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Costco stops carrying Coke drinks in price dispute

Tuesday, November 17, 2009
(Updated Wednesday, November 18 - 5:35 am)

ATLANTA (AP) — Costco customers may have to look elsewhere for Coca-Cola products now that the retailer has stopped carrying them because the pair are fighting over prices.

The public squabble between one of the nation's largest wholesale club operators and the world's largest soft drink maker is likely to fizzle quickly. But it reveals real tensions as retailers and product makers square off on prices.

As shoppers continue to grapple with the recession, retailers want to win their favor by giving them low prices. But that has been creating tension between product makers like Coca-Cola Co., who are working hard to maintain profit margins while meeting retailer demands.

Typically such negotiations take place behind the scenes, but once in awhile, a public dispute erupts.

"Beneath this surface of harmony, it's a dogfight out there," Gerry Khermouch, editor of Beverage Business Insights, said Tuesday at an investor meeting held by the soft drink maker at its hometown of Atlanta.

Retailers want to wield more power in determining pricing with product makers, who they depend on to stock their customers' favorite brands, Khermouch said.

Costco has been aggressive in putting up signs on store shelves and notices on its Web site.

"Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve," said a message on the company's Web site labeled "Price Alert!"

A Costco executive confirmed the move Monday but would not discuss the matter further.

The wholesale club operator, based in Issaquah, Wash., is not removing products like Coke and Diet Coke from store shelves, but it does not plan to restock them "until the matter is resolved," according to the message on its site.

Coca-Cola said in a statement late Monday it won't comment on ongoing negotiations but said Costco is an important customer and that it is committed to working with it "in a spirit of fairness."

This dispute is notable given the size and visibility of both companies, said Jim Hertel, managing partner at retail consulting firm Willard Bishop.

"It's not unprecedented, but it doesn't happen every day," Hertel said.

Earlier this year grocer Delhaize SA in Belgium said it would no longer stock at least 250 Unilever products because the food and consumer products maker was making "unprecedented" demands that would force retail prices up 30 percent, the two companies reached an agreement within months.

But the pricing pressure is more intense at Costco, whose business model is designed around offering lower prices than traditional retailers.

Hertel said most likely, the companies will recognize there is a mutual interest and will find a way to resolve it.

"These are complex relationships and hugely valuable," he said.

Who will win? Beverage analysts said don't bet against that famous logo.

"This is not going to bully Coke into changing its pricing strategy," said John Sicher, editor of trade publication Beverage Insights. "I think Coke is going to basically be focused on the right price and right market for its products, no matter the cost."

Accompanying Photos

File photo (Associated Press)

Photo Caption: People shop inside a Costco in California.

Comments

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d_random

November 17, 2009 - 12:04 pm EST

I hope Costco sticks to it's guns.

JimDandy

November 17, 2009 - 3:56 pm EST

I for one would like to see Castco win as well . I am sick and tierd of seeing the prices of soda go up with no other reason but that people will pay it. I"m sure Walmart picks its prices with Coke for both Wally World and Sams club . Has anyone noticed its getting cheaper to buy BEER then soda now days ? I just think if everyone bought Koolaid for one month instead of any soda it would really show how feed up were getting , but then again millons buy bottled water from these companies when they could save alot by just putting a $30.00 filter on their kitchen tap , its the same thing if not better.

eduguytoo

November 17, 2009 - 6:13 pm EST

Dead On. One of the best things we ever did was purchasing a refrigerator that dispenses filtered water through its door. That was a few years ago. Our two growing boys , thankfully, have never been much interested in soft drinks. They'll have one occasionally if we eat out. But they were absolutely breaking the bank with bottled water. We haven't had to buy bottled water now for several years. We change the filter in the fridge a few times a year (and they aren't totally cheap). But I'd guess we save a few hundred dollars a year this way. Not buying soft drinks at all saves more...and neither boy (now 24 and 16 years old) has ever had a cavity.

GBO_Yoda

November 17, 2009 - 3:56 pm EST

You are absolutely correct , stick to your guns.............

rmacz

November 17, 2009 - 6:37 pm EST

This story sounds slanted toward Cosco. Walmart usally has better deals than Cosco in the first place. I don't hear Walmart complaining.

Get Real

November 17, 2009 - 8:05 pm EST

The thing with Walmart is that they force companies to lower their prices to be carried in their stores which, in turn, sends American jobs to foreign countries.

teef

November 18, 2009 - 12:51 am EST

this is the beauty of the free market. if you don't want it, don't buy it. if you want it, buy it. if it's cheaper somewhere else, then go there, unless you like to pay more.
i like what costco is doing. i wish more large corporations would act righteously. it doesn't really matter if they sell coca cola... nobody will stop going to costco b/c of the lack of coca cola, and coca-cola is obviously not too concerned about selling a few less bottles. who cares?
solution... drink water. if america wasn't so addicted to soda, maybe we wouldn't be so ridiculously overweight as a nation. i'm tired of seeing people who are obviously obese, i'm talking 70-100 pounds overweight, drinking 44oz sodas. there should be a law.. like how you can't serve beer to an obviously intoxicated person

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