Shoppers continue to grapple with the recession – I know I am – and so the retailers want to win favor by giving them low prices.
Well, it seems that strategy is creating tension between product makers like Coca-Cola Co., who are working hard to maintain profit margins while meeting retailer demands.
The public squabble between Costco (one of the nation’s largest wholesale club operators) and Coke (the world’s largest soft drink maker) is likely to fizzle quickly because there is simply too much money to be pried from the dead hands of the consumers. But it reveals real tensions as retailers and product makers square off on prices.
I’m a serious Costco shopper and Diet Coke addict, but I almost never buy my soda at Costco. I’ve often wondered why Coca-Cola products never seem to be a particularly good buy there. I routinely stock up on Diet Coke for a big discount whenever there’s a mega-sale at my neighborhood Ralph’s (gotta be ready for insta-party to happen at any minute).
Costco customers may have to look elsewhere for Coca-Cola products now that the retailer has stopped carrying them because the pair are fighting over prices. The situation is that retailers want to wield more power in determining pricing with product makers, who they depend on to stock their customers’ favorite brands. You can see this with Costco in that they have been aggressive in putting up signs on store shelves and notices on its Web site. ”Costco is committed to carrying name brand merchandise at the best possible prices.
At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve,” said a message on the Costco’s Web site labeled ”Price Alert!” Costco 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,” according to the message on its site.
Earlier this year grocer Delhaize SA in Belgium said it would no longer stock at least 250 Unilever products because the food and consumer products maker was making ”unprecedented” demands that would force retail prices up 30 percent, the two companies reached an agreement within months. But the pricing pressure is more intense at Costco, whose business model is designed around offering lower prices than traditional retailers.
When it comes to extracting the last penny from a consumer, these 2 companies will recognize there is a mutual interest and will find a way to resolve it. Who will win? I would never bet against that famous logo, but Costco owns the minds of the consumer so it will be a tough fight.