The Coca-Cola acquisition of its bottlers failed because
A) Coca-Cola had valuable competencies.
B) the bottling business required too much capital investment and time.
C) consumers consumed less because the distribution channel changed.
D) Coca-Cola spent less money on the distribution of concentrates and syrups.

Question

Quizplus · Accepted Answer

Research shows that a majority of acquisitions of public corporations result in value destruction rather than value creation. For decades, Coca-Cola used independent bottlers to distribute Coke products to stores and restaurants. Coke would manufacture the concentrate used to make its soft drinks, but the actual bottling of the product and distribution to end retailers was handled by about 70 regional bottling firms. In 2010, Coca-Cola undertook a major initiative to buy its bottlers and create a national vertically integrated business operation, where Coke would not only manufacture the concentrate but also own its bottling and distribution system. The firm spent 12.3 billion USD to acquire Coca-Cola Enterprises, it largest bottling partner. Coca-Cola reversed course in 2015, announcing that it would sell off all its bottling operations. In the first step of this process, it agreed to sell nine production facilities to three bottling companies for 380 million USD. Additionally, Coke announced it would complete the process of selling off its remaining bottling plants and distribution facilities by the end of 2017. What happened to trigger this rapid change? Coke found that being in the bottling business did not help its financial performance. In the words of Jack Russo, an analyst at Edward Jones Investing-bottling is a low margin, capital-intensive business. As a result, Coke saw its operating margins fall from 20.7 percent in 2009 to 11.4 percent in 2014.

The Coca-Cola Acquisition of Its Bottlers Failed Because