Coca-Cola set to sell some bottling units to partners

NEW DELHI: American beverages major Coca-Cola is close to finalising deals to sell part of its bottling operations in India to three franchise bottling partners, three officials directly aware of the developments said.
The combined value of the deals in the first phase of the selloff is estimated at Rs 1,500-2,000 crore, one of the officials said.

“The company-owned Hindustan Coca-Cola Beverages (HCCB) is in final stages of negotiations to divest its plants to Moon Beverages, Ladhani Group and the Kandhari Group,” another official said. “All three have been longstanding franchise bottlers of Coca-Cola India, and the size of the deals vary depending on the plant capacity and infrastructure.”

The deals are expected to be closed next month.

A Coca-Cola India spokesperson in an email revert said: “This news is speculative and as a matter of policy we do not comment on speculation.”


Officials at the independent franchise bottlers with whom Coca-Cola is in talks with could not be reached for comment.

HCCB has 18 plants and accounts for two-thirds of Coca-Cola India’s volumes. The maker of Coke and Thums Up colas also
has 13 independent franchise bottlers. For 2018-19, HCCB saw 373% year-onyear increase in net profit at ?322 crore, according to data from business research platform Tofler. Revenues for the year had increased 4% at ?9,455 crore.

The move to refranchise bottling operations is in line with Coca-Cola’s global strategy to divest asset-heavy operations.

“Refranchising brings down fixed costs significantly since it reduces employee headcount and reduces built-in costs of distribution, leading to higher profitability,” one of the officials cited earlier said.

“Operating costs of global companies are significantly higher and selling concentrate and other brand-building functions are more profitable.”

In June this year, Coca-Cola had named a new head for M&A and new ventures—the first such vertical in India to focus on acquisitions and divestments. The maker of Sprite soft drink and Minute Maid juice said in a post earnings call last fortnight that better growth in India and China had helped it post 4% volume growth in the Asia Pacific region.

Announcing earnings for the July-September 2019 quarter, the company’s Atlanta headquarters said better growth in its packaged water business in India contributed to global business. It also said expansion of its premium water business in India under the Smartwater franchise had grown ‘successfully’ and become the second-largest premium water brand in the market. It added India is now the fourth-largest market globally for Smartwater.

Recent launches included new variants of Minute Maid juices, Georgia hot and cold tea and coffee, Aquarius water and Aquarius Glucocharge and Smartwater, as aerated drinks sales remain soft on health concerns by consumers.