Costco Drops Coke

Costco is no longer carrying Coca-Cola products in its stores nationwide because of a pricing dispute with the beverage maker. http://www.chicagotribune.com/business/ ... 0089.story

Dave148 wrote:Costco is no longer carrying Coca-Cola products in its stores nationwide because of a pricing dispute with the beverage maker. http://www.chicagotribune.com/business/ ... 0089.story

I ownder if this had anyting to do with the fact that Costco stated carrying "bootlegged" Mexican Coke.

stevez wrote:I ownder if this had anyting to do with the fact that Costco stated carrying "bootlegged" Mexican Coke.

I doubt it.

I have heard from a sales rep friend ( at Coke ) that it's not really "bootlegged" . The nice shiny new Mexican bottles were indeed delivered to Costco by your local Coca-Cola bottler, Coca-Cola Enterprises. How CCE and the Mexican bottlers are in "cahoots", I have no idea.

I wonder if they'll carry diet pepsi in their food court instead of diet coke now; Or if this only affects their warehouse stocked beverages.

doubt this will stick, but it's publicity and any is good.

Dave148 wrote:Costco is no longer carrying Coca-Cola products in its stores nationwide because of a pricing dispute with the beverage maker. http://www.chicagotribune.com/business/ ... 0089.story

Chalk it up again to the Chicago Tribune's inability to get the story right. Costco isn't restocking coke, they haven't dropped it. They're sitting on inventory that they won't restock. This will get fixed, but it may take some time. Costco has far more power than Coke does in this situation.

The article is poorly written, ie "no longer carrying", but the point about inventory is really semantics. Costco is no longer purchasing Coke products. Costco owns the inventory and will sell it through. Once the inventory is gone, there will be no Coke products in the stores, unless the dispute is resolved (which I expect it will)

Glenview is already out of Coke but you can still buy it in their pizza/hotdog stand.

Costco has far more power than Coke does in this situation

.

Costco can keep Coke out of its stores. What else?

If Coke has a pricing problem with Costco, it is probably a price increase that Costco doesn't want to take or a larger case pack that Coke wants to force in (to make price comparisons harder). On these or other issues Costco is not going to "win." Coca Cola has virtually complete distribution. While Costco is the largest distributor of Veuve Cliquot in the US and consequently a power broker, their Coke volume is probably large, but it is a small part of Coke's total. Compare for example what the WalMart/Sam's, Target, or grocery chains volumes are compared to Costco.

Coke won't jeopardize any of that business to get back in Costco. Coke will be back in Costco, but Costco will have little to say about the terms.

If Coke has a pricing problem with Costco, it is probably a price increase that Costco doesn't want to take or a larger case pack that Coke wants to force in (to make price comparisons harder). On these or other issues Costco is not going to "win."

Or it's quite possible Costco is demanding a lower price or special consideration that would undercut Coke's other customers.

MLS wrote:

Costco has far more power than Coke does in this situation

.

Costco can keep Coke out of its stores. What else?

If Coke has a pricing problem with Costco, it is probably a price increase that Costco doesn't want to take or a larger case pack that Coke wants to force in (to make price comparisons harder). On these or other issues Costco is not going to "win." Coca Cola has virtually complete distribution. While Costco is the largest distributor of Veuve Cliquot in the US and consequently a power broker, their Coke volume is probably large, but it is a small part of Coke's total. Compare for example what the WalMart/Sam's, Target, or grocery chains volumes are compared to Costco.

Coke won't jeopardize any of that business to get back in Costco. Coke will be back in Costco, but Costco will have little to say about the terms.

We have study after study that show that retailer power is far greater than manufacturer power- in the extreme amount, Wal-Mart is between 17-29 times more powerful than P&G, the largest manufacturer of consumer packaged goods in the world. Costco provides massive availability to Coke which is huge. Coke should be worried.

Just found this- nice blog summary on it: http://industry.bnet.com/retail/1000521 ... d-be-high/

MLS wrote:Coke will be back in Costco, but Costco will have little to say about the terms.

LOL!

Bill wrote:

MLS wrote:Coke will be back in Costco, but Costco will have little to say about the terms.

LOL!

Agreed. Coke needs Costco far more than Costco needs Coke. I've been following the situation really closely and it looks like Coke really misread this one.

Costco to resume carrying Coke products - http://www.chicagotribune.com/business/ ... 7456.story

Dave148 wrote:Costco to resume carrying Coke products - http://www.chicagotribune.com/business/ ... 7456.story

When the CFO is the one to deliver the announcement it's a pretty subtle sign that Coke gave up whatever price increase or price hold they wanted and caved to whatever Costco wanted.

Costco announced 11/17/9 that they were not reordering Coke. Costco (COST) was at $60.62; Coca Cola (KO) was at $56.58. When Costco announced that Coke would be back in Costco, COST was at 58.76; KO at $58.58.

During the three-week period Costco stock lost 3% and Coca Cola gained 3.5%. The market itself was almost even during that period. Further study will show that during that period Costco competitors’ stocks basically did better than Costco; Coke’s competitors basically did worse than Coke. Neither stock change was entirely or maybe not even largely effected by the other, but Coke’s demise by Costco may have been a tad overstated.

Costco’s announcement was apparently made by a spokesman; the CFO was speaking to an investors group. Given the amount of public spin Costco tried to put on their actions, I would have thought the CEO would have made the announcement, maybe he did not want his prints left on this episode. I did think Costco’s timing was brilliant though, restocking the new red Coke polar bear packaging before those cute bears start swilling Coke on TV.

For anyone who thinks Costco “won,” check what sort of “values” they will give their customers now that they have “won.” Apparently Costco were not upset with Pepsi’s pricing-so selling 36 packs of Pepsi for $9 must be a good value to them. Pepsi was available at Jewel (hardly a cost cutter) for $10 for two cases (48 cans) last week; Coke’s at $11 for two cases this week. Check any WalMart to see their regular price on a case of Coke or Pepsi.

Coke did not make any substantive concession to Costco, but if they did, it will be reflected in Coke’s stock price very soon. Any concession made to Costco will be extracted from Coke by the large players like WalMart/Sam’s, Target, and Krogers. If that happens, look for Coke stock value to drop. It could happen, but I wouldn’t count on it.

Last statement I had seen attributed the comments to the CFO.

Also, if you're quoting stock prices you'll know that beyond the fact of lagging earnings reporting that you can't draw any sort of a line between the events with coke and costco- I'm especially not willing to do so with a 3% movement representing a relatively small dollar amount change during the busiest season of the year to which beverage sales should theoretically contribute relatively little to overall performance.

I'll be curious to see how things continue to play out with Coke, but I'll continue to put my money on Costco and retailers over manufacturers in these kinds of disputes.

Coke will be back on shelves around Monday, Costco CFO Richard Galanti told investors during the company's earnings conference call Thursday. He did not want to comment further on the matter.

Focusing on Costco’s 3% decline in a three week period is not the important statistic! The third largest retailer in the US, Costco, drops Coke from its shelves and Coke increases in value 3.5% in the same time period!

If you do "put your money on Costco" rather than Coke, be glad that you didn’t do it 11/17/9. 6.5% for three weeks annualizes to 198%!

MLS and I are taking the financial discussion offline in order to not bore the hell out of you all

I do not think Costco's prices on routine soft drinks compete with sale prices at supermarkets at any time.

jpschust wrote:MLS and I are taking the financial discussion offline in order to not bore the hell out of you all

I thought it was fascinating.

same here

MLS wrote:Costco announced 11/17/9 that they were not reordering Coke. Costco (COST) was at $60.62; Coca Cola (KO) was at $56.58. When Costco announced that Coke would be back in Costco, COST was at 58.76; KO at $58.58.

During the three-week period Costco stock lost 3% and Coca Cola gained 3.5%.

It is not correct to draw any connection between the Coke-Costco issue and these changes in stock prices. First, stocks swing up, or down, by three percent over a three week period fairly regularly. You don't want to attribute this this particular to swing to any one event.

Second, saying that the issue led to a three percent change in the stock price implies three percent of Coke's future profits are attributable solely to Costco, which may be plausible, and that three percent of Costco's future profits are attributable to Coke, which is not at all plausible.