Cola giant, The Coca-Cola Company (KO - Analyst Report) recently entered into an agreement with SABMiller plc (SAB.L) and Gutsche Family Investments, to merge their bottling operations in Southern and East Africa to form the largest Coca-Cola bottling entity in the continent- Coca-Cola Beverages Africa.

SABMiller plc is one of the largest bottler of Coca-Cola drinks. On the other hand, Gutsche Family Investments has majority stake in Coca-Cola Sabco, a South African bottling company of Coca-Cola.

Coca-Cola Beverages Africa, with about 30 bottling plants, will cater to 12 countries with potential revenue of $2.9 billion.

According to the agreement among the three companies, 57% of the equity stake in Coca-Cola Beverages Africa will be held by SABMiller, 31.7% by Gutsche Family Investments: and the rest 11.3% by The Coca-Cola Company.  

As part of the deal, The Coca-Cola Company will acquire worldwide rights to SABMiller’s Appletiser brand and acquire or license rights to another 19 non-alcoholic ready-to-drink brands in Africa and in Latin America for a cash consideration of about US$260 million.

However, SABMiller will retain ownership of its non-alcoholic malt beverages in Africa and Latin America and its Coca-Cola franchises in El Salvador and Honduras.

Initially, Coca-Cola Beverages Africa will produce and distribute Coca-Cola beverages in nine countries, including South Africa, Kenya, Ethiopia, Mozambique, Tanzania, Uganda, Namibia, Comoros and Mayotte.

Later SABMiller will also include its Swaziland soft drinks operation and its listed subsidiaries in Botswana and Zambia.

The Coca-Cola Company, a Zacks Rank #4 company, is in the process of shifting to a more franchise-based model under which it will gradually grant new expanded U.S. territories to five of its bottlers to distribute its beverages.

In Nov 2014, The Coca-Cola Company entered into a definitive agreement to grant its territories in the greater Chicago area to Great Lakes Coca-Cola Distribution, L.L.C., a wholly-owned subsidiary of Reyes Holdings, L.L.C. The transaction is expected to close in 2015. The deal is intended to improve the efficiency of its operating territories and boost overall profits in the U.S.

The company plans to re-franchise the majority of its company-owned North American bottling territories by the end of 2017 and a substantial portion of the remaining territories no later than 2020.

Moreover, the company is acquiring equity stake in other growing companies. Coca-Cola bought 10% stake in Keurig Green Mountain, Inc. (GMCR - Analyst Report) in Feb 2014 for about $1.25 billion and subsequently announced its intention to gradually increase its stake to up to 16%. Coca-Cola also plans to purchase 16.7% stake in energy drink maker, Monster Beverage Corporation (MNST - Analyst Report), later this year for $2.15 billion. The new beverage partnership model should improve margins, going forward.

A better ranked beverage company includes, Dr Pepper Snapple Group, Inc. (DPS - Analyst Report), carrying a Zacks Rank #2 (Buy).

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