Terhune Soda Rebellion - Terhune, Soda Rebellion, WSJ, Mar...

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Terhune, Soda Rebellion, WSJ, Mar 2006. http://www.uic.edu/classes/actg/actg516rtr/Cases/13-Coke-Soda-rebellion-2006.htm “Soda Rebellion - A Suit by Coke Bottlers Exposes Cracks in a Century-Old System Serving Wal-Mart Is at Issue, But Spat Shines Spotlight On Local Businesses' Role The Brownes' 84-Year History.” By CHAD TERHUNE OKLAHOMA CITY -- The black-and-white photos hanging in Robert Browne's office recall happier times for the longtime Coca-Cola bottler. In a 1922 image, his grandfather stands proudly in front of his newly acquired Coke bottling plant. A 1978 snapshot shows three generations of Mr. Browne's family celebrating a new contract with Coca-Cola Co. alongside Donald Keough, later Coke's president. Yet last month Mr. Browne sued Coke. The suit by him and 54 other independent bottlers also named one giant Coke bottler, Coca-Cola Enterprises Inc. It seeks to bar them from breaching a century-old tradition at the iconic soda company, in which the independent companies that put its beverages in bottles and cans also deliver them to grocery stores and stack them on the stores' shelves. The problem: Wal-Mart Stores Inc. wants one Coke-produced beverage, the sports drink Powerade, sent directly to its warehouses. Coca-Cola Enterprises has agreed to do so, within its own sprawling territory. Smaller bottlers wouldn't be affected immediately. Yet they fear this is an opening wedge, a shift that ultimately could threaten their survival. Their concern is that straight-to-warehouse delivery will prove pleasing to Wal-Mart, that other chains will demand it, and that it would inexorably spread to other drinks and bottlers. The small bottlers then would see their close relationships with grocers diminished, and local marketing would suffer. Those relationships are the main way the bottlers feel they can drive sales in their territories -- and thus their own business success. Agreements dating to 1899 give Coke bottlers exclusive rights to handle sales and distribution within their territories, all the way down to building displays in grocers' aisles. Coke must rely on the bottlers, as well, to manage a growing assortment of new drinks and to execute marketing promotions. As a result, Coke's growth has always been built on a symbiotic relationship with local bottlers.
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But Coke has also chafed at their independence, and the company has steadily nibbled away at it. Bottlers numbered more than 1,000 in the 1930s in the U.S. In the 1980s and '90s Coke encouraged consolidation, eventually shrinking their number to 76 nationwide. Now, Coke is also facing a stubborn slide in U.S. sales of its flagship Coca-Cola Classic as consumers buy more bottled water, expensive lattes and energy drinks. Coke's world-wide volume growth was 4% last year, down from a recent peak of 9% growth in
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This note was uploaded on 08/09/2010 for the course INTB INTB 3351 taught by Professor Walker during the Summer '10 term at University of Houston.

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Terhune Soda Rebellion - Terhune, Soda Rebellion, WSJ, Mar...

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