Teamsters: Survey Finds “Significant Disruption” in SoCal Coke Distribution

The International Brotherhood of Teamsters claimed today that strategic decisions made by Coca-Cola bottler and distributor Reyes Coca-Cola Bottling (RCCB) “have created significant disruption in the quality of service” for customers in Southern California, according to the results of a survey of over 100 retailers.

RCCB, which services accounts in California and Nevada, is one of the numerous operators across the country to take over regional bottling and distribution following the completion of Coke’s national refranchising campaign in 2017. Reyes Holdings, the distributor’s Illinois-based parent company, also operates Great Lakes Coca-Cola Bottling; Martin-Brower Company, a food service distributor servicing McDonald’s and other brands; and the Reyes Beverage Group, one of the country’s largest beer wholesaler operations. According to the Teamsters, Reyes currently employs over 5,000 active union members across its company portfolio.

Greg Nowak, director and secretary-treasurer of the Teamsters Brewery & Soft Drink Workers’ Conference, shared key takeaways from the survey during a call “for investors and industry analysts” held this morning. Compiled from retailers in the greater Los Angeles and San Diego metro areas in November 2018, the survey included questions about “changes to delivery schedules, whether stores are adequately stocked with Coke product, and if Coke sales have been impacted by the changes,” according to the Union. According to the Union, feedback came from both large format grocery stores (such as Vons, Ralphs, and Albertsons) and gas stations, 7-11s and independent markets.

Of the 107 completed surveys returned, 39 percent of respondents reported inadequate inventories for Coke products, while 40 percent of retails said their costs have increased since the changeover.

Meanwhile, 56 percent of retailers said the changes implemented by Reyes have affected sales across the soda giant’s product portfolio anywhere from 15 to 50 percent. Retailers also complained about the distributor refusing refunds or credits for expired or damaged products.

“The new distribution system in Southern California—which Reyes intends to roll-out in Northern California in the coming weeks— has significantly reduced the number of Coca-Cola salesmen, merchandisers as well as Teamster drivers and warehouse workers with some members moving over to Pepsi or other unionized companies,” he said.

Nowak blamed the shift to a “static routing system” for cutting some customers’ deliveries by half, forcing smaller stores in particular to purchase and hold more product and also take over the burden of responsibility for rotating products and monitoring codes. About 18 percent of respondents said Reyes is not delivering all of the same SKUs on its new schedule.

Nowak added that Reyes’ policies have “reduced the number of Coca-Cola salesmen, merchandisers as well as Teamster drivers and warehouse workers” that has caused some members to move to PepsiCo and other unionized companies, but did not provide specifics. He also criticized the timing of the changes, noting that the combination of service cuts and Coke’s move to increase prices at the end of last year was puzzling. In addition, Teamster contracts covering over a thousand California Coca-Cola workers are set to expire this year and next year.

“These changes have impacted customer service, hurt morale among frontline employees, and created tension with the Teamsters Union ahead of upcoming contract negotiations,” Nowak said.

Addressing investors directly, he emphasized that the Union is voicing its criticism in order to “protect the Coca-Cola brand and the quality service customers have come to expect.”

“We hope you will join us in urging Coca Cola to intervene and demand that Reyes restore quality service and good jobs before expanding this experiment any further,” he said. “Our interests are aligned with yours.”

In a statement shared with BevNET, a spokesperson for RCBB stated that the new operating model is “focused on providing the highest quality products and consistent and reliable customer service” while reducing its environmental footprint. Since implementing that model, according to the spokesperson, it has “increased overall market share in California against our principal competitors.”

“This proven operating model has enabled our growth within the Coca-Cola system and in other parts of the Reyes Holdings business, including in foodservice and beer distribution,” the company said in an email. “In addition to fueling our continued growth, we firmly believe the model helps us standardize and simplify our RCCB operations, thus freeing up resources that can be reinvested in our people, technology, facilities, and fleet. This makes our business, and our customers’ businesses, more sustainable and brings us one step closer to achieving our vision.”