What changed in this filing

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Item 1. Business

2022-02-22 compared with 2021-02-26 · 54 added, 54 removed, 197 unchanged (35% of the section changed)

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Approximately 83% of our total bottle/can sales volume to retail customers consists of products of The Coca‑Cola Company, which include some of the most recognized and popular beverage brands in the world.

We also distribute products for several other beverage companies, including BA Sports Nutrition, LLC (“BodyArmor”), Keurig Dr Pepper Inc.

We also distribute products for several other beverage companies, including Keurig Dr Pepper Inc.

(“Dr Pepper”) and Monster Energy Company (“Monster Energy”).

Our purpose is to honor God in all we do, serve others, pursue excellence and grow profitably.

Frank Harrison, III, the Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J.

Frank Harrison, III, Chairman of the Board of Directors and Chief Executive Officer of the Company, together with the trustees of certain trusts established for the benefit of certain relatives of the late J.

Frank Harrison, Jr., control shares representing approximately 86% of the total voting power of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis.

As of December 31, 2020, The Coca‑Cola Company owned approximately 27% of the Company’s total outstanding Common Stock and Class B Common Stock on a consolidated basis, representing approximately 5% of the total voting power of the Company’s Common Stock and Class B Common Stock voting together.

As of December 31, 2021, The Coca‑Cola Company owned shares of the Company’s Common Stock representing approximately 5% of the total voting power of the Company’s Common Stock and Class B Common Stock on a consolidated basis.

The number of shares of the Company’s Common Stock currently held by The Coca‑Cola Company gives it the right to have a designee proposed by the Company for nomination to the Company’s Board of Directors in the Company’s annual proxy statement.

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Sparkling beverages are carbonated beverages and the Company’s principal sparkling beverage is Coca‑Cola.

Still beverages include energy products and noncarbonated beverages such as bottled water, tea, ready to drink coffee, enhanced water, juices and sports drinks.

Still beverages include energy products and noncarbonated beverages such as bottled water, ready to drink tea, ready to drink coffee, enhanced water, juices and sports drinks.

Our sales are divided into two main categories:

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The Coca-Cola Company Products:

Barqs Root Beer Fanta Zero AHA Honest Tea

Cherry Coca-Cola Fresca Coca-Cola Energy Hubert’s Lemonade

Cherry Coca-Cola Zero Mello Yello Coca-Cola with Coffee Minute Maid Juices To Go

Coca-Cola Mello Yello Zero Core Power Peace Tea

Coca-Cola Orange Vanilla Minute Maid Sparkling Dasani POWERade

Coca-Cola Vanilla Pibb Xtra Dasani Flavors POWERade Zero

Coca-Cola Zero Sugar Seagrams Ginger Ale FUZE Tum-E Yummies

Diet Barqs Root Beer Sprite glacéau smartwater Yup Milk

Diet Coke Sprite Zero Sugar glacéau vitaminwater

Fanta Gold Peak Tea

Barqs Root Beer Fanta Zero AHA Gold Peak Tea

Cherry Coca-Cola Fresca BODYARMOR products Honest Tea

Cherry Coca-Cola Zero Mello Yello Coca-Cola with Coffee Hubert’s Lemonade

Coca-Cola Mello Yello Zero Core Power Minute Maid Juices To Go

Coca-Cola Orange Vanilla Minute Maid Sparkling Dasani Peace Tea

Coca-Cola Vanilla Pibb Xtra Dasani Flavors POWERade

Coca-Cola Zero Sugar Seagrams Ginger Ale FUZE POWERade Zero

Diet Barqs Root Beer Sprite glacéau smartwater Tum-E Yummies

Diet Coke Sprite Zero Sugar glacéau vitaminwater Yup Milk

Products Licensed to Us by Other Beverage Companies:

Diet Dr Pepper Sundrop BodyArmor products Monster Energy products

Diet Sundrop Dunkin’ Donuts products NOS®

Dr Pepper Full Throttle Reign products

Diet Dr Pepper Sundrop Dunkin’ Donuts products NOS®

Diet Sundrop Full Throttle Reign products

Dr Pepper Monster Energy products

Beverage Distribution and Manufacturing Agreements

We have rights to distribute, promote, market and sell certain nonalcoholic beverages of The Coca‑Cola Company pursuant to comprehensive beverage agreements (collectively, the “CBA”) with The Coca‑Cola Company and Coca‑Cola Refreshments USA, Inc.

(“CCR”), a wholly owned subsidiary of The Coca‑Cola Company.

The CBA requires the Company to make quarterly sub-bottling payments to CCR on a continuing basis in exchange for the grant of exclusive rights to distribute, promote, market and sell the authorized brands of The Coca‑Cola Company and related products in certain of the Company’s distribution territories.

In addition to customary termination and default rights, the CBA requires us to make ongoing capital expenditures in our distribution business and to meet certain minimum volume requirements, gives The Coca‑Cola Company certain approval and other rights in connection with a sale of the Company or of the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, beverage components or other beverage products other than the products of The Coca‑Cola Company and expressly permitted cross-licensed brands without the consent of The Coca-Cola Company.

In addition to customary termination and default rights, the CBA requires us to make minimum, ongoing capital expenditures in our distribution business and to meet certain minimum volume requirements, gives The Coca‑Cola Company certain approval and other rights in connection with a sale of the Company or of the distribution business of the Company and prohibits us from producing, manufacturing, preparing, packaging, distributing, selling, dealing in or otherwise using or handling any beverages, beverage components or other beverage products other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross-licensed brands without the consent of The Coca-Cola Company.

We also have rights to manufacture, produce and package certain beverages bearing trademarks of The Coca‑Cola Company at our manufacturing plants pursuant to a regional manufacturing agreement with The Coca‑Cola Company entered into on March 31, 2017 (as amended, the “RMA”).

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Coca‑Cola bottlers or to The Coca‑Cola Company.

The RMA contains provisions similar to those contained in the CBA restricting the sale of the Company or the manufacturing business of the Company, requiring minimum capital expenditures in our manufacturing business, limiting our ability to manufacture products other than the products of The Coca‑Cola Company and expressly permitted cross-licensed brands without the consent of The Coca‑Cola Company and allowing for the termination of the RMA.

The RMA contains provisions similar to those contained in the CBA restricting the sale of the Company or the manufacturing business of the Company, requiring minimum, ongoing capital expenditures in our manufacturing business, prohibiting us from manufacturing any beverages, beverage components or other beverage products other than the beverages and beverage products of The Coca‑Cola Company and certain expressly permitted cross-licensed brands without the consent of The Coca‑Cola Company and allowing for the termination of the RMA.

In addition to our agreements with The Coca‑Cola Company and CCR, we also have rights to manufacture and/or distribute certain beverage brands owned by other beverage companies, including Dr Pepper and Monster Energy, pursuant to agreements with such other beverage companies.

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Our distribution agreements with Monster Energy grant us the rights to distribute certain products offered, packaged and/or marketed by Monster Energy.

Similar to the CBA, these beverage agreements contain restrictions on the use of trademarks, approved bottles, cans and labels and the sale of imitations or substitutes, as well as termination for cause provisions.

Similar to the CBA, these beverage agreements contain restrictions on the use of trademarks and approved bottles, cans and labels and the sale of imitations or substitutes, as well as provisions for their termination for cause or upon the occurrence of other events defined in these agreements.

Sales of beverages under these agreements with other beverage companies represented approximately 17%, 16% and 15% of our bottle/can sales volume to retail customers in 2021, 2020 and 2019, respectively.

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The Company has an incidence-based pricing agreement with The Coca‑Cola Company, which establishes the prices charged by The Coca‑Cola Company to the Company for (i) concentrates of sparkling and certain still beverages produced by the Company and (ii) certain purchased still beverages.

Under the incidence-based pricing agreement, the prices charged by The Coca‑Cola Company are impacted by a number of factors, including the incidence rate in effect, our pricing and sales of finished products, the channels in which the finished products are sold, the package mix and, in the case of products sold by The Coca‑Cola Company to us in finished form, the cost of goods for certain elements used in such products.

The Coca‑Cola Company has no rights under the incidence-based

pricing agreement to establish the prices, or the elements of the formulas used to determine the prices, at which we sell products, but does have the right to establish certain pricing under other agreements, including the RMA.

Under the incidence-based pricing agreement, the prices charged by The Coca‑Cola Company

are impacted by a number of factors, including the incidence rate in effect, our pricing and sales of finished products, the channels in which the finished products are sold, the package mix and, in the case of products sold by The Coca‑Cola Company to us in finished form, the cost of goods for certain elements used in such products.

The Coca‑Cola Company has no rights under the incidence-based pricing agreement to establish the prices, or the elements of the formulas used to determine the prices, at which we sell products, but does have the right to establish certain pricing under other agreements, including the RMA.

National Product Supply Governance Agreement

We are a member of a national product supply group (the “NPSG”), which is comprised of The Coca‑Cola Company, the Company and certain other Coca‑Cola bottlers who are regional producing bottlers in The Coca‑Cola Company’s national product supply system (collectively with the Company, the “NPSG Members”), pursuant to a national product supply governance agreement executed in 2015 with The Coca‑Cola Company and certain other Coca‑Cola bottlers (as amended, the “NPSG Governance Agreement”).

The stated objectives of the NPSG include, among others, (i) Coca‑Cola system strategic infrastructure investment and divestment planning; (ii) network optimization of plant to distribution center sourcing; and (iii) new product/packaging infrastructure planning.

Under the NPSG Governance Agreement, the NPSG Members established certain governance mechanisms, including a governing board (the “NPSG Board”) comprised of representatives of certain NPSG Members.

Under the NPSG Agreement, the NPSG Members established certain governance mechanisms, including a governing board (the “NPSG Board”) comprised of representatives of certain NPSG Members.

The NPSG Board makes and/or oversees and directs certain key decisions regarding the NPSG.

Subject to the terms and conditions of the NPSG Governance Agreement, each NPSG Member is required to comply with certain key decisions made by the NPSG Board, which include decisions regarding strategic infrastructure investment and divestment planning, optimal national product supply sourcing and new product or packaging infrastructure planning.

Subject to the terms and conditions of the NPSG Agreement, each NPSG Member is required to comply with certain key decisions made by the NPSG Board, which include decisions regarding strategic infrastructure investment and divestment planning, optimal national product supply sourcing and new product or packaging infrastructure planning.

We are also obligated to pay a certain portion of the costs of operating the NPSG.

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On March 31, 2017, we entered into an amended and restated ancillary business letter with The Coca‑Cola Company (the “Ancillary Business Letter”), pursuant to which we were granted advance waivers to acquire or develop certain lines of business involving the preparation, distribution, sale, dealing in or otherwise using or handling of certain beverage products that would otherwise be prohibited under the CBA.

Under the Ancillary Business Letter, subject to certain limited exceptions, we were prohibited from acquiring or developing any line of business inside or outside of our territories governed by the CBA prior to January 1, 2020 without the consent of The Coca‑Cola Company.

After January 1, 2020, the consent of The Coca‑Cola Company, which consent may not be unreasonably withheld, would be required for us to acquire or develop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components and other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited under the CBA represent more than a certain threshold of net sales (subject to certain limited exceptions).

Under the Ancillary Business Letter, the consent of The Coca‑Cola Company, which consent may not be unreasonably withheld, would be required for us to acquire or develop (i) any grocery, quick service restaurant, or convenience and petroleum store business engaged in the sale of beverages, beverage components and other beverage products not otherwise authorized or permitted by the CBA or (ii) any other line of business for which beverage activities otherwise prohibited under the CBA represent more than a certain threshold of net sales (subject to certain limited exceptions).

Markets Served and Facilities

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Certain information regarding each of these markets follows:

Market Description Approximate

Population Manufacturing

Market Description Manufacturing

Plants Number of

Carolinas The majority of North Carolina and South Carolina and portions of southern Virginia, including Boone, Hickory, Mount Airy, Charlotte, Raleigh, Winston-Salem, Greensboro, Fayetteville, Greenville and New Bern, North Carolina, Conway, Marion, Charleston, Columbia, Greenville and Ridgeland, South Carolina and surrounding areas.

15 million Charlotte, NC 17

Charlotte, NC 17

Central A significant portion of northeastern Kentucky, the majority of West Virginia and portions of southern Ohio, southeastern Indiana and southwestern Pennsylvania, including Lexington, Louisville and Pikeville, Kentucky, Beckley, Bluefield, Clarksburg, Elkins, Parkersburg, Craigsville and Charleston, West Virginia, Cincinnati and Portsmouth, Ohio and surrounding areas.

8 million Cincinnati, OH 13

Cincinnati, OH 12

Mid-Atlantic The entire state of Maryland, the majority of Virginia and Delaware, the District of Columbia and a portion of south-central Pennsylvania, including Easton, Salisbury, Capitol Heights, Baltimore, Hagerstown and Cumberland, Maryland, Norfolk, Staunton, Alexandria, Roanoke, Richmond, Yorktown and Fredericksburg, Virginia and surrounding areas.

23 million Baltimore, MD

Baltimore, MD

Silver Spring, MD

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Mid-South A significant portion of central and southern Arkansas and Tennessee and portions of western Kentucky and northwestern Mississippi, including Little Rock and West Memphis, Arkansas, Cleveland, Cookeville, Johnson City, Knoxville, Memphis and Morristown, Tennessee, Paducah, Kentucky and surrounding areas.

7 million West Memphis, AR

West Memphis, AR

Nashville, TN 10

Mid-West A significant portion of Indiana and Ohio and a portion of southeastern Illinois, including Anderson, Bloomington, Evansville, Fort Wayne, Indianapolis, Lafayette and South Bend, Indiana, Akron, Columbus, Dayton, Elyria, Lima, Mansfield, Toledo, Willoughby and Youngstown, Ohio and surrounding areas.

13 million Indianapolis, IN

Indianapolis, IN

Twinsburg, OH 10

Total 66 million 12 68

The Company is also a shareholder of South Atlantic Canners, Inc.

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We purchase all of the plastic bottles used in our manufacturing plants from Southeastern Container and Western Container, two manufacturing cooperatives we co-own with several other Coca‑Cola bottlers, and a majority of our aluminum cans from two domestic suppliers.

In 2020, the COVID-19 pandemic caused significant tightening in the domestic market for aluminum cans due to changing consumer purchasing patterns and, as a result, we changed our typical sourcing model and sourced aluminum cans from international locations and may continue to do so if the domestic supply of aluminum cans remains constrained.

We began sourcing aluminum cans from international locations in 2020, and we may continue to change our sourcing model in the future in order to ensure an adequate supply of aluminum cans at commercially favorable prices.

Along with all other Coca‑Cola bottlers in the United States and Canada, we are a member of Coca-Cola Bottlers’ Sales & Services Company LLC (“CCBSS”), which was formed to provide certain procurement and other services with the intention of enhancing the efficiency and competitiveness of the Coca‑Cola bottling system.

CCBSS negotiates the procurement for the majority of our raw materials, excluding concentrate, and we receive a rebate from CCBSS for the purchase of these raw materials.

We are exposed to price risk on commodities such as aluminum, corn, PET resin (a petroleum- or plant-based product) and crude oil, which affects the cost of raw materials used in the production of our finished products.

Examples of the raw materials affected include aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient.

We are exposed to price risk on commodities such as aluminum, corn and PET resin (a petroleum- or plant-based product), which affects the cost of raw materials used in the production of our finished products.

We both produce and procure these finished products.

Examples of the raw materials affected are aluminum cans and plastic bottles used for packaging and high fructose corn syrup used as a product ingredient.

Further, we are exposed to commodity price risk on crude oil, which impacts our cost of fuel used in the movement and delivery of our products.

We participate in commodity hedging and risk mitigation programs, including programs administered by CCBSS and programs we administer.

We participate in commodity hedging and risk mitigation programs, including programs

administered by CCBSS and programs we administer.

In addition, other than as discussed above, there are no limits on the prices The Coca‑Cola Company and other beverage companies can charge for concentrate.

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The Company’s products are sold and distributed in the United States through various channels, which include selling directly to customers, including grocery stores, mass merchandise stores, club stores, convenience stores and drug stores, selling to on-premise locations, where products are typically consumed immediately, such as restaurants, schools, amusement parks and recreational facilities, and selling through other channels such as vending machine outlets.

Due to the COVID-19 pandemic, consumer demand shifted in 2020 from products sold for immediate consumption through smaller retail stores and on-premise locations to take-home products sold in grocery stores, mass merchandise stores and club stores.

During 2020, due to the COVID-19 pandemic, consumer demand shifted from products sold for immediate consumption through smaller retail stores and on-premise locations to take-home products sold in grocery stores, mass merchandise stores and club stores.

During 2021, as the COVID-19 pandemic’s impact on economic activity abated, consumer demand increased for products sold for immediate consumption compared to 2020, although it remains somewhat lower than levels experienced prior to the COVID-19 pandemic.

The following table summarizes the percentage of the Company’s total bottle/can sales volume to its largest customers, as well as the percentage of the Company’s total net sales that such volume represents:

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New brand and product introductions, packaging changes and sales promotions are the primary sales and marketing practices in the nonalcoholic beverage industry and have required, and are expected to continue to require, substantial expenditures.

Recent introductions include AHA Sparkling Water, Coca‑Cola Energy, POWERade Ultra, POWERade Powerwater, Reign Inferno, Monster Java 300, Dunkin’ Cold Brew, Monster Papillon, certain new flavors of Monster Ultra, certain new flavors of BodyArmor Lyte, certain new flavors of glacéau smartwater, Coca‑Cola Cherry Vanilla, Sprite Ginger, Fanta Pina Colada, Dr Pepper & Cream Soda.

Recent introductions include BODYARMOR Edge, Dr Pepper Zero Sugar, glacéau smartwater wellness portfolio, certain new flavors of Coca-Cola with Coffee, and certain new flavors of Dunkin’ Donuts iced coffee.

We sell our products primarily in single-use bottles and cans, in varying package configurations from market to market.

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We rely extensively on advertising in various media outlets, primarily online, television and radio, for the marketing of our products.

The Coca‑Cola Company, Dr Pepper, Monster Energy and BodyArmor make substantial expenditures on advertising programs in our territories from which we benefit.

The Coca‑Cola Company, Dr Pepper and Monster Energy make substantial expenditures on advertising programs in our territories from which we benefit.

Although The Coca‑Cola Company and other beverage companies have provided us with marketing funding support in the past, our beverage agreements generally do not obligate such funding.

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In addition to our marketing and merchandising programs, we believe a sustained and planned charitable giving program to support the communities we serve is an essential component to the success of our brand and, by extension, our net sales.

Company made cash donations of approximately $12.6 million to various charities and donor-advised funds in light of the Company’s financial performance, distribution territory footprint and future business prospects.

In 2021, the Company made cash donations of approximately $22.5 million to various charities and donor-advised funds in light of the Company’s financial performance, distribution territory footprint and future business prospects.

The Company intends to continue its charitable contributions in future years, subject to the Company’s financial performance and other business factors.

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Regulators may restrict the use of benefit programs, including SNAP, to purchase certain beverages and foods currently classified as food or food products.

our products or commodities used in the manufacture of our products, including certain of our products that contain added sugars or sodium, exceed a specified caloric count or include specified ingredients such as caffeine.

Certain jurisdictions in which our products are sold have imposed, or are considering imposing, taxes, labeling requirements or other limitations on, or regulations pertaining to, the sale of certain of our products, ingredients or substances contained in, or attributes of, our products or commodities used in the manufacture of our products, including certain of our products that contain added sugars or sodium, exceed a specified caloric count or include specified ingredients such as caffeine.

Legislation has been proposed in Congress and by certain state and local governments which would prohibit the sale of soft drink products in non-refillable bottles and cans or require a mandatory deposit as a means of encouraging the return of such containers, each in an attempt to reduce solid waste and litter.

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Management monitors market compensation and benefits to be able to attract, retain and promote teammates and reduce turnover and its associated costs.

During 2021, the Company faced substantial turnover of teammates, periodic labor shortages and wage inflation in our front-line positions due to tight conditions in the nationwide labor market.

The Company responded to these challenges by making investments to attract, reward and retain front-line employees, as well as increasing base pay for front-line workers in certain competitive markets.

We are a learning organization committed to the goal of continuous improvement and the development of our teams and teammates.

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Our teammate onboarding experiences involve online learning, job-specific training and on-the-job development to learn about our Company, our products and our industry.

Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently sell, merchandise and display our products.

After onboarding, our teammates may participate in numerous learning experiences

offered by the Company to help them develop and improve their skills and capabilities to advance in their careers, including at one of our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience.

Job-specific training includes activity-based classes that focus on how teammates can safely and efficiently

sell, merchandise and display our products.

After onboarding, our teammates may participate in numerous learning experiences offered by the Company to help them develop and improve their skills and capabilities to advance in their careers, including at one of our two dedicated experiential learning centers where teammates can develop and grow their skills through a hands-on experience.

We provide a leadership program designed to challenge and grow our future servant leaders through a series of learning experiences, including on-the-job training, mentorship, peer coaching and formal leadership courses.

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We strive to cultivate diversity in our workforce and believe teammates with diverse backgrounds, experiences and viewpoints bring value to our organization.

In 2020, we launched a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer in order to enhance our focus on cultivating diversity at Coca‑Cola Consolidated.

This task force helped develop a diversity framework focused on four pillars – communication, accountability, empowerment and partnerships.

Each member of our senior executive leadership team is hosting similar discussion groups around the Company.

The task force and these discussion groups strive to enhance Company-wide engagement on diversity and inclusion, provide opportunities for teammates to discuss diversity and inclusion, develop initiatives to support our diversity framework and monitor progress across these initiatives.

We have a diversity task force comprised of diverse teammates from across the organization and led by our President and Chief Operating Officer with a focus on cultivating diversity at Coca‑Cola Consolidated.

This task force developed a diversity framework focused on four pillars – communication, accountability, empowerment and partnerships.

The task force and discussion groups led by our senior executive leadership team strive to enhance Company-wide engagement on diversity and inclusion, provide opportunities for teammates to discuss diversity and inclusion, develop initiatives to support our diversity framework and monitor progress across these initiatives.

Exchange Act Reports

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business