US: Coca-Cola Co, PepsiCo may close plants - analysts

The Coca-Cola Co and PepsiCo may close several facilities in North America as part of their bottler integration processes, Sanford Bernstein analysts have predicted.

Bernstein said this week that more plant closures are likely as the companies seek extra synergies from their respective bottler takeovers, against the backdrop of a sluggish North American soft drinks market.

Last year, Coca-Cola purchased the North American operations of its largest bottler, Coca-Cola Enterprises (CCE), while PepsiCo sealed a deal to purchase the global operations of its own largest two bottlers, Pepsi Bottling Group and PepsiAmericas.

While all the bottlers had previously made efforts to reduce their number of manufacturing and distribution facilities in the US, Bernstein said that it believes PepsiCo could shut another 44 facilities and Coca-Cola could shut a further 34 facilities across North America. The analyst group estimated combined job losses of around 4,500.

"During PepsiCo's last quarterly conference call, the company increased its cost savings target by US$150m while increasing its integration costs by $275m, suggesting an acceleration of longer-payback endeavours, such as manufacturing and/or distribution rationalisation," said Bernstein research analyst Ali Dibadj.

"Although neither Coca-Cola nor PepsiCo has emphasised these types of savings, we believe that there might be material manufacturing and production savings to be had through the ongoing consolidation of both the red and blue systems in the US," he added.

In response, a Coca-Cola spokesperson told just-drinks yesterday (24 March): "I won’t speculate on what we may do at some future point, but it is certainly the case that we are constantly evaluating our supply chain and distribution processes in order to continue to provide our customers with the freshest, superior quality products."

PepsiCo declined to comment on the Bernstein note.

Last week, Beverage-Digest reported that the US carbonated soft drinks category fell by around 0.5% in 2010. The soft drink category in the US hasn't seen an increase since 2004, the publication said, signalling that flagging sales numbers are not just recession driven. The total category's volume has now sunk back down to 1996 levels.

As US consumers turn away from CSDs, the big winners appear to be energy drinks, ready-to-drink tea, and sports drinks. "The colas have gotten a little bit boring to people," said Dibadj.