottlers account for a minimal portion of our total unit case volume. In addition, unit case volume includes sales by joint ventures in which the Company has an equity interest. Although most of our Company's revenues are not based directly on unit case volume, we believe unit case volume is one of the measures of the underlying strength of the Coca-Cola system because it measures trends at the consumer level. The unit case volume numbers used in this report are derived based on estimates received by the Company from its bottling partners and distributors. Concentrate sales volume represents the amount of concentrates and syrups, (in all cases expressed in equivalent unit cases) sold by, or used in finished beverages sold by, the Company to its bottling partners or other customers. Most of our revenues are based on concentrate sales, a primarily wholesale activity. Unit case volume and concentrate sales growth rates are not necessarily equal during any given period. Factors such as seasonality, bottlers' inventory practices, supply point changes, timing of price increases, new product introductions and changes in product mix can impact unit case volume and concentrate sales and can create differences between unit case volume and concentrate sales growth rates. In addition to the items mentioned above, the impact of unit case volume from certain joint ventures, in which the Company has an equity interest, but to which the Company does not sell concentrates or syrups, may give rise to differences between unit case volume and concentrate sales growth rates.
The Coca-Cola system sold approximately 24.4 billion, 23.7 billion and 22.7 billion unit cases of our products in 2009, 2008 and 2007, respectively. Sparkling beverages represented approximately 77 percent, 78 percent and 80 percent of our worldwide unit case volume for 2009, 2008 and 2007, respectively. Trademark Coca-Cola Beverages accounted for approximately 51 percent, 51 percent and 53 percent of our worldwide unit case volume for 2009, 2008 and 2007, respectively.
In 2009, concentrate sales in the United States ("U.S. concentrate sales") represented approximately 22 percent of the Company's worldwide concentrate sales. Approximately 51 percent of U.S. concentrate sales for 2009 was attributable to sales of beverage concentrates and syrups to 74 authorized bottler ownership groups in 393 licensed territories. Those bottlers prepare and sell Company Trademark Beverages for the food store and vending machine distribution channels and for other distribution channels supplying products for home and immediate consumption. Approximately 34 percent of 2009 U.S. concentrate sales was attributable to fountain syrups sold to fountain retailers and to 451 authorized fountain wholesalers, some of which are authorized bottlers. The remaining approximately 15 percent of 2009 U.S. concentrate sales was attributable to sales by the Company of finished beverages, including juices and juice drink products and certain water products. Coca-Cola Enterprises Inc. ("CCE"), accounted for approximately 47 percent of the Company's U.S. concentrate sales in 2009. At December 31, 2009, our Company held an ownership interest of approximately 34 percent in CCE, which is the world's largest bottler of Company Trademark Beverages.
In 2009, concentrate sales outside the United States represented approximately 78 percent of the Company's worldwide concentrate sales. The countries outside the United States in which our concentrate sales were the largest in 2009 were Mexico, China, Brazil and Japan, which together accounted for approximately 31 percent of our worldwide concentrate sales. Approximately 89 percent of non-U.S. unit case volume for 2009 was attributable to sales of beverage concentrates and syrups to authorized bottlers together with sales by the Company of finished beverages, other than juice and juice-drink products, in 464 licensed territories. Approximately 5 percent of 2009 non-U.S. unit case volume was attributable to fountain syrups. The remaining approximately 6 percent of 2009 non-U.S. unit case volume was attributable to juice and juice-drink products.
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 approximately $4.5 billion in 2009.
Significant investees in which we have noncontrolling ownership interests include the following:
Coca-Cola Enterprises Inc. ("CCE"). Our ownership interest in CCE was approximately 34 percent at December 31, 2009. CCE is the world's largest bottler of Company Trademark Beverages. In 2009, sales of concentrates, syrups, mineral waters, juices, sweeteners and finished products by the Company to CCE were approximately $6.5 billion. CCE estimates that the territories in which it markets beverage products to retailers (which include portions of 46 states and the District of Columbia in the United States, the U.S. Virgin Islands and certain other Caribbean islands, Canada, Great Britain, continental France, the Netherlands, Luxembourg, Belgium and Monaco) contain approximately 78 percent of the United States population, 98 percent of the population of Canada, and 100 percent of the populations of Great Britain, continental France, the Netherlands, Luxembourg, Belgium and Monaco. In 2009, CCE's net operating revenues were approximately $21.6 billion. Excluding fountain products, in 2009, approximately 60 percent of the unit case volume of CCE consisted of Trademark Coca-Cola Beverages; approximately 33 percent of its unit case volume consisted of other Company Trademark Beverages; and approximately 7 percent of its unit case volume consisted of beverage products of other companies.
Coca-Cola Hellenic Bottling Company S.A. ("Coca-Cola Hellenic"). Our ownership interest in Coca-Cola Hellenic was approximately 23 percent at December 31, 2009. Coca-Cola Hellenic has bottling and distribution rights, through direct ownership or joint ventures, in Armenia, Austria, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland and Ukraine. Coca-Cola Hellenic estimates that the area in these 28 countries which it serves through its bottling and distribution rights has a combined population of 560 million people. In 2009, Coca-Cola Hellenic's net sales of beverage products were approximately $10 billion. In 2009, approximately 42 percent of the unit case volume of Coca-Cola Hellenic consisted of Trademark Coca-Cola Beverages; approximately 53 percent of its unit case volume consisted of other Company Trademark Beverages; and approximately 5 percent of its unit case volume consisted of beverage products of Coca-Cola Hellenic or other companies.
Coca-Cola FEMSA, S.A.B. de C.V. ("Coca-Cola FEMSA"). Our ownership interest in Coca-Cola FEMSA was approximately 32 percent at December 31, 2009. Coca-Cola FEMSA is a Mexican holding company with bottling subsidiaries in a substantial part of central Mexico, including Mexico City and southeastern Mexico; greater São Paulo, Campinas, Santos, the state of Matto Grosso do Sul, the state of Minas Gerais and part of the state of Goias in Brazil; central Guatemala; most of Colombia; all of Costa Rica, Nicaragua, Panama and Venezuela; and greater Buenos Aires, Argentina. Coca-Cola FEMSA estimates that the territories in which it markets beverage products contain approximately 47 percent of the population of Mexico, 25 percent of the population of Brazil, 98 percent of the population of Colombia, 48 percent of the population of Guatemala, 100 percent of the populations of Costa Rica, Nicaragua, Panama and Venezuela, and 31 percent of the population of Argentina. In 2009, Coca-Cola FEMSA's net sales of beverage products were approximately $8 billion. In 2009, approximately 63 percent of the unit case volume of Coca-Cola FEMSA consisted of Trademark Coca-Cola Beverages; approximately 36 percent of its unit case volume
We refer to our employees as "associates." As of December 31, 2009 and 2008, our Company had approximately 92,800 and 92,400 associates, respectively, of which approximately 17,900 and 16,500, respectively, were employed by consolidated variable interest entities ("VIEs"). The increase in the total number of associates in 2009 was primarily due to an increase in the Latin America operating group driven by its finished product business, as well as an increase in the Bottling Investments operating group. These increases were partially offset by the impact of the Company's ongoing productivity initiatives. As of December 31, 2009 and 2008, our Company had approximately 11,700 and 13,000 associates, respectively, located in the United States, including Puerto Rico, of which approximately 190 and 90, respectively, were employed by consolidated VIEs.
Our Company, through its divisions and subsidiaries, has entered into numerous collective bargaining agreements. We currently expect that we will be able to renegotiate such agreements on satisfactory terms when they expire. The Company believes that its relations with its associates are generally satisfactory.