Coca-Cola and small bottlers settle lawsuit

CHICAGO, Feb 12 (Reuters) Coca-Cola Co. has reached an agreement under which several of its bottlers would dismiss lawsuits against the world's largest soft-drink company and two of its largest bottlers, ending a dispute over the distribution of its beverages.

Under the agreement, Coca-Cola and the bottlers would test and develop new customer service and distribution programs to supplement the Coca-Cola's direct-to-store deliveries. The agreement also provides for payments to smaller bottlers in the event national distribution agreements impinge on their territories.

Last year, a group of bottlers sued Coca-Cola, its largest bottler, Coca-Cola Enterprises Inc. and Coca-Cola Bottling Co Consolidated to prevent the test and delivery of the PowerAde sports drink to Wal-Mart Stores Inc. warehouses instead of to individual stores.

The test proceeded in the second quarter of 2006 and is continuing, Coca-Cola North America President Sandy Douglas said in conference call with reporters.

That test, while small, was seen as a potential threat to smaller bottlers that deliver Coca-Cola products to individual stores in specific territories.

Under the new agreement, executives from Coca-Cola, its two largest bottlers and the smaller bottlers would oversee, develop and test new distribution systems.

FORMAL PROCESS The smaller bottlers received the protection they sought in the agreement, said W Thomas Haynes, executive director of the Coca-Cola Bottlers Association.

''There rally wasn't anything more that we were trying to get,'' he said in an interview.

The bottlers represented in the lawsuit account for about 11 percent for Coca-Cola North America's distribution volume, he said.

The distribution tests will initially focus on certain noncarbonated beverages, Douglas said, declining to say which beverages and which customers would be involved.

One example Douglas gave of a potential test would be bringing a smaller, niche beverage to a retailer's warehouse rather than delivering that product to individual stores.

Douglas notes that some customers already receive products at warehouses, instead of at individual stores.

''What the bottlers and the company agreed was to formally manage the process going forward,'' Douglas said.

The financial impact of the agreement is not particularly large, but the deal represents a move by Coca-Cola and its distributors to be more flexible in what it offers customers, John Faucher, an analyst J P Morgan Securities Inc said in a research note.

''The Coke system is taking a step forward in terms of its ability to adapt to the changing demand of its customers and we view the shift of certain categories to warehouse delivery as simply a part of that,'' said Faucher, who rates Coca-Cola ''overweight'' and Coca-Cola Enterprises ''neutral.'' Coca-Cola shares were up 43 cents at 48.19 dollars around midday today on the New York Stock Exchange and Coca-Cola Enterprises was up 33 cents at 20.63 dollars. Coca-Cola Bottling Co Consolidated was up 1.11 dollars at 59.15 dollars on Nasdaq.

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