Coca-Cola Races to Sell off Manufacturing Businesses by 2017
23 Mar 2016 --- Coca-Cola is expected to sell off its US manufacturing and distribution assets by next year, earlier than expected, as it looks to cuts costs and avoid being an acquisition target, according to a report.
Last year, Coca-Cola announced it was to sell nine of its US production businesses with a value of around $380 million, as part of plans to make itself more nimble and cut costs.
Earlier this year, the drinks giant updated the market and said it was looking to sell off all of its production units, which manufacture and distribute its drinks.
It is selling the businesses off as Coca-Cola chief executive Muhtar Kent wants to focus the Coca-Cola on its core business-and more profitable business –of making drinks such as standard Coca-Cola, Diet Coke, Sprite and Fanta, as opposed to manufacturing and distributing them.
Coca-Cola believes the sell-off will save it around $3 billion in costs.
It had been expected to sell them off by 2018 but according to a report in the Wall Street Journal, it is now hoping to sell them off by 2017.
The report says that Coca-Cola is now hurrying through the divestment because investors in Coca-Cola are becoming restless after the company missed profits targets in the last two years, which has led to speculation that it could become an acquisition target.
Carlos Laboy, a drinks analyst at HSBC, said: “The clock is ticking.”
It is selling its plants to partners that currently help it make its drinks as it argues that they are better distributors of its drinks as they are more focused on the local communities that they serve than Coca-Cola is.
These include Coca-Cola Bottling Co. Consolidated, Coca-Cola Bottling Company United and Swire Coca-Cola US.
To date, Coca-Cola has inked in deals to sell approximately 45 percent of its bottling operations.
By selling off the businesses, Coke estimates that its revenues will be cut by just shy of $14 billion in 2015 but its margins will increase by over 10 percent.
