The Coca-Cola Company (NYSE:KO) sealing bottling deals, uncorking profits

by Loventrice Farrow | Wednesday, Apr 17, 2013 | 653 views

Northern, WI 04/17/2013 (usastockreport) – Reported first-quarter profits of The Coca-Cola Company (NYSE:KO) (Closed: $42.37, Up by 5.69%) have exceeded analyst projections as sales volumes in Latin America rose. The company has also announced that it will be selling some of its distribution rights for bottling, in North America. In a statement the company said that its net income dropped from $2.05 billion or 45 cents per share that it stood at , a year earlier, to $1.75 billion by 15 percent or 39 cents per share. Its profits stood at 46 cents per share with the exclusion of some items and exceeded the average analyst estimate of 44 cents.

One step at a time
New package sizes have been introduced in Latin America by Muhtar Kent the Chief Executive Officer to emphasize Powerade and Del Valle juices the soft drinks branded by Coca-Cola. Kent has been streamlining distribution in North America and the company has said that under the new agreement, it will retain manufacturing. However, it will sell and swap a few distribution rights amongst five franchise bottlers who are considerably smaller. Eventually a large part of the bottling operations will be divested and this is merely the first step in that direction. Analysts are of the opinion that Coca-Cola does not want distribution assets as capital intensive as these, to indefinitely show up on the balance sheet.

The cola demand
Since 2010, when the company reacquired the Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) (Closed: $60.56, Up by 4.40%) operations in North America, it has been in efforts to restructure its distribution in the United States. Close to 80 percent of the volume of drinks that are sold are bottled here. There was a 4 percent rise in beverage volumes in Latin America with Brazil and Mexico in the lead. There has been very little change in the volume that is consumed in Europe primarily due to the weak spending and consumer confidence as well as poor weather conditions.

In expansion mode
The company said that Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) (Closed: $60.56, Up by 4.40%), Swire Coca-Cola USA, Coca-Cola Bottling Company United Inc., Corinth Coca-Cola Bottling Works Inc and Coca-Cola Bottling Company High Country are the five bottlers who will be getting additional expanded territories while there may be more expansions in the pipeline. Around 75 percent of the U.S sales volume will eventually be distributed.

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