Coke bottlers sue parent in Wal-Mart dispute
Pub Date: 5/1/2006
In a dispute that some suggest could be a harbinger of things to come, more than 50 Coca-Cola bottlers and distributors are suing the parent Coca-Cola company for breach of contract because it plans to ship Coke products specifically the PowerAde line directly to big box retailer Wal-Mart's own warehouses, rather than have local bottlers deliver directly to the store.
They are also suing Coca-Cola Enterprises, a giant bottling and distribution company set up by Coca-Cola in the wake of a wave of bottler consolidation in the 1980s and 1990s. It is responsible for 77 percent of Coke's volume.
Wal-Mart has said it finds efficiencies in handling its own inventories. It does its own warehousing and distribution for rival PepsiCo's Gatorade. The store is seeking uniform pricing for the PowerAde line-up and reportedly will give the Coke brands more shelf space when they are shipped directly to Wal-Mart's warehouses.
At issue is whether contracts between parent Coca-Cola and regional bottlers allows products to be shipped directly to retailers' warehouses or must be delivered directly to stores.
Local bottlers argue that the contracts create the core value of the local bottling companies, and watering the contracts down will reduce that value.
Like liquor wholesalers, bottlers have contended that the current system has inherent efficiencies, bolsters competition and benefits communities and smaller retailers. In the 1970s, Congress passed the Soft Drink interbrand Competition Act which preserved the system of independent bottlers and distributors for those reasons.
Independent local bottlers contend their ability to make direct-to-store deliveries has a bearing on their ability to build personal relationships with retailers, effectively market the products, to grow their brands and their companies.
While initially the direct-to-warehouse delivery of PowerAde to Wal-Mart would occur only in the vast territory covered by Coca-Cola Enterprises, which is 36 percent-owned by Coca-Cola, the remaining bottlers say they fear the practice will spread to other retailers and to the territories of smaller bottlers and will grow to include other Coke products.
As it is, some independent bottlers personally service their local Wal-Mart stores twice or even three times daily every day. About 10 percent of Coke's volume moves through Wal-Mart retailers.
Source: The Montana Tavern Times, May, 2006, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.