Famous quote/paraphrase I rememeber form Roberto was when he was being interviewed he said he used to keep his info on Pepsi in his left(or right) drawer but he pitched it out because they just didn't matter anymore. My, my, how things sure do change. You guys are right about arrogance; these guys had a money printing machine based on rasing the price of concentrate to bottlers and revving up volume through CCE and letting the CCE other shareholders take the beating. The thing is, I'm not so sure that group would do much different today than they did then, other than make better excuses for the train running out of steam. I think the events of the past 10 years prove that they weren't that great of visionaries or leaders after all. They just had a good punching bag(the shareholders of CCE).
Top dog... so it is that most on this board regard KO as. Yet Wall Street analysts, yes the cheerleaders, can only must a 5% earnings forecast for KO. 5%. That was supposed to be the low end of volume gains as forecasted by Daft just a few short years ago. Now it is the "goal" for earnings. Anyone stop to think what this means for CCE?
It means KO will be scavenging for every penny it can get from CCE's hide. KO may be top dog, but it is starting to look emaciated. In 4 months, Treasuries will outperform KO earnings growth. Treasuries! How much muscle is left at CCE to bring home the bacon to its non KO, independent shareholders? I think there is only 1 way out for CCE indy shareholders, get the dividend increased to 5%. Force management to perform. Treat KO just like the supplier it is and the common shareholder it is.
>>>Where KO and their bottlers lose out is vs the Pepsi system as they have no food wholesalers and the bottlers sell in the profitable bundle approach with all customers. This is why Pepsi is kicking KO and CCEs butt!! <<<
Well... there's also the minor difference of what PBG paid for the right to distribute Pepsi. Compare the balance sheets. For a normalized amount of revenue, CCE paid double on franchise rights (intangibles). Commensurately, CCE carries double the debt as well (therefore the bondholder has its hand in the shareholders pocket). While appearing on the balance sheet, it should not be ignored. It is what is hollowing out CCE's ability to compete with PBG.
KO has the best of all worlds. They have numerous syrup distributors across the US who compete with bottlers, use the syrup as a loss lead to gain new food business and allow KO an out if they are not happy with bottler pricing and distribution. CCE caused this route to market back in the early days (1986)as management on the west coast got out of the syrup business leaving KO in a mess thus the creation of food wholesalers as distributors to protect KO. There is little to no profit for bottlers in the syrup business. It only serves as part of a profitable bundle approach to cold drink customers (NCBs and 20 oz). Food wholesalers do a terrible job of selling in a profitable bundle approach to beverage distribution but KO could care less as they make a ton of money on the syrup. Where KO and their bottlers lose out is vs the Pepsi system as they have no food wholesalers and the bottlers sell in the profitable bundle approach with all customers. This is why Pepsi is kicking KO and CCEs butt!!
You are corect, I forgot the whole CO2 debacle. I signed many RFAs for purchase of more cylinders to replace those the 'competitor' had picked uup due to the bounty. They laughed all the way to the bank at us! KO seemed more protective of the other syrup distributors than it did CCE, which I never understood. What a crazy way to run fountain. For sure, I hardly ever met a bottler person who gave a rip about syrup because we weren't getting paid for it and the guy down the street competed with us on KO syrup.
The sypical scenario I recall was that ourr fountain person would sell in the account and place the equipment and the initial order of syrup. As soon as the food service supplier came aliong, he coonvinced the new account to buy his cheaper KO syrup. The account got the equipment cheap and maintained by us, got his syrup cheaper from the food supplier and we were left to maintain the equipment. The system was too messed up to keep track of who was our customer, who was KO's ftn customer and who was the food supplier. After awhile, the fountain guys at the bottler didn't care and there was no good flow of info between the sales side and the equipment side. We furnished everyone ftn equipment, CO2 cylinders and service and they got their syrup from someone else. Again, a small example of how messed up the system is and how KO's interest conflicts with CCE's interest.
While we wait to hear the good word on the direction our company will be going with new leadership on board..............
Syrup is more a measure for KO vs PEP when looking at gallonage in the fast food or similar channels. Syrup is a small contributor to CCE profits.
There are at least 6-10 distributors of KO syrups available in every metropolitan city. Sysco, MB, PFG, TriCon/AmeriServe/Yum, McLean, US Food, and those are just the nationals, then add the locals serving single owner operators etc.
Most use syrup as a loss leader. Cut it $2.00 a bag and make up for it on the meat and veggies and paper goods.
CCE has no leverage at all on syrup. That is why Cold Drink focuses on placing coolers and selling in B/C. If you want to see some real smoke and mirrors, take a look at the presentation advising owner/operators their profit and margin on selling 20oz PET is better than selling fountain cups from syrup. Really creative accounting. Cold Drink should be proud of that fairy tale.
Old, you forgot to mention distributors putting a bounty on collecting CO2 cylinders. On more than one occasion we had to send certified letters demanding return of our CO2 tanks which competitors had claimed and routinely used in their float.
CCE and KO are the only sellers of syrup? Not when I was there. KO let food distributors sell in every city I knew of and they frequently got better pricing than CCE did and undercut CCE on syrup sales. They would steal(or win) fountain account routinely. If they ran out of a flavor, they tucked their tail and came to CCE to pick up some more to sell local customers. They also paid their people cash incentives to take away CCE fountain customers. It was a lousy situation; we were the Coke company who had to fix the equipment, but yet they bought their syrup from Sysco, lol. What a joke of a distribution system. The fountain system was a bigger joke than the bottle/can business.
The boxed syrup is Bag in the Box for Fountain units or bar guns. KO and CCE are the only providers of Syrup. Sam's Club has just started in the last couple of years to sell the syrup, which when I was with CCE, it was a very restrictive product.. Sales Centers are paid on volume of syrup sold. With it on the street (in Sam�s) that is money out of the local CCE Sales Center's pocket.
The price is higher than the average price for most restaurants. If you are a small mom and pop pizza parlor and do not use much syrup and do have a machine ( 99% of the machines in the market are CCE machines, just look for the tags, they were given to the account when they opened to sell the Coke product) then this is perfect for you. If I were purchasing syrup from Sam's I would be watching the dates. They are usually very close to code as on many of thier items.
In the Mid Atlantic area... club stores: Sam's and Costco.
Went to Sam's Club this morning and looked at the beverages for sale in a new (more informed) light.
I saw Coke, Diet Coke and Sprite in several packages. I'm guessing those 3 comprise the lion's share of volume across the board for CCE?
On the way out the door ( I diverted to get a hot dog and fountain drink) I went by a dispay I hadn't seen before. It was cardboard boxes of Coke syrups but there were many more flavors including Diet Coke with Lime. They were priced at $49 and change. Where do they get the Coke syrup? Is that a competitive price? How does CCE compare to other companies who deliver Coke syrup? Oh, there was also a sign that stated you had to have your own machine. Any ino on that?
How many different club stores are there? Do they operate in a like fashion to Sam's?