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Coke to invest Rs 160 crore, buy back excess capacities

Coke to invest Rs 160 crore, buy back excess capacities

Author | Source: The Economic Times | Friday, Dec 22,2006 9:10 AM

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Coke to invest Rs 160 crore, buy back excess capacities

Coca-Cola bottling is investing about Rs 150-160 crore to buy back the excess capacities of its bottlers which were set up at Coke's behest when it was pushing for volumes three years ago. The move is in line with the soft drink firm's restructuring exercise aimed at driving manufacturing efficiencies. In all, manufacturing lines of 12 excess facilities are being bought out.

Sources told ET that the first deal has been settled with AP-based co-packer Laxmi Balaji Bottling, in Chittoor near Tirupati. Laxmi Balaji Bottling has manufacturing lines dedicated mainly to PET bottles for soft drinks and juice-based drinks. Another buy-out is expected to be sealed in north Bareilly shortly.

Hindustan Coa-Cola Beverages (Coca-Cola bottling) has been in talks with co-packers in Balia, Bareilly, Kanpur, Aurangabad and Rourkela to buy-out their respective manufacturing facilities. According to sources, while HCCB has bought out assets of co-bottlers in some cases, other deals involve giving bottlers returns on their investments.

When contacted by ET, a Coca-Cola spokesperson said, “We want to align our manufacturing capacities for efficient and productive utilisation of our assets. We are in negotiations with our co-bottlers for acquiring excess capacities.”

Many of these were set up at the time the soft drink firm was pushing its volume strategy. The arrangement was that bottlers would invest their own money in new bottling facilities and Coke would buy an assured volume from them annually.

With its renewed focus on profitability and not just volumes, Coca-Cola is in the process of realigning idle company-owned capacities. In addition, new lines are being put up for forthcoming product launches.

In all, the company proposes to invest $250 million for the purpose of restructuring bottling and marketing operations. The company claims that its decision to split marketing and bottling operations last year has begun showing desired results.

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