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Customer Relationship Management of Coca-Cola Company -
January 17th, 2011
The Coca-Cola Company (NYSE: KO) is a beverage retailer, manufacturer and marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its flagship product Coca-Cola, invented by pharmacist John Stith Pemberton in 1886. The Coca-Cola formula and brand was bought in 1889 by Asa Candler who incorporated The Coca-Cola Company in 1892. Besides its namesake Coca-Cola beverage, Coca-Cola currently offers more than 500 brands in over 200 countries or territories and serves 1.6 billion servings each day.
The company operates a franchised distribution system dating from 1889 where The Coca-Cola Company only produces syrup concentrate which is then sold to various bottlers throughout the world who hold an exclusive territory. The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.
The Coca-Cola Company is headquartered in Atlanta, Georgia. Its stock is listed on the NYSE and is part of DJIA, S&P 500 Index, the Russell 1000 Index and the Russell 1000 Growth Stock Index. Its current chairman and CEO is Muhtar Kent.
Coca-Cola Bottling Co. Consolidated is the second largest Coca-Cola bottler in the United States. This manufacturer, marketer, and distributor of soft drinks, primarily products of the Coca-Cola Company, is the local Coke bottler for almost 15.5 million people and 120,000 retail outlets in 12 southeastern states.
Coca-Cola Bottling Co. Consolidated can trace its history to 1902, when three North Carolina entrepreneurs--J. B. Harrison, J. Luther Snyder, and J. P. Gibbons--set out to bring bottled Coca-Cola to the Carolinas. Before these pioneers got to work, the thirsty had to travel to drugstore soda fountains to enjoy a Coke. In the early days of bottled Coke, production workers washed refillable bottles by hand, used manually operated bottling machines to fill them, corked them by hand, and sold them from horse-drawn carriages. These efforts helped build a thirst for Coke that survived the Great Depression and the sugar rationing of World War I and World War II. By the early 1970s, hand-washed bottles and horse-drawn carts had given way to sophisticated bottling and distribution operations. The offspring of the first North Carolina bottling companies were beginning to consolidate and expand their territories.
Coke Consolidated traces its more recent history to 1972, when the Charlotte Coca-Cola Bottling Co. renamed itself the Coca-Cola Bottling Company of Mid-Carolinas and began trading its stock publicly. The following year, it acquired the Coca-Cola bottlers in Greensboro, Winston-Salem, Raleigh, and Hamlet. The fast-growing concern became Coca-Cola Bottling Co. Consolidated, which was incorporated in Delaware on May 14, 1980. James Johnson, who started working summers at the Statesville Coca-Cola Bottling Company when he was 11, became president and chief executive officer of both Charlotte Coca-Cola Bottling Company and the Carolina Coin Caterers Corporation in 1969. Johnson saw the new Coke Consolidated through its incorporation as president and CEO; from 1980 to 1987, he was vice chairman of the board and director of public affairs.
In 1983, chairman J. Frank Harrison, Jr., hired Marvin Griffin, from Coca-Cola USA to be Coke Consolidated's chief executive. Under Griffin's leadership, Coke Consolidated began to expand its territory more aggressively. In 1984, it acquired three Georgia bottlers: Federal Coca-Cola Bottling Co. in Columbus, the Pageland Coca-Cola Bottling Works, and Waycross-Douglas Coca-Cola Bottling. The following year, Coke Consolidated purchased Wometco Coca-Cola Bottling Co. for $300 million, thereby acquiring new Coke franchise territories in Alabama, Tennessee, Virginia, and West Virginia. The sale of Consolidated Coin Caterers Corp. and 1.5 million new shares helped finance the Wometco purchase. In 1986 Coke Consolidated added bottling companies in Florida, Georgia, Tennessee, and Virginia. In 1987 and 1988, the company sold its Canadian subsidiary and added new territories in Tennessee, Kentucky, and North Carolina.
Several outside factors hurt Coke Consolidated's profitability in the mid-1980s. First, the introduction of New Coke in April 1985--and the public's emphatic assertion that it preferred the old Coke--brought big losses to Coke bottlers across the country. Coke Consolidated suffered along with everyone else. The same summer, the Coca-Cola Company began marketing a new line of clothes under the Coke label. Because the new line was manufactured abroad, it created a public-relations nightmare for Coke Consolidated, a company located in the heart of the depressed textile communities of the Carolinas. Coca-Cola responded to consumer protests with a $5 million donation to the textile and garment industries' Crafted With Pride campaign, but the damage was done. A $5 million settlement in a lawsuit brought by a local bottler also cut into profits. Heavy discounting was unable to raise profits. In April 1987, Griffin was out as CEO.
The difficulties did not impede Coke Consolidated's expansion. In 1989, the company obtained the Coca-Cola Bottling Company of West Virginia, Inc., from The Coca-Cola Company in exchange for 1.1 million shares of common stock and about $4 million. The same year it added the territories of Dick-son, Tennessee, and Laurel, Mississippi. Coke Consolidated continued to acquire territories in North Carolina, Tennes-see, and Mississippi in 1990 and 1991, including the franchise rights for Barq's and Dr. Pepper in the Jackson, Tennessee, territory.
Coke Consolidated was involved in two price-fixing cases in the late 1980s, winning a major decision in one and arranging a novel settlement in the other. In the first, a major antitrust case, the company was one of several accused of price-fixing by Sewell Plastics, Inc., an Atlanta company that pioneered the development of two-liter bottles for soft drinks. In 1986, Sewell sued Coca-Cola and bottlers in North Carolina, South Carolina, Georgia, Virginia, Tennessee, and Alabama for $17 million, alleging that Southeastern Container Inc., a cooperative the bottlers created in 1982 with the help of Coca-Cola, violated antitrust laws by setting prices for the plastic bottles that the cooperative produced. The U.S. District Court in Charlotte, North Carolina, dismissed the suit, ruling that the formation of the cooperative had actually increased competition and resulted in lower prices to consumers. In September 1990, a federal appeals court upheld the lower court's decision. In February 1991, the U.S. Supreme Court declined to renew the suit.
In a smaller price-fixing case, Coke Consolidated apparently became the first bottler to use coupons in a settlement. The West Virginia attorney general filed a price-fixing complaint against the company, alleging that it conspired to fix soft-drink prices from 1982 to 1985. Coke Consolidated, which said it acquired the offending bottler in 1985, agreed to settle the case by paying $50,000 to the state and attaching $50,000 worth of 20-cent coupons to two-liter bottles of Diet Coke, Diet Sprite, and Caffeine-Free Diet Coke. It distributed the bottles in areas of West Virginia where the alleged violations occurred.
In late 1991, analysts touted Coke Consolidated as a good stock bargain. Although a price war with PepsiCo's wholly owned bottling operation kept earnings down, Coke Consolidated per-share earnings were up after losing a cumulative $5.54 between 1986 and 1990. Analyst Joseph Frazzano told Forbes that although Coke Consolidated's stock was undervalued based on its cash flow, it was no target for an unfriendly takeover raid: the company had 9.2 million outstanding shares, Coca-Cola Co. held 30 percent of the equity, and the Harrison family controlled 86 percent of the votes.
The acquisition of Sunbelt Coca-Cola in 1991 for approximately $15.2 million in cash and company debt helped Coke Consolidated grow by 35 percent in 1991 and 1992. Before the acquisition, Coke Consolidated was the fourth-largest Coca-Cola bottler, with annual sales of $400 million. Adding Sunbelt, number eight with annual sales of $200 million, vaulted Coke Consolidated to second, behind only Coca-Cola Enterprises, Inc., an Atlanta company owned by Coca-Cola Co. By taking on the Charleston, South Carolina bottler, Coke Consolidated continued its growth strategy of purchasing bottlers in adjoining territories.
In 1993, a joint venture with the Coca-Cola Co. gave Coke Consolidated management responsibility for Wilmington Coca-Cola Bottling Works, Inc., Coastal Coca-Cola Bottling Co., and Eastern Carolina Bottling Company. Under the terms of the venture, named the Piedmont Coca-Cola Bottling Partnership, Coke Consolidated acquired new sales centers and territories in parts of South Carolina, North Carolina, and Virginia. The company reported that the joint venture would increase sales by 15 percent and reduce the company's outstanding debt by about 20 percent. In addition, it gave Coke Consolidated control of more than 90 percent of the territory in the Carolinas.
In the late 1980s, Coke Consolidated invested in advanced computer systems to provide management with timely and relevant data. All its route salespeople received handheld computers to record sales transactions. That innovation allowed salespeople to transmit the information via phone lines and, sometimes, by satellite, to the company's Charlotte computer center at the end of the business day. The following morning, managers could pull up freshly compiled volume, sales mix, selling price, and gross margin information. Another information innovation, the Lab Management System, allowed the company to store and analyze information on its extensive quality assurance program. Its computer system, Norand, also enabled Coke Consolidated to incorporate new acquisitions into the system almost as soon as it acquired them. The sales centers of the companies involved in the Piedmont Partnership were all operating on Norand in less than two months.
Other Coke Consolidated innovations have come in the areas of customer service and sales. A 24-hour toll-free number allowed customers to call the Consumer Response Center with questions and comments and provided information for the company to use in determining trends and consumer concerns. The 'Cold Drink' organization made Coca-Cola products available in factories, entertainment venues, recreation areas, hotels, offices, and schools for on-site consumption. The 'fast-lane merchandiser' put cold Cokes at check-out lines in retail outlets to encourage impulse buying.
Coke Consolidated's close relations with the Coca-Cola Co. have involved marketing collaborations as well as business opportunities. In the early 1990s, Coke Consolidated began working with Coke on the Mello Yello 500 NASCAR race at Charlotte Motor Speedway. In the weeks before the race, point-of-sale displays, visits by show cars and drivers to retail outlets, and tailored advertising drew attention to the race and boosted sales. On race day, 180,000 fans at the Speedway and millions more at home would see the event and the related advertising.
Coke Consolidated earned a record $14.8 million in 1993 on net sales of nearly $687 million, compared to a loss of $118.3 million (attributed to mandatory accounting changes) on sales of almost $656 million in 1992. The net income applicable to common shareholders was $1.60 per share. The company attributed the improvement in earnings to the 5 percent boost in revenues, in addition to lower packaging costs, improved operating efficiencies, and the tax and financing cost benefits of a refinancing of preferred stock in late 1992.
These results capped a five-year period during which the company's sales and operating cash flow nearly doubled, from $389 million in 1989 to 1993's $687 million. Income from operations during the period increased by approximately 20 percent each year, from $23.8 million to $57.3 million, and adjusted earnings per share (a measure that takes into account earnings per share plus amortization per share) grew by 30 percent annually. The return to shareholders during the five-year period averaged 13 percent.
Coca-Cola Consolidated, a Fortune 500 company, produced more than 343,000 cases of soda per day from its four manufacturing centers--Charlotte/Snyder Production Center, North Carolina; Roanoke, Virginia; Nashville, Tennessee; and Mobile, Alabama. From company headquarters in Charlotte, North Carolina, president and CEO James L. Moore oversaw 10 division offices, 74 distribution centers, and the work of approximately 5,000 employees. The company could boast steady growth, solid family ownership, and a strong relationship with the owner of perhaps the most recognizable brand name in the world. As it looked ahead, Coke Consolidated was confident that it would continue to generate volume growth from within and add new customers through the acquisition of additional territories.
Principal Subsidiaries: Columbus Coca-Cola Bottling Co.; Coca-Cola Bottling Co. of Nashville, Inc.; Dickson Coca-Cola Bottling Co.; Coca-Cola Bottling Works of Columbia, Tenn.; Coca-Cola Bottling Co. of Roanoke, Inc.; Coca-Cola Bottling Co. of Mobile, Inc.; Albany CCBC Inc.; Panama City Coca-Cola Bottling Co.; Case Advertising Inc.; CC Beverage Packing, Inc.; Tennessee Soft Drink Production Company; Coca-Cola Bottling Company of West Virginia, Inc.; Coca-Cola Bottling Company of Jackson, Inc.; Mrs. Sullivan's Pies, Inc.; Jackson Acquisitions, Inc.; Sunbelt Coca-Cola Bottling Company, Inc.; Palmetto Bottling Company; Fayetteville Coca-Cola Bottling Company; Coca-Cola Bottling Co. Affiliated, Inc.