Rift Between Coke, Some Bottlers Eases

Posted 13 February 2007 @ 12:14 pm EET     Print     Reprint     E-Mail     Comments

ATLANTA (AP) - A rift between The Coca-Cola Co. and some bottlers has been eased as the world's largest beverage maker announced Monday that several suits over its plan to distribute Powerade to Wal-Mart stores directly through the retailer's warehouses were being dropped. Coca-Cola also said it will work with the bottlers "to develop and test new customer service and distribution systems."

The company and its bottlers will consider shipping products directly to retailers' warehouses, as well as other ideas, Coca-Cola spokesman Dan Schafer said. In turn, the bottlers will be compensated for products delivered in their regions through forms of distribution other than themselves, Schafer said, adding that details still need to be worked out.

Atlanta-based Coca-Cola said that it hoped that all U.S. bottlers who distribute Coca-Cola products, including Powerade, will participate in the initiative. Those who have already joined agreed to drop lawsuits now pending in U.S. District Court in Atlanta, and Circuit Court of Jefferson County in Birmingham, Ala., Coca-Cola said in a statement. It was not immediately clear if all the bottlers that had sued Coca-Cola over breach of contract agreed to drop their claims. Schafer said "substantially all the bottlers in the suit" had dropped their claims.

Last year, several bottlers that handle roughly 10 percent of Coca-Cola's U.S. volume sued to try to block a new delivery system that the beverage maker's largest bottler, Coca-Cola Enterprises Inc., wanted to test for its Powerade sports drink. A major Coca-Cola customer, Bentonville, Ark.-based Wal-Mart Stores Inc., had approached the company and its bottlers, saying it wanted to increase availability of Powerade in its stores and help the brand grow faster by delivering the product to its stores through its own warehouses rather than through the bottler system.

Wal-Mart is the world's largest retailer. The test of the proposal was only being conducted in CCE's territory, but some other of Coke's bottlers objected, Coke said. "Our bottling system is our heritage, and it will be the foundation for our future growth. The partnership with our bottlers is what makes the Coca-Cola system powerful and unique, and we will work diligently to ensure that we move forward and succeed together," said Sandy Douglas, president, Coca-Cola North America. "One of the historic strengths of our system has been its ability to change and adapt as our consumers, customers and competitors have changed."

Under the agreement, the company will join U.S. Coca-Cola bottlers in testing new systems to bring company products to customers who require special services. At the same time, Schafer said CCE's Wal-Mart warehouse delivery system will continue. Analysts said the news was positive for Coca-Cola. "For Coca-Cola, getting past the disputes with its bottling system is critical to meeting the changing needs of its retail customers and opens the door for a more aggressive and diverse product pipeline over the next few years," Banc of America Securities analyst Bryan Spillane said in a research note.