I miss the "tough negotiations"
with independent KO bottlers,
time in the stores & outlets with
them & long dinners with plenty
Also miss the visits to
Has anybody in top CCE position
invited you to his or her home?
Thanks, good answer.
I thought Coke had gone a bit beyond testing with Swerve. Though it was never available outside of schools, I was under the impression that it was nationally available -- did I have that wrong?
Bravo is an interesting niche player for CCE which KO actually has an indirect interest.
In schools, Bravo no longer is a competitor to KO in lunch lines because soft drinks and the other sugarfied product lines have been either legislated out or voluntarily removed.
If a student buys a BRVO product, there is no impact to KO equivalent volume sales since the buyer did not have an alternate KO product choice other than Minute Maid, and I don't see it represented in the lunch lines. MM is in lunch boxes, but not the lunch lines as the current dairy providers don't offer it.
Now, what is KO's interest in milk based products ? KO test marketed flavored milk products packaged in cans. Product was in cafeterias and vending. Not a lot of success. Product was eventually pulled. Given the choice, students could buy a 20oz soda for $1, buy a can of soda for $0.60 or a can of milk for $1.00. What do you think they chose ? Besides, the graphics were very juvenile and did not appeal to middle school or high school age demographics who have the discretionary dollars to spend in an a la carte lunch menu program.
The product was not universally available for direct lunch line purchase because of contractual issues.
So....my guess is KO will watch the BRVO sales and if hurdles are overcome and volume becomes stable then it will buy in.
If product loses velocity over time, KO loses nothing and actually conducted a marketing experiment with CCE monies.
"Why do you think CCE sells a water brand (Dasani) which has ingredients while Pepsi sells a plain filtered tap water at much lower cost of production ? Because KO would not receive revenue on the production and sale of an item lacking branded ingredients.
"Why do you think CCE does not have any independent private label brands of flavors to compete with general private label flavors ? Because KO would not receive revenue on the sale or production of a private label item.
"In a certain sense, CCE is already nothing more than a contract packer and delivery agent for KO. A glorified third party provider of merchandising services to retail clients and a delivery agent to non-merchandised accounts."
How does the Bravo Foods distribution deal fit in here? KO has no interest in BRVO, will see nothing from its sales.
And to say that other CCE suppliers, outside of KO, 'fund it', is nonsense.
For the benefit of Canucanoe, "the self serving and centered know it all of this forum", CCE does in fact receive funding from suppliers. I have seen these agreements, I have negiotiated these agreements and I have managed manufacturing plants where they are applicable. Full stop, end of story.
I had read this forum for months prior to posting. I had hoped that my small contributions would in some way enhance and foster positive dialogue. To have my comments labelled "nonsense" from someone who clearly has no idea of how CCE operates is an insult.
cceforlife, I don't think an independent company puts up with the bs that this board presents, hence I really don't buy into 'independence' talk. And much of this independence talk is pure nonsense on this board. It is really KO talk. Management of a franchisee wouldn't put up with the nonsense that many posters present as CCE's options. CCE has a lot of muscle it can exert in its relationship with KO, much like many franchisee's have when they band together and fight against nonsense. Heck... McDonalds even backed down when confronted. As for KO setting the price for ingredients, that's true. But CCE sets the tone for what it does.
Oh please,,, stop presenting excuses and a KO centric view. IF, and this is a mighty big IF, CCE is independent, they have lots of options on how they want to treat their suppliers and thier customers. I haven't heard you discuss these at all. Seems to me you don't feel CCE is independent. I also take exception with much of what you list. Business is not black and white, there is lots of gray. Same with contracts. And to say that other CCE suppliers, outside of KO, 'fund it', is nonsense. ...btw, look at PBG and PEP and you will see a much different relationship that changes your 'fund it' views. I present that is because PBG management understands how to negotiate, not because the mother syrup supplier knows how to 'control' it.
Canu, as much as I appreciate your ideas and insights, there is a piece of the KO/CCE relationship that has not become apparent to you. The concept of independent bottler is gone for CCE.
CCE is a franchise. KO is the parent franchisor, hence the nickname "ma coke".
Just as a McDonalds franchise location cannot create its own menu and offer its own product lines, or even buy ingredients from nonMcDonalds distributors, and still call itself McDonalds, CCE is in the same situation.
The terms and conditions of CCE's existence are contractualy established in the franchise / master bottler agreement. I've seen parts of it and all the strength is in the franchisor's side of the agreement. KO sets all terms and conditions for costs of ingredients. Even the level of marketing funding back to the franchise is pre-set.
CCE has no negotiating room in the traditional business to business sense. CCE can ask for terms and conditions in order to grow the business or improve operations, but if KO does not wish to support the request, there is nothing CCE can do in response. KO evaluates the funding request and determines if it adds improve ROI/value to KO first. If not, then the answer is no, no matter how beneficial to CCE.
Several years back there was a very large upscale family restaurant franchise chain that broke away from the parent company. They had a few hundred locations and thought they knew the restaurant operations business better than the parent company so they created their own new restaurant brands and their own menu's etc. They failed miserably and went bankrupt within three years. Parent company is doing fine without them.
Besides, if CCE were to attempt to do anything in a strong arm fashion (slow down sales, no support of marketing promotions, etc) KO would simply call the loan or call for replacement of key executives. Yes, KO holds loan papers on CCE as well as stock.
Why do you think CCE sells a water brand (Dasani) which has ingredients while Pepsi sells a plain filtered tap water at much lower cost of production ? Because KO would not receive revenue on the production and sale of an item lacking branded ingredients.
Why do you think CCE does not have any independent private label brands of flavors to compete with general private label flavors ? Because KO would not receive revenue on the sale or production of a private label item.
In a certain sense, CCE is already nothing more than a contract packer and delivery agent for KO. A glorified third party provider of merchandising services to retail clients and a delivery agent to non-merchandised accounts.
For those of us inside the business, we are all to familiar with the parental strength of KO in the relationship.
"I must say, that is all legal nonsense"..
Whether it be legal nonsense or legal brilliance matters not, it is still "legal" and binding.
"Legalities are for those that don't understand business and how to negotiate an independent path"..
CCE is a legally independent company. I think we agree on that as well as the fact that CCE doesn't behave as an independent company in many areas. Where we disagree is the appropriate strategy to maximize CCE performance and shareholder return. After retiring from four decades in the Coke system including time with CCE I would suggest that the first step is refocus CCE from within without antagonizing KO. Namely:
-change Alm and Kline
-a relevant and timely HR/IR function.
-better cost control flexed to volume in distribution, warehousing and manufacturing.
-effective management of the key account customer management function.
In my opinion KO would welcome the above changes with "open arms." To date it unfortunate/sad/deplorable that the CCE BOD has not pushed for significant internal change rather they continue to accept the reorganizations suggested by the continually under performing Alm, Kline and crew. When will they wake up???..1997 reorg, 1999 reorg, 2001 reorg,2005 reorg..have they brought about significant increased financial results. The answer is obvious.
cce4u2, I must say, that is all legal nonsense. CCE has heft, muscle and there has been enough going on that can be used to adjust all your arguments in the business domain. Legalities are for those that don't understand business and how to negotiate an independent path. CCE, if it is an independent company, is on an independent path. The negotiation would be quite simple.