The Coca-Cola model splits ownership of the brand and concentrate from capital-intensive bottling and logistics, by far the bulk of which is handled by independent franchises, with the remainder owned by the company. The system works for Coca-Cola by providing it with the superior margins that come with an asset-lite model, while giving it control over the bottlers.
In general, Coca Cola appear to favour the franchise option and in fact operate Bottling Investments Group, dubbed “the hospital ward” by outsiders, who describe it as the place where ailing bottlers are spruced up before being sold on again. According to the FT, the company is in the process of building scale and closer links with its franchisees through greater co-ordination and consolidation of the sprawling bottling empire. Details of regional/local performance and analysts' estimates of financial impact in key regions are given in the FT article.
Food for thought?
Whilst the option of splitting brand ownership from production & logistics may not be available to all other suppliers, the advantage in terms of ‘allowing’ the multiple franchisees to handle the commercial relationship (esp. margins, prices and terms) with the trade, and the consequent dilution of retailer power, has to make this alternative worthy of exploration…
By keeping commercial issues tied to ‘local’ production units, the supplier could then focus upon brand building, and more effective management/negotiation/compliance ref trade spend, without the distraction of having to deal with other parts of the commercial relationship…
Too radical? Welcome to these unprecedented times….
In general, Coca Cola appear to favour the franchise option and in fact operate Bottling Investments Group, dubbed “the hospital ward” by outsiders, who describe it as the place where ailing bottlers are spruced up before being sold on again. According to the FT, the company is in the process of building scale and closer links with its franchisees through greater co-ordination and consolidation of the sprawling bottling empire. Details of regional/local performance and analysts' estimates of financial impact in key regions are given in the FT article.
Food for thought?
Whilst the option of splitting brand ownership from production & logistics may not be available to all other suppliers, the advantage in terms of ‘allowing’ the multiple franchisees to handle the commercial relationship (esp. margins, prices and terms) with the trade, and the consequent dilution of retailer power, has to make this alternative worthy of exploration…
By keeping commercial issues tied to ‘local’ production units, the supplier could then focus upon brand building, and more effective management/negotiation/compliance ref trade spend, without the distraction of having to deal with other parts of the commercial relationship…
Too radical? Welcome to these unprecedented times….
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