Posted on 06/08/2006 12:27:13 PM PDT by RWR8189
NEW YORK (CNNMoney.com) - Coca-Cola, fearing Wal-Mart would launch its own sports drink to rival the beverage giant's Powerade if it didn't agree to the retailer's new distribution terms, caved under the pressure and altered its own century-old supply system, a published report said Thursday.
Wal-Mart, the world's largest retailer, asked Coke last year to switch to the straight-to-warehouse delivery method, and Coke's largest bottler, Coca-Cola Enterprises (Research) (CCE), began doing so across much of the U.S. in April, the Wall Street Journal said.
But according to June 1 court filing by Coke, the company stated that it faced a "serious risk" of a Wal-Mart-branded rival to Powerade unless it abided by Wal-Mart's demands of direct distribution instead of having Coke (Research) bottlers deliver drinks to individual stores within their exclusive territories and stack those drinks on store shelves.
The disclosure was made in a lawsuit filed in U.S. District Court in Atlanta against Coke and its largest bottler by 55 smaller bottlers, the paper said.
The smaller bottlers who brought the suit claim the distribution change violates their distribution contracts with Coke, but the beverage giant and CCE have argued that the plaintiffs aren't entitled to "claim nationwide veto rights" over how another bottler serves its territories, the paper said.
Internal CCE documents filed as part of the suit show that Wal-Mart officials criticized the traditional Coke distribution system for failing to keep Powerade in stock on store shelves and for taking too long to introduce products throughout the Wal-Mart chain, the paper said.
(Excerpt) Read more at money.cnn.com ...
This is like Godzilla meets King Kong.
Wow...business at work.
Yeah but who to cheer on? Decisions, decisions.
As Henry Kissinger famously said of the Iran/Iraq War, "It's a shame they can't both lose..."
Interesting.
Wal-Mart is going to save $$$ for Coke with this the way I see it.
A lot of union drivers are going to be upset about it. Coke probably doesn't want that headache.
Ha i was thinking the same thing. In the reverse Coca Cola has been the big distributor for decades putting pressure on small distributors with the 'my way or the highway' line. Most major fast food and restaurant chains still live under the carry nothing but Coke, or you have to live with Pepsi arrangement. Cant say Walmart is picking on the little guy in this instance. Just goes to show you how organized and 'centralized Walmart really is. They run all their production as a whole instead of each individual store like Kmart or Target or something similar.
These are the sorts of shinanigans that make me glad I drink Dr. Pepper and shop at regular grocery stores.
Actually by caving in , Coke is shafting their smaller franchises and bottlers from distribution rights. I have a friend that works as a driver. While Walmart is not in his territory, he would be upset if that was taken off of his route.
The consumer.
Drivers get paid by the case delivered. If the bottling plant ships directly to a Wal-Mart warehouse, bypassing the local distributer, the driver gets hurt.
Wal-Mart's creation of a new sportsdrink is a laughable bluff. The sportsdrink market is already saturated and Gatorade is the perennial leader anyway. Wal-Mart is not going to invest the time and money in such an endeavor.
Coke should have called Wally's bluff and threatened to take their product out of their stores. Wal-Mart would have lost some business because everyone and their momma who shop there ends up buying Coke and Coke products anyway.
But I guess it's more comfortable breaking out the kneepads to Wal-Mart instead of competing head-on.
By G*D I LOVE to watch capitalism at work!!!!
One more group of American workers that can question why everyone says the economy is getting better...
Wrong. The only people getting the shaft are the smaller stores that Coke delivery drivers stock up en route to delivering at Wal-Mart.
These drivers aren't union, by the way.
Coke should have stood its ground here and dared Wal-Mart to force them to switch to direct delivery.
I don't know about that. They are seeking permission to open their own bank. If they can get into banking they surely can start up a soft drink manufacturing company.
I certainly do not know much more about this matter other than what the article says.
My very first notion was that this was a union thing.
I worked with union drivers for a long time. I'm certain that Wal Mart does not want to have recruiting done at their stores. That does happen you know.
Certainly there is likely a lot more to it, but that was what my instinct told me.
I happen to have some experience with a lot of union people losing jobs because of underhanded tactics by Wal Mart. They are a quite vicious predatory institution.
Me? I was never a part of the union, but I did leave that management job sometime ago in order to pursue other endeavors.
The economy gets better when it functions more efficiently.
Walmart is eliminating an unecessary intermediary in their supply-chain. This should lower their costs which they can then pass on to their customers or to their owners.
Suggestion: You can enjoy this benefit by becoming either a customer or an owner of Walmart.
These disgruntled drivers can now find jobs that will actually contribute to our economy.
If the drivers for Coke in your area are not union that is simply an anomaly.
They are probably more out-of-work or less able to pay their bills, than disgruntled.
Are you one of those "the economy sucks" people?
The employment rate has never been higher then under this president, more people own their own homes then ever before, consumers debt is actually shrinking and average personal wealth is at an all time record high.
Stop watching the alphabet networks for the news.
I'll defer to one of the lawyers on this issue but I think Robinson-Pattman would find Coke is giving a "continuing" price discount to Wal Mart.
Sounds like a win win situation.
No, I'm more of one of those look around and listen to others, people.
I can't tell the difference among Coke, Pepsi or Walmart cola brands. I know many can. I do like that these behemoths have to actually negotiate every once in a while. There was a recent TV report about a lawn mower company that said no to Walmart on going with them because they would have to make a new, cheap, flimsy model. They refused, and sell through Home Depot, I think. Good for them.
The headline had me envisioning a cave full of coke that caved in from the weight of the Wal*Mart built atop it.
Sort of true in a way.
When I worked at a grocery store in mid-Michigan, the grocery workers were not union, and the United Food and Commercial Workers Union (UFCW) was trying desperately to unionize us, which included some rather unsavory tactics.
The drivers who delivered to our store (Coke, Pepsi, etc. as well as the Kroger drivers who were Teamsters) didn't bug us much about it.
Sometimes the Kroger drivers were noticably late with the twice a week frozen food delivery, which meant I had to stay very late to stock (as I was the store's frozen food person as well as the one day a week morning delivery door person). We assumed it might have had something to do with the union issue, but it might have just meant that the delivery guys were lollygaggers.
Wal-Mart strong-arming businesses again.
The long-term effect?
Eventually, Wal-Mart will force Coca-Cola to distribute their other products straight to the Wal-Mart warehouse and by-pass the local bottlers.
End result? Wal-mart slowly gains a financial advantage over the local bottlers and puts them out of business.
The price of Coca-Cola to the consumer is not the issue right now. What is at issue here will be the ability of the local bottlers to match pace with Wal-Mart's aggressive pricing.
Eventually, Wal-Mart will put all of the local bottlers out of business and will then corner the market on the distribution of Coca-Cola products.
Maybe Coke didn't get bluffed but are making Walmart wear the black hat for something they wanted...
You are EXACTLY right, this is the first shot in Coca-Cola shafting their distributors.
Companies routinely discount their products to volume buyers.
And if they can't do it, China can.
"consumers debt is actually shrinking"
Not according to USAToday
http://www.usatoday.com/money/perfi/general/2004-03-17-debtcover_x.htm
Yeah, I celebrate that lower price everytime I go into Wal-mart and wait in line 20 minutes to check out. EVERY time.
Wal-Mart may have the lowest prices but their service has become the biggest joke on the planet.
Creative destruction is a by-product of capitalism. New and innovative business models flourish while old business models die out. The success of Amazon.com destroys traditional book sellers. The success of Expedia.com puts traditional travel agents out of business. This sucks if you are a book seller or a travel agent, but in time we refer to these events as 'progress'.
Coke probably can't afford to lose the Wal-mart market.
Wal-mart can promote the competitors, Coke has no other recourse.
Wal-Mart is going to save $$$ for Coke with this the way I see it.
Most of the drivers for bottlers are just kids in college barely making $12.00 an hour.
Wal-Mart is like hiring someone to Mow your 1 acre yard for 5 dollars. They agree to mow it once a week rain or shine.
They show up and mow your yard with a huge tractor and bushhog. They cut down every sprig of grass in sight. And they leave huge ruts in your yard.
You would use someone else, but they've torn up the yard so bad that no else will mow it. So, you are stuck with them.
That article was written over 2 years ago.
Coke prices in Wal-Mart are just the same as any other grocery stores, except that Wal-Mart honors competitors' prices and there's no limits on quanitity. Coke had plenty of recourses here. They could have told Wal-Mart to get bent and pulled their products out of their stores, which would have hurt some grocery sales at Wal-Mart because people buy soda in addition to other things too.
Coke passed up a good chance to fire a shot across Wal-Mart's bow, IMO. Don't get me wrong I love Wal-Mart but I like it when businesses stand up to them like the Snapper dealer and how Netflix ate Wally's lunch in DVD rentals.
That's a stretch of an analogy. I think I can still waltz into Wawa or a hundred other places and buy Coke any time I want some.
"American consumer wins... "
Eventually, Wal-Mart will force Coca-Cola to stop using distributors for their products and ship direct to Wal-Mart.
When that happens, some of the distributors will go out of business. Then, Coca-Cola becomes harder to find. Coke will lose market share.
If Coke tries to buck Wal-Mart, they yank their product off their shelves.
Coca-Cola is the loser in this.
Two different things. Wal-Mart already makes soda through their Sam's Choice brand anyway.
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