Understanding Bottling Companies: Their Role in Beverage Production and Distribution

A bottling company places beverages into bottles and then distributes them in a defined area. Some companies create their own beverages, bottle them, and distribute them worldwide. Others have a franchise contract with a specific manufacturer or manufacturers to bottle products and distribute them within a defined geographic area.

Large soft-drink manufacturers make the beverages in a specific plant or plants and then ship the manufactured beverage to another location to be bottled. This allows the soft-drink manufacturer to maintain tight quality controls and secrecy about its formulas. It also reduces the cost to transport the product to market. The product can be transported less expensively in bulk than in individual bottles.

To protect the quality and secrecy of specific formulas, a bottling company must execute a franchise agreement or some other form of agreement that designates the controls and security associated with the beverage once it reaches the bottling company’s facility. These agreements may place limitations on the bottler such that the bottler may not bottle a competing product within the same facility. These exclusive or semi-exclusive agreements are considered more profitable to the franchisee than the franchiser.

Generally, the franchiser sells its product to the franchisee in order to have it bottled. The bottling company then distributes and sells the product within its designated territory. Bottling companies may bottle soft drinks, water, and alcoholic beverages. Some vineyards that sell large amounts of product in a given area use bottling companies to reduce transportation costs.

An independent bottling company may create its own products that the same company bottles and sells throughout a geographic area. Most of these companies sell their products within a local area, although certain companies may ship their bottled products nationally or globally. Usually, these companies begin selling to larger markets using their own bottling facility, but if the product sales go beyond a certain level, these companies begin to franchise the bottling of their own products to third parties.

Bottling companies tend to serve a given geographic area. If this area includes a metropolitan market, the area may be broken down so that multiple bottling companies service the same area. The franchiser and its franchisees work together to determine the best method to use in order to get the product into the hands of all potential purchasers.

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