Coca-Cola’s European bottling plants merge to form a single company: Cost cutting and expansion of market in sight

In an obvious attempt at cost-optmisation, three European bottlers of Coca-Cola drinks have decided to merge and create a single company. The merging partners are independent bottlers such as Coca-Cola Enterprises, Coca-Cola Iberian Partners and Coca-Cola Erfrischungsgetränke, which is a subsidiary of the Coca-Cola in Germany.

The new company will be called "Coca-Cola European Partners" and it is hoping to cut costs substantially in the next three years. In the new set up, CEE shareholders will own 48 percent while CCIP will keep 34 percent and Coca-Cola Co. will retain 18 percent. The deal is also structured in such a way so as to to reduce tax burden with CCE moving its corporate headquarters from Atlanta to London to avoid high tax exposure in the US.

New management

Under the deal, investors in Coca-Cola Enterprises would receive one share in the combined company and one-time cash payment of $14.50 (AU$19.6) per share. Sol Daurella, the executive chairwoman of Coca-Cola Iberian Partners, will be the chairperson of the unified company, while John Brock, the chairman and chief executive of Coca-Cola Enterprises will be the chief executive.

Reflecting on the significance of the deal, Muhtar Kent, Coke's Chief Executive called it a “major milestone and major transaction” benefiting all parties involved. There will be a larger geographic footprint for bottlers with effective competition in the sales of non-alcoholic beverages. The company is expecting to achieve annual cost savings of $350 million (AU$473 million) in three years of completing the transaction. Together, the new bottler would have more than 50 bottling plants and 27,000 employees with products sold in Andorra, Belgium, Britain, France, Germany, Iceland, Luxembourg, Monaco, Norway, Portugal, Spain, Sweden and the Netherlands.

Larger market

According to the Coke CEO, the combined company would serve more than 300 million consumers in 13 countries in Western Europe and is expected to post revenue of $12.6 billion (AU$17.2 billion) in 2015, reports BBC . Kent also said the strong leadership drawn from the three organisations will make Coca-Cola European Partners to deliver better and make it effective in servicing customers throughout Western Europe, while driving growth in multiple categories. After the approval from regulators and shareholders, the deal is expected to close in the second quarter of 2016.

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