The Coca-Cola Company took another significant initiative by building a robust and more streamlined production system in its flagship market. The company has announced the formation of a new National product Supply system (NPSS) in the United States.
The NPSS will facilitate optimal operations of the U.S. product supply system for Coca-Cola bottlers to achieve the lowest optimal delivered and manufactured cost for all bottlers in the Coca-Cola’s system. The NPSS will enable system investment to build sustainable capability and competitive advantage. Moreover, the system will prioritize quality service and innovation in order to effectively meet and exceed consumer and customer requirements.
Under the new NPSS, three existing independent producing bottlers, Coca-Cola Bottling Co. Consolidated (Consolidated), Swire Coca-Cola USA (Swire), Coca-Cola Bottling Company (United), and the Company-owned Coca-Cola Refreshments along with Coca-Cola North America, will be joining Coca-Cola's National Product Supply Group (NPSG).
The NPSG will monitor key national product supply activities for these NPSS bottlers that currently represent about 95 per cent of the US produced volume.
Chairman and CEO of The Coca-Cola Company, Muhtar Kent said that their US operating model continues to become stronger, more aligned and competitive. Kent added that today, the company is taking further action to boost profitable growth for its entire US system. The company will leverage the strengths and capabilities of four major producing bottlers in its US system (Consolidated, Swire, United and Coca-Cola Refreshments), to operate as one highly streamlined and highly competitive national product supply system.
Under the initial terms of the Letters of Intent, it is expected that each NPSS bottler will obtain certain production facilities from CCR within their transitioning distribution regions. Initially, it was planned that CCR will remove the accompanying nine production facilities with an estimated net book value of $380 million.
The terms further stated that the consolidation will acquire production facilities in Cincinnati, Oh., Sandston, Va., Indianapolis and Portland, In., and Baltimore and Silver Spring, Md. Coca-Cola Bottling Company (United) will acquire the production facility in New Orleans, La, whereas, Swire Coca-Cola USA will acquire production facilities in Phoenix, Az. and Denver, Co.
The move of these production facilities from CCR to NPSS bottlers is expected to take somewhere in between, 2016 and 2018. The sale of additional production facilities from CCR to NPSS bottlers in previously announced transitioning distribution regions will be considered in due course. CCR's domains will continue to be refranchised as previously announced, and decisions on any remaining production facilities in those regions will likewise be considered at that moment.
Sandy Douglas, Executive Vice President and President of The Coca-Cola North America, said that the NPSS will benefit all of their US bottling partners by driving their production system to manufacture product at minimal cost. The board members of the National Product Supply Group (NPSG) will concentrate on innovation and infrastructure planning, and optimal sourcing.
Douglas believes the NPSS model allows the company to leverage their significant system scale with a unique competitive advantage of being able to act with speed. This move will be powered by the outstanding commercial capabilities of a strong bottling system.
The Coca-Cola Company is divesting its other assets, including warehouse and driving trucks in the US, and bottling globally. Today, the company announced that the new transitions are subject to the parties for reaching definitive agreements. The partners are committed to working together to implement a smooth transition with less disruption for consumers, customers and system associates.