Unless you’re an attentive investor or you work in the industry, you may not realise that Coca-Cola isn’t just one giant corporation; it’s a system of almost 275 independent small companies connected to The Coca-Cola Company.
Coca-Cola VP of Innovation and Entrepreneurship David Butler writes in his book “Design to Grow: How Coca-Cola Learned to Combine Scale and Agility (and How You Can Too),” cowritten with Linda Tischler, that under this franchise model, “when it wants to scale fast, it can.”
It began in 1899 when two Tennessee lawyers, Benjamin F. Thomas and Joseph B. Whitehead, approached Coke’s chairman Asa Griggs Candler and asked if he would let them bottle Coke. The drink was sold as a syrup that retailers would mix with soda water, but it wasn’t typical to drink cola on the go or bring it into the home.
Candler decided to hand over the bottling rights for just a dollar, which he never collected, because he was content with maintaining the rights to the syrup.
This marked the beginning of what the company internally calls The Coca-Cola System, a franchise partnership with bottlers that allowed the brand to truly take off.
Many of these bottlers are public companies with significant revenues, like Coca-Cola Consolidated Bottling Co., Coca-Cola Enterprises, and Coca-Cola Bottling Company United. The franchise model allows The Coca-Cola Company to avoid costs associated with manufacturing, storage, and distribution.
In 2013, The Coca-Cola Company updated its franchise model in the US and Canada when it split its North American operations into Coca-Cola North America and Coca-Cola Refreshments. The latter made an agreement with several major American bottlers where it expanded the bottlers’ territory but took ownership of their production assets.
That means that The Coca-Cola Company is now determining ways to simultaneously control more of its business than it previously had while giving more responsibilities to its most significant bottlers.
“This model has allowed the company to leverage global brands but remain very local,” Butler writes. “And this is what drives its ability to execute.”
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