Friday, November 20, 2009

Coke versus Costco - Greed is not so Good!

It's all over the news. Well, the 'Soda' news.
Costco isn't getting the pricing it wants from Coca Cola, so they've decided to no longer carry their products.

Well...they'll sell out what they have and THEN stop carrying it. The quote in the Associated Press article reads like this:

The wholesale club operator, based in Issaquah, Wash., is not removing products like Coke and Diet Coke from store shelves, but it does not plan to restock them "until the matter is resolved,".

The Chicago Tribune, Huffington Post and Walletpop reported the story also...but both sides of the argument are being rather tight lipped about it all so there isn't much for them to share.

Which products? Apparently ALL of them: Coke, Cherry Coke (Jay-Z's favorite!), Classic Coke, Black Cherry Vanilla Coke (yes, really!), Diet Coke, Coke Zero and Sprite. And Disani water! and Vitamin Water! And Energy Drinks!

But who is really being the price bully here? Have you ever bought soda in a price club? I have NEVER seen brand-name soda at a reasonable price at ANY price club. I don't care if it's Costco, Sam's, BJ's...they all have been consistently higher in price than the grocery chain stores.

How big a discount does the #1 soda distributor have to give a retailer? Soda is like soap...people are going to keep buying it no matter WHAT it costs. This is not to say that it's reasonable to 'price gouge'...but my point is that if the national Grocery Chains can sell soda at a given price, then the wholesale stores should be able to sell 'competitively' as well.

These 'price clubs' have made a career of asking the public to pay a membership fee so that they can buy products in bulk. Sure, you get a good price on Mayonaise...it's because you're buying a 2-gallon jug of it! Less plastic, less glass, less paper labels...lower price.

But maybe Joe Blow doesn't WANT to buy 300 cans of Coca Cola in order to get a good price. He wants to go where he buys his chopped meat and chicken and buy everything for dinner in 1 place. If Costco can't make money selling Coca Cola then they should stick to selling no-name brands at a profit.

Costco is a huge chain, but will Coca Cola suffer dramatically from the loss?
I'm inclined to say 'no'.

Sure, you want every sale you can get...but this might open Coca Cola up to finding some markets they have NOT yet exploited...and tell Costco to get back in line with everyone else and pay what everyone else is paying.

And do you think Costco can find enough no-name substitutes for the brands they are discontinuing? How many people are going to say "Oh look! It's Cola Zero! Sure, it's not COKE Zero, but I'll drink it! And LOOK! They have Dish-ani! Sure, it's not Disani..but I'm sure it's similar!"

Almost none.

Much of the feedback I've seen has been based around "glad to see Costco telling Coke to shove it." As a business man and a Costco customer I say "tough noogies, Costco."

1 comment:

Anonymous said...

It is useful to try everything in practise anyway and I like that here it's always possible to find something new. :)