clock menu more-arrow no yes

Filed under:

Coca-Cola announces refranchising; profit beats

In this file photo made May 11, 2009, Coca-Cola bottles are shown at Carrefour supermarket in Paris.
In this file photo made May 11, 2009, Coca-Cola bottles are shown at Carrefour supermarket in Paris.
Thibault Camus, Associated Press

NEW YORK — Coca-Cola reported first-quarter results on Tuesday that came in above expectations and said it struck deals to start refranchising its business in the U.S.

The world's biggest beverage maker, which makes Sprite, Dasani and Powerade, had purchased the bulk of its North American bottlers in 2010 with the goal of streamlining production under one roof. CEO Muhtar Kent has suggested that the company would eventually refranchise the territories to independent bottlers.

A franchising model lowers overhead costs for Coca-Cola because it means regional bottlers take on the responsibilities for delivering its drinks to supermarkets, gas stations and other retailers. But the details on how exactly Coca-Cola plans to structure its franchise business in the U.S. over the long term are still not clear.

Under the deal announced Thursday, for instance, Coca-Cola would still own the production plants in the affected territories. The bottlers, which are independent companies, would buy trucks and other equipment and deliver to expanded areas.

According to the industry tracker Beverage Digest, the deals mean Coca-Cola will end up handling about 74.5 percent of its U.S. bottling business, down from 79.4 percent.

Meanwhile, Coca-Cola said that global volume during its first quarter rose 4 percent, with Thailand, India and Russia posting strong gains. In its flagship North American market, volume rose 1 percent, fueled by growth in non-carbonated drinks such as Honest Tea and Simply Orange juice.

But soda declined 1 percent in the region, reflecting a continued movement away from soft drinks in developed countries such as the U.S.

For the three months ended March 29, the company said it earned $1.75 billion, or 39 cents per share. That's down from $2.1 billion, or 45 cents per share, a year earlier.

Not including one-time items such as restructuring charges, however, the company says it earned 46 cents per share. That's better than the 45 cents per share analysts expected.

Net revenue declined to $11.04 billion, from $11.14 billion a year ago, hurt by foreign currency exchange rates and two fewer selling days in the period. Analysts expected $10.97 billion, according to FactSet.

Shares of Coca-Cola Co. rose almost 3 percent at $41.23 in premarket trading.