KO will get competetive with pepsi and prop up the volume growth in the u.s. over the next 24 months and then they will sell this capital intense bottling investment to FEMSA. There is absolutely know way that kent wants to keep this low margin capital intense bottling business on his books. even warren buffet mentioned this strategy on cnbc earlier this week. swire coke consolidated and others will not get larger rather they will get gobbled up by KO and then sold off to FEMSA. IMHO
KO branding became a "business unit" with the financial engineering escapades of Ivestor and G. It was pure bs to justify the leveraging up of the system to report short term profits at the expense of long term unwinding.
The unwinding has been occuring now for 12 years. With the most egregious of the bottling assets now on KO's balance sheet, the end game is returning.
There is no "branding", "bottling", etc. separation to the KO business. It was a mirage painted by MBA types to rape the shareholders who did not comprehend. However, Buffet comprehended - and look what has happened to his investment in KO for a dozen years! Just goes to show that his big investment style of the '80s boxed him in.
It is the core job of the brand owner to find, create, develop, strengthen the messages and imagery associated with brands so they are influential to consumer choices. I don't think either PEP or KO are doing well in this arena.
What if you learned 60-70% of customer purchases and brand attitudes about soft drinks didn't correlate to advertising style, creativity, or spend ?
Is that a numb consumer or bad branding ?
What if only 30-40% of shoppers are brand loyal and 60-70% repond to what's on sale ? Is that commodity economics playing out or is that a response to bad branding ?
Personally, I hate the Coke Zero ads with the Coke brand guys complaining about taste infringement or whatever, they are juvenile, and I still drink the product. And once in a while I drink diet Pepsi just to remind myself I don't really like it for unknown reasons.
I don't think it is any coincidence both Pepsi and Coke core brand advertising has been weak to the point of almost non-existent in the last several years.
I do think Dr. Pepper has created advertising which builds on their brand and their distinguishing flavors.
I also think retailers have been more influential for asking brand owners to create brand themes rather than pure product advertising. Grocery stores and fast food want product partnerships with brand owners, not pure product advertising which takes consumers anywhere, not just their store.
Coke and Tailgating was a huge success at retail in the fall.
Coke and March Madness similar.
McDonalds and Coke have partnered well with Monopoly over the years.
Coke has great visibility on American Idol, but there is no other tie in at retail.
All the above is really a condemnation of the current creative themes offered to consumers which fail to break through the noise, clutter, and numbness experienced by shoppers.
What is so fantastic about the Coke Zero campaign?
Sure there were sales, but there were sales for Tab and Diet Coke too.
Considering the huge branding campaigns of the '70s, '80s and early '90s, nothing has comparably clicked. KO in branding has been a miserable failure for quite some time now and one should consider how this hurt bottlers over the long term.
However, for the US and Canadian markets, one doesn't need to consider it now that KO owns the bottlers. The legacy of branding failure will go directly to KO's bottom line now - as it always should have.
i wonder what percentage of coke zero sales is actually new growth and new drinkers vs people just switching from regular. Im one of them i like zero alot wish it was on more fountains cant find it everywhere yet.
Once you change the distribution business model to a model that doesn't imitate a horse drawn wagon pulling 8oz coke bottles from store to store, the amount of capital necessary to run the business drops dramatically.
In two years, 90% of the volume will never see a sales center warehouse. Most sales Centers will have closed and sales will be completely separated from distribution.
Watch for the outsourcing of merchandising.
In effect, it will be run the way a new operator would establish this business if starting from scratch.
I can see the stores getting products delivered from their DC coming in the future, but I also see store like Wal-Mart that can't keep their own shelves full, much less manage to have a person dedicated to the Coke section for 8+ hours a day. As for outsourcing merchandising to a independent company sounds like a problem waiting to happen. Wal-Mart and Publix, I am sure would do it themselves but paying a 3rd party would prove to be no value because of the lack of dedicated employees that acquire incremental displays and space daily. It is the incremental activity that makes us great. Speed to Market!!! The workforce we have trained and managed is why we win in the market every day. Even now we have Key Accounts sell in displays at corporate level, which we at the sale center level, fight with store managers to execute. If we waited on some college grad in a suit to pay the slotting fees and then wait for that slot to be filtered down through the stores chain of command it would be weeks, if not months to get a new product on the shelf. This decision could only be made by a person that wishes to get a quick but temporary rise in stock price, to guarantee early retirement for them self. We started this company 125 years ago based on sales and service to ensure our products are in 1st and best position and in stock. Now there’s a problem that needs fixing boys, our in stocks during this last Wal-Mart sale were inadequate. We were picking flavors to display daily. Let’s keep America working and stop sending our jobs overseas. Remember cause and effect, if we employ less people in the states, and then less people in the states have the money to buy our products. Thus we have a rising European market and a declining North America market. Duh! This company was founded in this country, let’s keep this country 1st in our hearts and mind.
grey, regarding your comment:
<<In effect, it will be run the way a new operator would establish this business if starting from scratch. >>
Why wouldn't CCE have done such? Just what makes you think KO can?
Really ? so what you are saying is while Pepsico just got stronger having 3 or 4 reps from gatorade to frito in an account all trying to achieve one goal KO would actually kill of the one thing it still has ? ownership ,relationships,and dedication with its customers i dont know sounds really far fetched i think the part time merchandising is already the biggest mistake we have ever made talk about not givin a shit full time guys just clean up after most of them. However i wouldnt doubt KO thinking that just a sales force could keep things rollin with sub par service while Pepsico gobbles them up oh well will be interesting ride work hard and kick some ass in the meantime.....Side note i asked a store manager once why you so good to me and he said cause im always good to him made lottsa money in that account......i never didnt go there on sunday when not on sale just cause some new system said dont just one more day of lost opportunity way i see it...
i agree with you assessment, no way KO stays in the bottling business for long. they have already started to re-arrange the deck chairs, they clearly have been working on this for some time and they know exactly what they want to and will do. however, i dont think femsa will get the u.s. KO does not want to deal with a larger femsa. if femsa controls mexico, the u.s., and parts of south america it will be way to powerful and a much bigger problem that CCE currently is. i'm sure KO is lining up suckers to buy the u.s. now.