🔒East Hartford Coca-Cola bottler sees greater local control after buyout by regional franchisee

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When Wayne Pesce started his career with Coca-Cola, Connecticut — like many states — was home to multiple bottling plants for the soft drink giant, run predominantly by family owned production franchises that operated more independently from the demands of the Atlanta-based parent company.

That business model, said Pesce, who is now president of the Connecticut Food Association, led at times to competing goals between the production demands of Coca-Cola Co.'s corporate headquarters, which generates its greatest profits from the sale of soda syrup for company-owned brands, and the revenue driver for bottlers — response to local consumer demand.

In the past, products the national enterprise prioritized may not have been top sellers locally, creating a tension at times between profit motives.

To better align its go-to-market strategies with its bottling system, Pesce said, Coca-Cola spent several years buying out independent bottling centers, which have declined from hundreds of facilities nationwide to only 68 today. In recent years, with restructured contracts with bottlers, Coca-Cola has divested all of its company-owned facilities, including the sale last September of its 400,000-square-foot production, distribution and sales center in East Hartford to New Hampshire-based Coca-Cola Bottling Company of Northern New England (CCNNE), which — in light of additional acquisitions in the Northeast — has more than tripled its workforce and expanded annual production from 27 million cases to more than 82 million.

As the general manager of the 500-employee East Hartford facility, Mike Defeo is responsible for managing a production center that cranked out more than 30 million cases last year. The facility, which runs 24-hours a day, produces cans — at a dizzying pace of 2,200 per minute — and two-liter and one-liter bottles across multiple product lines.

Although carbonated soft drink sales have declined over the past decade, as consumer tastes have shifted to more health-conscious options like teas and bottled water, soda sales across North America still totaled more than $81 billion in 2016, dwarfing growing categories like water ($23 billion) and sports drinks ($9.4 billion), according to Beverage Digest, which also found that during that time Coke's market share in North America increased from 17.3 percent to 17.8 percent.

The market-share figures are substantially higher in the Hartford area, where Coca-Cola tops 45 percent of the region's soft-drink market. In part, that's because despite the headwinds of shifting consumer demand, new aluminum tariffs and the threat of a soda tax, which has been explored in Connecticut, Coca-Cola has continued to innovate both in its product offerings and packaging, including zero sugar sodas like Coke Zero and 100-calorie mini-cans, which have seen double-digit sales growth in New England over the past year.

But Defeo sees room to expand his territory's piece of the pie even further given CCNNE's focus on expanded local control. He points to accounts — most especially in the quick-serve restaurant category of clients, like pizza places — that his sales team has won back this past year under the banner of new ownership.

“We've been able to offer some newer programs and new pricing [at a local level] and that's helped,” Defeo said.

When East Hartford was corporate-controlled, pricing was more black and white. Under CCNNE, local sales teams have more opportunity to offer better pricing based on, for instance, volume.

That's part of regional bottler's strategy, according to Rick Sewall, senior director of large stores sales for CCNNE, which also acquired distribution territories throughout New England and upstate New York in 2017.

“We want to give each of our locations a level of autonomy aligned with our broader sales and community goals,” Sewall said. That autonomy, he added, helps to create a culture of local brand ambassadors to capitalize on community relationships.

Tech and workforce

CCNNE is also leveraging the automation of the East Hartford facility's distribution wing, which was upgraded with robotics in 2015. The upgrades, Defeo says, have improved packaging and delivery efficiency, and led to more high-tech jobs for a company workforce that has grown steadily over the years.

Like the industry itself, developing Coca-Cola's workforce has changed too, Defeo says. He points to his own career trajectory, which started as a Coca-Cola truck driver, then in merchandise before becoming an account executive.

“The majority of people still with the company started on our delivery trucks and learned the business from the bottom up,” Defeo said. “But Millennials have never driven a [delivery] truck, so they often start in sales.”

Defeo is bullish about his company's future. He sees the national brand continuing to invest in product innovation, including the announcement earlier this month that Coke acquired a minority stake in Body Armor, the sports drink start-up backed by former NBA star Kobe Bryant, which will now have access to Coke's bottling system. He also joins a regional bottler that's one of the largest in the Coca-Cola system, with more than $1 billion in annual revenue, but with the flexibility to grow the brand locally.