BevBlog: Wal-Mart puts Coke in its place

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1. 1 On June 12th, 2006, Anonymous said:

   Wal-Mart is not necessarily Coke’s typical DSD client and it’s understandable that they are trying to distance themselves from Coke’s DSD problems.
   With the volume and margins of Wal-Mart one cannot afford product shortages and empty shelves waiting for small bottlers to deliver.
   But if Wal-Mart decides to go with private label, they will probably need the help of some Coke bottlers to contact bottling…
   So it’s a new but small world after all.

   By the way, what was PowerAid??

2. 2 On July 27th, 2006, Remmel808 said:

   2 Cent POV –

   Coca-Cola cannot afford to let Wal-Mart create a private label sports drink just yet, and they’ll be determined as ever to prolong the inevitable for as long as possible.

   This is a pure volume driven channel (nothing more) that although is painful, is a necessary evil for a stock driven company. Volume drives share but unfortunately doesn’t help drive profitability or daily cash operating profit. Coke & Pepsi need the club stores in an effort to help grow what have become saturated markets across the US.

   Here’s what I’d say to Coca-Cola supporters that are upset at Wal-Mart. 2 Things:

   1. Coca-Cola has enjoyed a nice profit for many years with PowerAde. They’ve been # 2 in a weak category with not many other players. Needless to say they have enjoyed price realization and would do better with some competition.

   2. If you really care about PowerAde and its longevity in the marketplace then take a look at Coca-Cola themselves and the HUGE opportunity missed. I believe they are in their 5th year of an exclusive 7 year deal with the NCAA. This is the largest platform available for their target demographic and they have failed, in my opinion, to build enough loyalty to ensure its success in the years to come. Time will reveal its lifespan – but for what it’s worth, a private label sports drink will do nothing more than help Wal-Mart expand their value driven brands into yet another beverage category. All beverage companies need Wal-Mart, and Wal-Mart is here to stay…

   John Remmel II

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