Coke fear: A Wal-Mart brand
Posted on Friday, June 9, 2006
URL: http://www.nwanews.com/adg/Business/157151/
Coca-Cola Co. said in court documents filed recently it felt “ominous” pressure that Wal-Mart Stores Inc. would create its own private-label sports drink if Coca-Cola’s largest bottler didn’t change the way it delivered Powerade to the retailer.
There was a “serious risk” that Wal-Mart would sell its own sports beverage if bottler Coca-Cola Enterprises Inc. didn’t distribute Powerade to Wal-Mart warehouses instead of delivering directly to stores, Coca-Cola and Coca-Cola Enterprises said in a June 1 response to a lawsuit in the U. S. District Court in Atlanta seeking to prevent the new distribution.
About 60 bottlers, including some with operations in Arkansas and Missouri, sued Coca-Cola, the world’s biggest soft-drink maker, and Coca-Cola Enterprises in February to block the arrangement because they say their Powerade sales will be hurt if it's distributed differently.
The suit, filed in Springfield, Mo., contends that an agreement negotiated in 1994 between the bottlers and the company specifically prohibits warehouse delivery of Powerade to retailers like Bentonville-based Wal-Mart.
With warehouse delivery, Coca-Cola said Wal-Mart plans to double its purchases of the beverage and give it more shelf space to compete with PepsiCo Inc. ’s Gatorade, which controls 80 percent of the sports-drink market.
Coke warned in the filing that if the delivery system isn’t changed, a private-label competitor to Gatorade could prevent Powerade from any future growth opportunities in Wal-Mart stores.
“This is no mere idle threat,” Coca-Cola and Coca-Cola Enterprises said in the filing. “This is precisely what Wal-Mart has done with water sales in its stores where the two largest water products are warehouse delivered and Coca-Cola’s and Pepsi’s direct-store delivered water brands are left to fight for third place.”
Coca-Cola said its Powerade drinks aren’t carried by Costco Wholesale Corp., which has created its own private-label sports drink to compete with Gatorade.
“In this action, for the first time in the history of the Coca-Cola system’s 100-plus years of existence, a group of bottlers are not content to exercise and protect the exclusive territorial rights that they have been granted and seek to claim nationwide veto rights over the means used by another bottler to deliver Powerade to a retail customer in that bottler’s territory,” Coca-Cola and Coca-Cola Enterprises, both based in Atlanta, said in the filing.
The group of bottlers suing Coca-Cola collectively handles about 6 percent of the company’s U. S. volume, and Coca-Cola Enterprises distributes about 80 percent. As of December 2005, Coca-Cola owned 36 percent of Coca-Cola Enterprises, the world’s largest soft-drink distributor.
Coca-Cola spokesman Dan Schafer declined to comment further.
Bill Marks, spokesman for the bottlers suing Coca-Cola and Coca-Cola Enterprises, also declined comment.
Coca-Cola shares fell 1 cent to $ 43. 39 in New York Stock Exchange composite trading. Coca-Cola Enterprises lost 10 cents to $ 19. 40, while Wal-Mart, the world’s largest retailer, added 26 cents to $ 47. 30. Information for this article was contributed by The Associated Press.