Coca-Cola Spins the Bottle(rs)

by: Judy Weil

Coca-Cola Company (NYSE:KO) executives talk about bottlers on its Q408 conference call:

We will continue to invest with our bottling partners. Our bottling partners’ appetite for investment remains very strong around the world.

We have got a very good program in place in terms of the new integrated supply chain initiative that will consolidate the common supply chain initiatives. It will optimize product flow and create over $150.0 million of annual incremental operating income by 2011 for CC and the Coca-Cola Company. I think all our other bottling partners are going to benefit from that. It is a very serious initiative.

Q: CapEx has risen and you talked about investing in companies and company-owned bottlers. It’s a little bit of a change from how we have historically thought of CapEx at the Coca-Cola Company. So how long do you see this higher capex trend continuing and as you begin to divest more bottlers does it have less of an incremental impact year-over-year?

A: Capex last year and in 2009, $1.8 billion to $2.0 billion for 2009, about half of it or so is actually related to the bottling investments group or the bottlers that we own. My expectation... is over time we will be net sellers and as we actually sell bottlers, the CapEx will come down fairly significantly.


The CapEx is really being driven right now because as we continue to invest in China and the Philippines and Germany and those bottlers, and really invest in India, investing in cold drink equipment, those kinds of things, to drive volume, value… But CapEx will start coming down significantly over the next five years, if you will, as we are disposing of some of those bottlers.

After the investment that we had in Coca-Cola Bottlers Tokyo, we are continuing to work to create the next cluster in Japan, around [Kyoto] and if there is a need for us to inject ourselves in a small way, to ensure that we can play a role of catalyst there, we will do so.

As in the fourth quarter, our revenues will continue to be impacted due to structural changes primarily related to disposal of bottlers. We would expect a similar drag during a portion of 2009 as we cycle the sale of the re-milled bottler in Brazil at the end of Q2 and the Pakistan bottler investment at the end of Q3.


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