Wal-Mart puts Coke in its place

Most readers of this site have probably heard about Wal-Mart forcing Coke to go direct to its warehouses rather than direct to its stores. If they don’t, Wal-Mart is going to come up with a private label sports drink and drop the brand. At least that’s what Coke says.

Two thoughts on this situation:

1. The Coke (and Pepsi) distribution systems are not necessarily good systems for retailers. This is becoming especially true as new brands, specifically in functional, energy, and water, become more important to retailers. It’s not easy for Coke to fix this century old system, but when Wal-Mart throws its weight around, people listen.

2. PowerAde’s brand equity is not much better than private label. People who want to pay for a “premium” sports drink are going to buy Gatorade. People who want value/cheap are going to pick the other brand that Wal-Mart sells. . If Wal-Mart can make a private label sports drink and squeeze out some more margin, they might as well give it a try.