(COKE) rose to a fresh record high Thursday morning after Coca-Cola Company (KO) said it is forming a new National Product Supply System in the U.S to optimize production and reduce costs. Its subsidiaries include Propimex, S.de R.L.de C.V., Controladora Interamericana de Bebidas, S.de R.L.de C.V., Spal Industria Brasileira de Bebidas, S.A, Distribuidora y Manufacturera del Valle de Mexico, S.de R.L.de C.V. and Servicios Refresqueros del Golfo, S.de R.L.de C.V.
The initial terms of the agreement call for Coca-Cola Refreshments, which is owned by Coke, to divest nine production facilities valued at about $380 million to the other bottlers between 2016 and 2018. Meanwhile, the sale of additional production facilities from C.C.R.to N.P.S.S. bottlers in previously announced transitioning distribution territories will be considered in due course, the company said.
While the macro environment is improving in the US, management expects persistent challenges in many key emerging/developing markets like Brazil, Russian Federation and China. Chief Financial Officer Kathy Waller acknowledged previous year that Coke likely wouldn’t book a positive return on its US bottling investment this decade.
The Coca-Cola Co. has formed a new National Product Supply System (N.P.S.S.) in the United States, a move the company said puts it on the path toward building “a stronger, more streamlined production system in its flagship market”.
Coke says it now has 71 plants in the US after shuttering several in recent years. “Coke’s primary expertise is sales and marketing”, said Mr. Haynes, who headed the Coca-Cola Bottlers’ Association from 2002 to 2012. The Company makes its beverage products available to consumers throughout the world through its network of Company- owned or controlled bottling and distribution businesses, in addition to independent bottling partners, providers, wholesalers and retailers. On average, analysts forecast that Coca-Cola FEMSA, S.A.B.de C.V. will post $3.32 earnings per share for the current year.
As part of the plan, Coca-Cola Bottling Co will buy plants in Virginia, Maryland, Indiana and Ohio, Coca-Cola Bottling Co United will buy a plant in New Orleans and Swire will buy plants in Arizona and Colorado.
Last October it expanded a cost-cutting program, promising to deliver $3 billion in annualized savings by 2019.
Chelsey Dulaney contributed to this article.