La domanda che nasce in alcuni forum specialistici è: Chi ci perde? La CostCo, La CocaCola o i consumatori?

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Jason Buschlen
Passionate Shopper Insight & Shopper Marketer
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Costco boots out Coke. Who is hurt more - Costco, Coke or the Consumer?
Posted 3 days ago | Reply Privately
Comments (22)

Martin Calle
I run Calle & Company - the most successful product development company in the consumer packaged goods industry.
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Coke. Costco moves 10 times the volume in one day all the chain drug and grocery stores in the region do in a week. Easily, Costco is in the driver's seat. Make it and price it our way or you loose distribution. They did this to Tide as well. For the first time in history A.G. Lafely and P&G had to bow to the whims of Costco or loose distribution. All due to the fact that manufacturers are completely unable to meaningfully differentiate their products to consumers. So the TAIL (reTAILer) now gets to wag the dog. Who's doing the "think" work in these companies anymore anyway?
Posted 2 days ago | Reply Privately

Given how drastic this move is, imagine how acrimonious the stuation must be.
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I agree with Martin, with the exception of Coke Classic. Seems to me that if consumers want a specific product, it will be easy enough to get. Unfortunately for Coke, most people will simply buy something else.

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Agreed, Coke. No brand can impose the power they deep down believe they should but just can't. The brands that have that power (Apple comes to mind) are the ones we see doing the unique things but what a rarity it is.
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I thought Sam's had a fairly large percent of business going to small businesses, restaurants, food service. Maybe, I'm wrong. Does Costco cater to the business market and what %?

I can envision the business customer being more upset with Costco than the general consumer. Small restaurants, business owners & employees, etc --- might, again, might take business elsewhere if must make double warehouse trip to find their Coke brand. I don't think it's easy for food service to switch from Coke brand to Pepsi to Private Label.

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I am sure that Costco knows how much Coke they are selling and pretty much to whom. Even if they are selling mostly to businesses, it is probably more like mom & pop stores and offices (for their personal use) than to restaurants or places where it would be hugely detrimental to the business for them not to be able to get Coke products and in turn would force them to shop somewhere else. Most C-stores would do enough business to have direct delivery from the bottlers and so would restaurants.

I would bet that they are counting on the Pepsi, Dr Pepper and private label products to carry them through if it does come down to them actually not carrying Coke products. I would also bet that private label has gained in sales and that the larger margin for Costco on private label is part of the equation here.

Costco is also probably figuring that if they can't get the competitive pricing they are looking for, then their customer may shop elsewhere for the Coke anyway. This way it isn't taking up valuable shelf space, they may see a rise in private label soda sales and can maintain their goal of providing great prices.

It comes down to which is the most powerful and valuable brand? Coke or Costco?
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lest we forget, he who controls distribution and access, controls all.
Coke loses out the most if we are to believe in shopper marketing
since most consumers will likely find an acceptable alternative
the rest will simply divert their Coke purchases elsewhere until it become inconvenient to do so.
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Yes! From what I learned working in the soda industry was that "route to market" is huge. But also that getting one to change from Coke to Pepsi (as an adult) was extremely difficult. What was able to undercut the preference was private label.
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Is this really much different than what restaurants do? Restaurants, as well as night clubs, typically carry Coke or Pepsi products and the consumer has to live with that if they wish to eat at that establishment. How many wind up choosing water because their brand is not offered?

The one difference here is that the consumer, not businesses, are probably shopping in other venues other than Costco and it will not be that big of a deal to pick up their Coke purchase elsewhere. So, Coke will not lose in that instance. But, I'm not sure how much that will hurt Costco either because the consumer probably isn't going to stop shopping Costco just because they deleted Coke products. That would be decided with future changes to the product mix.

It is fairly clear, that consumers do have a preference between Coke and Pepsi. Agreeing with Leslie on the private label unless a consumer is a diehard brand lover.
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Coke is hurt worse. A large percentage will transfer to Pepsi or Private label in Costco. Those who are Coke loyalists will purchase Coke somewhere else.

Costco will only feel a real impact from this type of business practice when and if they do this to enough brands on the shopping list that the consumer feels like they are forced into too many compromises. Then consumers will look for a retailer that is more convienient based on assortment across their range of purchase preferences. Sound familiar? I know I can't shop at just one place anymore...
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To coin a phrase, it's a no win situation. Shoppers loose or at the very least are inconvenienced. If our shopper is a Coke loyalist he/she will buy her soft drink elsewhere, but she'll still be confronted with missing Coke at shelf and if only for a moment may feel disappointment towards Coke or Costco, or both.

Our shopper's market basket at Costco may shrink a bit with Coke gone, especially if she is a loyalist; there are certainly enough options out there for her to buy Coke in another channel without a major problem. Or worse, Costco looses a trip because in her household soda is a planned purchase, she may just decide this trip I'll go to Walmart, Sam's or BJ's for stock up.

Coke looses an important distribution point, but they can beef up communication efforts in other channels in an attempt to stem attrition and show Costco they can thrive without the retailer.

We're analyzing SKU rationalization now and its impact on shoppers and while we have found some shoppers will simply choose another brand at shelf, a significant number will move to other channels they're already shopping, like grocery, drug or other mass merchants.

The real question is why would a retail or club channel eliminate the market leader from its shelves? Is it just a play by Costco to force Coke to pay higher margins, or is Coke sales at Costco really tanking and to the benefit of their shoppers they're giving more shelf space the better performing brand?
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Research shows that people don't change soda loyalty lightly. One of the most difficult thing for soft drink companies is to introduce a new soft drink. Ask Coke about the success of Mr. Pibb vs. Dr Pepper. Many Coke bottlers put DP back in after trying to get people to change to Mr. Pibb.

The soda industry is a cut-throat industry. Back in the 90's Coke reduced its price to the market way below the profit line. They knew they were big enough to hold it there for an extended amount of time and still come out okay. The purpose was to do damage to the smaller companies that could not sustain an extended period with losses.

Of course it is political. Totally political. Walmart and Sam's are constantly trying to drive the cost down on product, one in particular is soda, and they work for an exclusive price during a specific time frame.

Costco took the gamble that it was more advantageous for them to be without Coke for a while. Coke is calling their bluff.

And look at ALL the advertising and promotion they are getting right around Christmas time. Wonder how many people went to Costco to get the "last of the Coke" on the shelves and purchased other items in the same trip.
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Leslie, I was just thinking the same thing about the advertising piece. In this case, it could come out positive for both and look how the negative publicity on New Coke helped Coke Classic. In the end, many consumers thought it was little more than a ploy by Coke. But, it worked to Coke's advantage. However, that is not always the case.

There was something similar that happened outside of CPG in the hospital and insurance industries. One of the largest hospitals in the area dropped one of the largest, if not the largest, insurance company in the area. Businesses were scurrying around trying to get their benefits in line because the doctors out of that hospital were no longer accepted either. Ironically, the hospital still had to accept the insurance in the case of emergencies and the hospital had the only CareFlight service in the area. (Not going to mention the names or location.) In any case, they both suffered in the end due to negative publicity but it was a year to three years before they came to an agreement.

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We have been throwing this discussion around at lunch (where my group often tries to solve world problems:-) and the answer is Coke. Not only does Coke lose out on this distribution at Costco but what are they going to do with all the forecasted inventory that was scheduled for Costco...which retailer will will pick up the slack, Wal-Mart, Kroger, Publix and at what price?
As for Costco, they'll sell off the remaining inventory then place in new product in that space. Happy holidays, Costco!

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And I almost forgot...Coke is so paranoid about giving ANYONE an opportunity to start new usage habits that this must be causing them to pull their hair out. Imagine what they're thinking. For every empty Coke pallet space at Costco sits a void waiting to be filled by Pepsi. Unless Coca-Cola has completely lost its marbles this situation will end before inventory at any Costco store is depleted.

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Ha, ha! I can picture all those Coke execs in Atlanta walking around bald!

What this does underscore is the shift that started happening about 6 or 7 years ago. That is the increasing power in the brands of Costco, Walmart, Sam's Club, Kroger, etc. and the lessening power in the CPG's. Route to market has become king and name brands just don't have the pull that they did 10 years ago.

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pull is determined by ability to differentiate. price is now issue because beverage is a heavily price driven commodity business.

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Anyone know re how Coke is set up and this might be an internal problem. I thought that Coke purchased independent or related bottlers across the US to create the Coke (soft drink - cola type) organization -- a division of Coca-Cola the mother brand.

I wonder how the bottlers manage the business -- and if any political pricing /in-fighting between bottlers / divisions. I know there was division in my hometown bottler (originally set up as independent) and they run fairly autonomously from mother-ship. That was years back -- don't know now.

but Coke always a maverick. Line of clothing and subsequent lawsuits. New Coke. Vision? As least a thought-leader vs. sleeper? We can all be Monday morning quarterbacks -- we're not on the line.

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Information on the Coca-Cola system/partners - http://www.thecoca-colacompany.com/citizenship/the_coca-cola_system.html

Bottlers are "partners". Some owned by Coca-Cola, or a division of, and some are independent. When it comes to pricing for big box stores, it gets very complex and pricing changes according to the bottler/distribution area.

Did you ever notice that in the hot summer states during the summer time, soda prices tend to rise?

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This surely is a No-Win situation for Coke and Customer. Customer failing to buy Coke at a Costco store would surely have to go some place to buy it. However, if the customer base is loyal to Costco and they wanted to stick with Coke's competing brands, Coke would loose it big time to their competitors. This clearly shows retailer's power over manufacturers. But, what kind damage is Costco doing to its loyal customers who expect to buy their soda at Costco as well. Do they have to change the brand only because their favorite retailer has no agreeable terms with the retailer. Is that fair from the customer standpoint? Now if Costco wanted to make more monies by selling cross-brands, what would you term such a retailer? Shouldn't Costco be sensible over this and start stocking merchandise from Coke as well?