GEVO Gevo Inc

Coca-Cola Co. (KO) expects to have a plastic bottle made entirely from plant-based materials ready for commercial use in the next few years as it looks to reduce its reliance on petroleum used in traditional plastic bottles.

Coca-Cola on Thursday disclosed multi-million-dollar agreements with three biotechnology companies--Virent Inc., Gevo Inc. (GEVO) and Avantium--to develop a new version of its PlantBottle, which is currently made with up to 30% of plant-based materials. Specific terms of the deal weren't disclosed.

Coca-Cola believes it can have the plant-based bottle developed by 2015 so that, by 2020, all of Coca-Cola's plastic bottles can be using the new material, said Vice President of Commercial Product Supply Rick Frazier.

Coca-Cola's chief rival, PepsiCo Inc. (PEP), has already developed a plastic bottle made entirely from plant-based materials and plans to start producing the bottle in tests next year before determining whether to move into full-scale commercialization.

Coca-Cola has distributed more than 10 billion PlantBottles worldwide since 2009. The bottle costs more to produce than the petroleum-based bottles primarily because it is produced in much smaller quantities than the traditional plastic ones. Coca-Cola hopes that gap will eventually narrow as PlantBottle production become more efficient.

"As we improve the supply chain, we will continue to reduce the premium," Frazier said at a press conference in New York. He added that the goals for the program are to make a bottle that is derived from sustainable materials and then make it competitively priced.

Coca-Cola hasn't passed on the higher cost for the PlantBottle by raising prices for consumers, Frazier said. The bottle is used on all Dasani bottled-water products in the U.S. Coca-Cola has also collaborated with H.J. Heinz Co. (HNZ) on ketchup bottles that use the PlantBottle.

The new bottle can potentially help Coca-Cola to achieve more-predictable costs for plastic bottles. The plastic material currently used in bottles is difficult to hedge, leaving the company susceptible to the swings in costs that are typically tied to volatile crude-oil prices. A 100% plant-based bottle would rely on various feedstocks for production, and the cost won't be linked to one material.

"It gives us choice that we didn't have," Frazier said.

Coca-Cola shares were up 1.3% in recent trading to $67.15. Gevo, one of the publicly held partners with a market cap of around $180 million, saw shares jump 23.6% to $6.97 upon word of the partnership.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

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