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Refreshment Reformation

A 114-year-old Alabama private company pops the cap on a 21st Century transformation.

Located in Birmingham, Coca-Cola Bottling Company United is the third largest Coca-Cola bottler in North America and the largest privately held Coca-Cola bottler. United has grown steadily over the past century, taking economic fluctuations in stride. And through a recently announced realignment, it promises to increase the company’s size by 45 percent.

“The predecessor company of Coca-Cola Bottling Company United, Crawford Johnson and Co., has been a part of the Alabama economy for 111 years,” says today’s CEO Claude Nielsen. “It was a very modest beginning in 1902.” Entrepreneur Crawford Johnson founded his company with little more than a single employee, wagon, mule and a 25-by-50-foot facility at 1st Alley and 24th Street, Birmingham. “He took the risks and invested in a simple, refreshing, yet unproven idea,” says Nielsen.

“These humble beginnings are a constant reminder that we should never take anything for granted,” Nielsen says. “Our founder’s entrepreneurial spirit has actually continued through product innovation, which has fueled our growth.”

The company’s starting production capacity was 30 cases per hour. For its first 57 years, Johnson’s business only offered Coca-Cola in a 6.5 ounce bottle. Now, Coca-Cola Bottling Company United distributes more than 750 products.

Coca-Cola Bottling Company United was officially founded in 1974, when several Coca-Cola bottlers around the Southeast consolidated into one company. As the independent company grew, it acquired and consolidated franchises around the Southeast, operating 18 distribution centers and three production centers.

In 1979, Nielsen joined the company following four years in banking. He initially worked in accounting at the Birmingham division, before moving on to operations.

He worked in several departments, including distribution, strategy and management before becoming the company’s CEO in 1991. “It’s been very rewarding,” he says. “I work with great people, and I am able to be associated with a wonderful product and excellent brands.”

As part of his management routine, Nielsen takes a yearly assessment of all his company’s distributions centers. He meets with employees at the facilities and within their local markets. “While I’m there, we look for new opportunities within those markets,” he says. “We want our employees to ‘take ownership’ of their markets. We try to operate with a very coherent corporate strategy, but delegate execution authority and responsibility to the local level.”

Nielsen and company take pride in United’s status as a private business, believing it to be an important part of the company’s identity. “Private businesses can define value with non-conventional metrics,” he says. “The value of our brands or the goodwill that exists with our consumers and customers is not quantified or recorded on our balance sheet. However, we carefully track our brand health and market share metrics. That is why stewardship of our brands is so critical to our long-term success and the value of our enterprise.”

Nielson and the United team view employees and their families as a part of the communities they reach. “We understand that the men and women representing Coca-Cola in the local market develop relationships with customers and communities,” he says. “In fact, we rely on those men and women to represent the spirit of our company every day. Community reinvestment is a core principle of our company.” Coca-Cola United invests is several philanthropies, including youth, education and active lifestyles, and prides itself on supporting organizations such as United Way, Boys and Girls Club and the Birmingham Civil Rights Institute.

Community investment is ingrained within Coca-Cola United’s operating model. “Our business is local,” Nielsen says. “The success of our enterprise is based on serving consumers, customers and communities with excellence. That means we will always nurture our brands, support and enable our team of employees, and we will always be relentless about outstanding execution, which our customers expect of us.”

Nielsen believes that being a private company gives Coca-Cola United a strategic advantage in the face of economic headwinds. “The most significant benefit, from our perspective, is our ability to remain focused on our long-term strategy and consistently execute our business plan, even when we experience challenging circumstances or disappointing results.” Although the company is preparing for substantial growth, enthusiasm is curbed by a struggling economy, rising commodity costs and fluctuating fuel prices.

“All of these factors can adversely affect our financial performance,” says Nielsen. “During these times, we try not to overreact. We focus on what we can control, improve execution and work diligently to eliminate waste. When the economy and other conditions improve, our business will be healthy, and we will be at a competitive advantage.”

A major part of that advantage promises to be the historic reorganization announced on April 16. United and The Coca-Cola Co. announced a territory expansion that would incorporate existing facilities in Alabama, Georgia, Florida and Tennessee. “We are excited about the opportunities ahead for United through both acquisition and organic growth,” says Nielsen. “We are also very sober about the work ahead to integrate a very complex acquisition that materially increases the size of our company.”

Much of the new acquisition borders United’s existing territory. The joining of contiguous franchises is part of a new operating model geared toward efficiency. The Coca-Cola Co. and United intend to implement a goods model allowing each bottler to receive territory rights and distribution assets.  

The transaction is contingent on the involved parties reaching an agreement by the end of 2013. United expects the transaction to proceed without interruption and hopes to close the deal next year. “We definitely anticipate economies of scale,” says Nielsen. “We’re acquiring contiguous territories, so by geographic proximity and the size of the new territory, we stand to benefit greatly.”

Although the immediate results of the transaction are not certain, Nielsen is optimistic that the Alabama-based company’s enterprise will be an economic boon for the region. “I expect and certainly hope that our state will benefit from our business,” says Nielsen. “Frankly, it is too early in our due diligence process to predict the impact on jobs, but I fully expect the impact will be positive.”

The franchises coming into United’s fold were previously bought by The Coca-Cola Co. to be resold to a trusted bottler. “There is no doubt that a major factor in their choice was the United team,” Nielsen says. “Our management team, at all levels and sales centers, has an average of 24 years of service.”

Nielsen considers his company’s experience and business knowledge to be high among United’s appealing qualities. “It gives us continuity in leadership, in purpose and in relationships,” he says “That’s the real secret ingredient, and the reason The Coca-Cola Co. has confidence in us.”

Thomas Little is a freelance contributor to Business Alabama. He lives in Birmingham.

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