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two-tiered in the sense that there were independent concentrate
makers and independent bottling facilities, each usually owned
separately yet dependent upon one another.
Economic Landscape
The bottling industry began to realign fundamentally around
1986 as Coke and Pepsi vertically integrated their bottling
businesses by buying their bottling facilities. Coke and Pepsi
could then produce, bottle, and distribute their own beverages
without independent bottlers.
This marked an important departure from the bottling
business of the past when bottling facilities could contract with
Coke or Pepsi to exclusively bottle and distribute their drinks
in a given geographic region. Independent bottling companies
lost that resource after Coke and Pepsi vertically integrated and
pressured the independent bottling companies to sell their
franchise rights to Coke or Pepsi.
In addition, 1986 was the heyday of the leveraged buyout
(LBO) era, in which investors were scouring the country for high
cashflow industries. The bottling industry with its fairly high
cashflow business was an attractive industry for an LBO.
Bottlers
One LBO opportunity in the bottling industry arose when
Philip Morris, Inc. chose to exit the soft drink bottling
business. The managers of this bottling business (the management
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Last modified: May 25, 2011