Coca-Cola Co. has announced its plans to sell 9 bottling plants amid the company's sluggish sales volumes in the United States.
The world's largest soda-manufacturer, Coca-Cola Co., made an announcement Thursday that the company will be selling nine production facilities to three of its largest independent bottlers — Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Co. United and Swire Coca-Cola USA. According to The Columbus Dispatch, the bottlers will acquire the plants for $380 million as the company pursues to drop low-margin assets and reduce production costs in the United States.
Moreover, Coca-Cola Co. has announced that all four bottling companies, including Coke's operating group in North America, will also form a new supply group to work together on decisions in areas such as new packaging launches and ingredient purchases. The new group will also represent about 95 percent of the company's manufacture volume in America, New Hampshire Union Leader has learned.
Meanwhile, Coca-Cola Co. Chief Financial Officer Kathy Waller acknowledged last year that Coke likely wouldn't book a positive return on its U.S. bottling investment this decade. And with persistent challenges in many key emerging and developing markets like Brazil, Russian Federation and China, the move would likely help the company. Due to the closing down of some facilities in recent years, the beverage maker has now 71 plants in America.
On Thursday, Coca-Cola also said that it will start a National Product Supply System with its bottlers. Rapid News Network reported that Coke is aiming for $3 billion in cost-cutting for the year, and is redirecting savings into marketing like its "Share a Coke" campaign.
So far, Coca-Cola Co. has not sold production facilities yet. But the sale of the plants, which produce soft drinks like Coke, Sprite and Fanta, is expected to take place between 2016 and 2018. As for the company's stock, it has now an average rating of "Hold" and an average price target of $44.73. And aside from sluggish sales, the company has also been hurt by the instability in emerging markets, which formerly supplied much of its growth.
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