Toll Group (ASX: TOL) announced today that is has secured $380 million worth of contracts with Coca-Cola Amatil (ASX: CCL) to span the next five years. With Toll Group as Aussie's leading provider of transport and logisitics and Coca-Coca Amatil as one of the top five Coca-Cola bottlers in the world, the logistics match is meant to maximize the scale and efficiency that each company can offer.
The five-year contract will nearly double Toll Group's sales in route distribution, bulk distribution and inter-state road, rail and sea transport. "To be awarded such an extensive portfolio of contracts from an industry leader such as Coca-Cola Amatil recognises the innovative solutions of Toll's Contract Logistics and Intermodal business," said Bruce Wilson, General Manager of the same business. "As a long-term supplier of transport services to the beverage industry throughout the Asia Pacific region, we look forward to working with Coca-Cola Amatil to improve the supply chain."
Foolish takeaway
A $380 million five-year contract is a significant win, even for a company as large as Toll Group. With annual sales of $8.7 billion, the annualized value of this contract is equivalent to a 0.9% increase in sales, and the sustainability and reliability of this contract makes it all the more valuable.
And this may be the beginning of an even more fruitful relationship. Toll Group and Coca-Cola Amatil have significant overlap in their global operations, and Australia is just one country. Coca-Cola Amatil currently operates in six Asia-Pacific countries, while Toll Group stretches globally across 50 nations.
If Toll Group can prove itself with this sizeable contract, Coca-Cola Amatil (or other multinational bottling companies) may put more work on the table that could make this current arrangement look like an anthill.
