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Coke caves under Wal-Mart pressure
CNN/Money ^ | June 8, 2006

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 ...


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: cce; cocacola; coke; powerade; sportsdrinks; walmart
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1 posted on 06/08/2006 12:27:18 PM PDT by RWR8189
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To: RWR8189

This is like Godzilla meets King Kong.


2 posted on 06/08/2006 12:29:31 PM PDT by Brilliant
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To: RWR8189

Wow...business at work.


3 posted on 06/08/2006 12:31:01 PM PDT by CWOJackson
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To: Brilliant

Yeah but who to cheer on? Decisions, decisions.


4 posted on 06/08/2006 12:31:47 PM PDT by Centurion2000 (You go to Heaven for the climate; Hell for the company and conversation.)
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To: Brilliant

As Henry Kissinger famously said of the Iran/Iraq War, "It's a shame they can't both lose..."


5 posted on 06/08/2006 12:32:11 PM PDT by jebeier (Rice 2008)
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To: RWR8189

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.


6 posted on 06/08/2006 12:33:08 PM PDT by Radix (Stop domestic violence. Beat abroad.)
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To: CWOJackson
If I were a compeating retailer to Wal Mart, I would demand the same deal from Coke.
I think this could be a Robinson-Pattman Act case.
7 posted on 06/08/2006 12:33:14 PM PDT by Eric in the Ozarks (BTUs are my Beat.)
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To: Centurion2000

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.


8 posted on 06/08/2006 12:35:37 PM PDT by ritewingwarrior
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To: RWR8189

These are the sorts of shinanigans that make me glad I drink Dr. Pepper and shop at regular grocery stores.


9 posted on 06/08/2006 12:35:39 PM PDT by nhoward14 (Guns don't kill Muppets. Muppets kill Muppets.)
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To: Radix

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.


10 posted on 06/08/2006 12:37:14 PM PDT by ritewingwarrior
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To: Centurion2000
Yeah but who to cheer on?

The consumer.

11 posted on 06/08/2006 12:40:21 PM PDT by opinionator
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To: Radix

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.


12 posted on 06/08/2006 12:41:24 PM PDT by Yo-Yo (USAF, TAC, 12th AF, 366 TFW, 366 MG, 366 CRS, Mtn Home AFB, 1978-81)
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To: RWR8189
Coke bit the pillow on this deal.

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.

13 posted on 06/08/2006 12:42:11 PM PDT by Extremely Extreme Extremist (Conservatism is moderate, it is the center, it is the middle of the road)
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To: RWR8189

By G*D I LOVE to watch capitalism at work!!!!


14 posted on 06/08/2006 12:43:25 PM PDT by Eagles Talon IV
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To: Yo-Yo

One more group of American workers that can question why everyone says the economy is getting better...


15 posted on 06/08/2006 12:43:32 PM PDT by stuartcr (Everything happens as God wants it to.....otherwise, things would be different.)
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To: Eric in the Ozarks
I suppose you would probably get the same deal from Coke...as long as you promise to buy in the same quantity as does Walmart.
16 posted on 06/08/2006 12:45:10 PM PDT by Eagles Talon IV
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To: Radix
A lot of union drivers are going to be upset about it. Coke probably doesn't want that headache.

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.

17 posted on 06/08/2006 12:45:20 PM PDT by Extremely Extreme Extremist (Conservatism is moderate, it is the center, it is the middle of the road)
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To: Extremely Extreme Extremist
"Wal-Mart's creation of a new sports drink is a laughable bluff."

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.

18 posted on 06/08/2006 12:49:50 PM PDT by Eagles Talon IV
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To: Yo-Yo; ritewingwarrior
"bypassing the local distributer, the driver gets hurt."

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.

19 posted on 06/08/2006 12:50:36 PM PDT by Radix (Stop domestic violence. Beat abroad.)
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To: stuartcr
One more group of American workers that can question why everyone says the economy is getting better...

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.

20 posted on 06/08/2006 12:51:01 PM PDT by opinionator
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