Coca-Cola Amatil confirmed on Monday that it has been in talks with The Coca-Cola Co over the future of its bottling franchise in Indonesia, where returns and earnings have been going backwards for several years.

"We're working together with The Coca-Cola Co on a sustainable solution for Indonesia – those talks are ongoing, they're friendly and constructive," a spokeswoman for CCA managing director Alison Watkins said.

However, CCA declined to confirm a report in Monday's Australian Financial Review that one proposal under discussion was TCCC's acquisition of an equity stake in a new vehicle which would hold the Indonesian operations. "There are a number of options and talks are ongoing," the spokeswoman said.

The Indonesian business is estimated to be worth between $1.6 billion and $2.5 billion, based on recent bottling transactions. If TCCC took a 30 per cent stake in Indonesia, matching its shareholding in CCA, the bottler would receive between $500 million and $750 million to invest in capex and market development.

However, analysts and insiders warned that such a deal may not necessarily create value for CCA shareholders, pointing to CCA's past deals with TCCC in South Korea and the Philippines.

"TCCC aren't a benevolent society – they're tough people and they want their pound of flesh," said one source, who declined to be named.

"It's a sale and lease back and ultimately they'll pay for that one way or another in higher concentrate rates and lower advertising spend," the source said.

CCA has invested about $1.3 billion in Indonesia over the past 20 years and is now the largest player in the soft drink market, with about 60 per cent share.

Beverage volumes have doubled since 2004, but the business is still cashflow negative and is expected to report a loss this year, compared with a profit of more than $105 million in 2012.

CCA is now losing market share in Indonesia to budget bottler Big Cola, which is owned by private company AJE, and has been forced to reduce prices to appeal to poorer consumers, further crimping returns.

Citigroup analyst Gino Rossi said an equity injection from TCCC would reduce the pain for shareholders but was unlikely to enable CCA to achieve an adequate return on its investment in Indonesia. Other options should be explored, he said.

"Fresh equity is nice and gives you a ready valuation ... but it doesn't address the issue," Mr Rossi said. "To win back market share they need to address capital and earnings – we've been through this in the Philippines and Korea and it doesn't always work."

It is understood that TCCC has suggested several solutions to the problem over recent years, including merging the Indonesian franchise with Malaysia and Singapore. However, CCA was not convinced that any of the proposals would lead to better returns.

"You explore all these things but only on the basis it gives some wins to CCA shareholders – if it didn't the market would crucify them because it would be a return to the old days where people thought TCCC dictated strategy," another source said.

CCA would require shareholder approval to sell part of the Indonesian business to TCCC in a related party transaction and would need to convince investors of the short-term and long-term merits of a deal.

A decision is expected before October 30, when Ms Watkins is due to unveil the outcome of a strategic review.