Coca-Cola Enterprises Inc. and a group representing 75 other bottlers of Coca-Cola Co. drinks have sued Novelis Corp. over the aluminium-can maker’s pricing of soda cans.
Coca-Cola Bottlers Sales and Services (CCBSS), which helps bottlers purchase goods as a group, accused Cleveland-based Novelis of breaching its contract.
Specifics of the suit, filed on 15 February in Fulton County Superior Court in Atlanta, are unclear because sections of the document were filed under seal.
The complaint claims potential damage to the bottlers of hundreds of millions of dollars. “The price of can stock is of vital importance to the business of CCBSS’s members,” according to the suit.
Coca-Cola Enterprises, the world’s largest soft-drink distributor, and competitors said higher aluminium costs are partly to blame for price increases that have reduced sales in North America.
The bottlers spend $1.9 billion (Rs8,360 crore) on aluminium cans yearly, according to the suit. The price of aluminium ingots in the US Midwest has risen 20% in the past year, according to industry publication Metals Bulletin. The last time the price doubled was more than a decade ago.
Charles Belbin, Novelis’ corporate-communications manager, said the suit doesn’t have merit and that the company would defend itself. He wouldn’t comment further, citing confidential business agreements.
The 12-page complaint urges the court to declare the bottlers’ rights under the Novelis contract. The bottlers want a jury trial, unspecified damages and attorney fees.
A Hindalco official, who did not wish to be named, told Mint: “On the face of it, the dispute does not mean anything to us. It is unlikely to impact Hindalco’s plans for Novelis. We have already conducted proper due-diligence of the company and taken into account all the legal issues that the company is involved in. We have lawyers and tax experts who are engaged in looking into this matter and, if need be, they will take a call on it.”
Coca-Cola Enterprises, based in Atlanta, handles about 80% of Coca-Cola’s bottle-and-can volume in North America. Novelis is the company’s only aluminium-can supplier, Coca-Cola Enterprises spokeswoman Laura Asman said.
The bottlers’ group is one of Novelis’s largest customers, Belbin said.
Shares of Novelis Inc., the parent company Novelis Corp., fell 16 cents to $44.13 in New York Stock Exchange composite trading. Coca-Cola Enterprises fell 17 cents to $20.54.
Coca-Cola Enterprises said on 13 February that its raw-materials costs will rise about 9% per case in 2007, compared with a yearly average of 2.5 % in the past five years.
The cost of aluminium cans will rise “mid-teens” percentages and high-fructose corn sweetener will increase at least 20%, Bill Douglas, chief financial officer of Coca-Cola, said.
The bottler said its earnings this year will fall by 5-10% from $1.30 a share last year.
Cost pressures and dropping soda volumes in the US prompted the company to write down the value of its North American unit by $2.9 billion in the fourth quarter. CEO John Brock announced a restructuring that includes 3,500 job cuts.
(A staff writer contributed to this story from Mumbai)