Coca-Cola Continues Refranchising Effort In Tri-State Area

The Coca-Cola Company has taken another step towards its goal of refranchising all of its company-owned territories in the United States by the end of this year with the formation of Liberty Coca-Cola Beverages LLC, a new bottling company that will serve a critical region that includes the metropolitan areas of New York City and Philadelphia, as well as most of New Jersey and a small portion of Connecticut.

The company today announced that Liberty, a joint venture between veteran Coca-Cola Refreshments executives Paul Mulligan and Fran McGorry, has signed a letter of intent for the territories mentioned above, referred to as the Tri-State Metro Operating Unit. The area includes four production plants in Philadelphia, Maspeth, N.Y., Moorestown, N.J., and Elsmsford, N.Y.

“This is a critical milestone in a journey that dates back more than a decade,” said J. Alexander “Sandy” Douglas Jr., president of Coca-Cola North America, in a press release. “This important bottling territory will be in great hands under the leadership of Paul and Fran. They are experienced, locally respected operators who see many growth opportunities in the Tri-State market.”

McGorry will continue in his role as president of the Tri-State Metro Operating Unit of Coca-Cola Refreshments. Mulligan will also continue as president of Coca-Cola Refreshments, a position he has held since 2014.

A definitive agreement will need to be reached before the deal can be closed.

“Becoming a Coca-Cola franchise owner is an honor and a privilege, with a responsibility and challenge we respect,” Mulligan said in a press release.

“I have been part of the Coca-Cola family for 30 years, and we see this as a great opportunity to accelerate the business while being an integral part of the local community,” McGorry added.

The letter of intent from Liberty marks another significant step in Coca-Cola’s long-term mission to redevelop its bottling operations that began in 2010 when the company acquired North American bottling businesses, leading to the establishment of Coca-Cola Refreshments, an in-house bottling and distribution unit.

The company reversed strategies in 2013 when then CEO and chairman Muthar Kent announced that it would be returning bottling operations to franchise owners as part of a greater effort to reduce costs and increase efficiency by shifting its focus to supplying concentrates and syrups to authorized companies. Coca-Cola believed that lifting the burden of low-margin manufacturing and distribution would also allow for greater attention on new product development.

In February 2016, Coca-Cola announced it was accelerating its timeline by setting the new goal of refranchising all North American territories by the end of 2017, three years earlier than previously expected. This plan also included the sale of all of the company’s 51 cold-fill production facilities in the U.S.

Including the letter of intent from Liberty, Coca-Cola has reached definitive agreements or signed letters of intent to refranchise territories representing 100 percent of U.S. bottler-delivered distribution volume under Coca Cola Refreshments, or about 90 percent overall. The remaining approximately 10 percent of Coca-Cola Refreshments North American volume is from Canada.

According to the press release, the Coca-Cola system in North America will ultimately “be comprised of economically aligned bottling partners that have the capability to serve major customers, coupled with the ability to maintain strong, local ties across diverse markets in the United States and Canada.”

In April, the soda giant underperformed analysts’ projections for its first-quarter earnings, reporting a 20 percent drop in quarterly profit which was impacted by the higher costs related to the refranchising project.

Other territories recently closed in the refranchising effort include North Florida (Tampa-based Coca-Cola Beverages Florida), eastern Michigan (Great Lakes Coca-Cola Distribution LLC) and Hawaii (Odom Corp. of Bellevue, Wash.).