DELIVERING THE DRINKS
O’Hara company’s beverage division to triple in size with Coca-Cola deal
The Coca-Cola Co. sends massive numbers of bottles of Sprite, Monster energy drinks and Smartwater to supermarkets and convenience stores around the globe.
But, after years of consolidating its supply chain, the Atlantabased soft drink giant has begun selling its bottling operations and working with local companies to handle the task of getting drinks from bottlers to consumers.
And that is a big deal for one O’Hara-based company.
Abarta is in the process of inking a deal with Coca-Cola to acquire sales and distribution rights for 90 percent of Pennsylvania — the exception is the Philadelphia area — and in Fairmont, W.Va. Financial terms were not disclosed.
The agreement means Abarta’s beverage segment will triple in size, according to CEO Charles Bitzer.
“We’re going to have a much bigger footprint,” he said.
As a result, Abarta Coca-Cola Beverages is adding almost 1,250 employees to its operations throughout the state, bringing its total workforce to about 1,600. The company has acquired 12 distribution facilities, bringing its total to 14, and plans to spend $10 million a year over the next decade on equipment, facilities, delivery fleet and community support throughout Pennsylvania.
The company will distribute the “full family” of Coke products, including the namesake brands, Sprite, Dasani, Monster, Vitamin Water, Powerade and Smartwater.
Abarta is a privately held, family-owned company that is unusually diversified. It operates branches not only in beverages but also oil and gas, frozen foods and technology.
The recent agreement is not the O’Hara company’s first time working with The Coca-Cola Co. In fact, the beverage giant helped inspire the company’s name.
Abarta got involved in the bottling business when one of its founders, Rolland Adams, bought a 90 percent stake in the Bethlehem and Pittsburgh CocaCola operations in 1963. The remaining 10 percent was purchased by his three sons-in-law, John Bitzer Jr., George Roehr and Don Taylor.
The name Abarta comes from a combination of the three last names.
The company later bought Coca-Cola operations in Cleveland and Buffalo. After selling some facilities, it retained plants in Cleveland, the Lehigh Valley and Downingtown in Chester County.
But those plants, which employ about 600 people, switched from bottling to distribution at the end of May in preparation for the new deal with Coca-Cola. Production jobs shifted to positions like forklift operators, Mr. Bitzer said. In addition to changing equipment at the plants and retraining workers, Abarta also switched its IT infrastructure to a service called Cona, or CocaCola One North America.
One reason to get out of bottling is that consumer preferences are changing and it’s a challenge for smaller companies
to keep up, Mr. Bitzer said.
“It’s packaging,” he said. “People want products more often, but in smaller quantities. It’s how and where they’re consuming.”
Changing markets
Coca-Cola is undergoing a sweeping business transformation that’s expected to be complete by the end of 2017. The strategy, first announced about a decade ago, comes at a time when soft drink consumption is fizzling.
U.S. soda sales fell 2.4 percent in the four weeks ending June 18 compared with the same period last year, according to Bloomberg Intelligence, citing data from market research company IRI.
Meanwhile, sales in North America may remain weak through 2021, falling about 0.8 percent per year, “even as producers implement plans to cut beverage calories consumed per person in the U.S. by 20 percent by 2025, in part by introducing lower-calorie drinks and smaller portion sizes for fullcalorie ones,” Bloomberg said in February.
As for cutting back on ownership of bottling operations, Bloomberg notes those parts of the business “typically generate lower profit margins compared with the core Coca-Cola business of producing soft drink concentrates to affiliated bottlers under licensing agreements.”
Analysts have noted that the plan has taken a cut out of the company’s revenue but the long-term goal aims to create a less costly operation.
“The company is shrinking its total size by shedding its bottling assets, but becoming more profitable as the capital-intensive businesses are divested,” analysts said at Moody’s Investors Service.
For Abarta, the distribution business is a local one built on relationships.
For instance, it’s focusing on what it calls “static routing,” meaning the supermarket or convenience store that will get Abarta’s shipments can expect to be served by the same delivery person. About 75 percent of the company’s beverage employees are visible to customers.
“Coca-Cola looked at independent franchises like us and said they want partners that are closer to the market than they can get,” Mr. Bitzer said. “I think they’re right.”