Question

A group of 50 Coca-Cola Bottlers in the United States sued the Coca-Cola Company when it announced a plan to ship its powerade sports drink directly to Walmart warehouses, thus upsetting the established chain of distribution. Coa-Cola uses a distribution system called :direct-to-store delivery" that relies on the licensed bottlers to package and deliver Coca-Cola products to retailers. Bottlers also set up retail displays and stock the shelves. Rival Pepsi-Cola, which markets Gatorade, the competitor to Powerade, ships its products directly to retailers's warehouses.Coca-Cola says forcing them to distribute their products through bottlers will make them less competitive. from Walmart perspective, cutting the bottlers out of the channel of distribution could reduce their operating costs and therefor increase their profits. Walmart's margin on Gatrorade is 30%, but on Powerade it is only 20%.

Not all retailers have warehouses. Convenience stores and smaller independent grocery stores don’t have them. Assuming that the Coca-Cola bottlers deliver to these stores as well as Walmart, why were they so upset about the possibility of losing just one customer?

WRITE AN ESSAY OF 250 - 300 WORDS

Answer 1

The idea here is the huge brand value of walmart. It might seem like just 'one' customer, but we need to understand that delivering to Walmart is equivalent to delivering Coca-Cola to at least 20 retailers. Huge consumer base has ensured this trend. The consumption in Walmart stores are extremely rapid and the licensed bottlers see this as a revenue generating activity. But once Coca-cola announced that they will bypass the supply chain, these bottlers are missing out on a significant revenue which they have been relying heavily upon. Of course they do deliver it to small retails, the point of concern is the missout on a major revenue. These bottlers might have scaled up the supply chain with sophistication backed up by the revenue generated by delivering to walmart. But when this vital chain breaks, there is a dearth in maintenance cost of this sophisticated supply chain. Therefore, the bottlers have to resort to cut down on other expenses such as labor, packaging, etc. The bottlers lose significant revenue in setting up retail displays and stocking, especially considering a massive chain of retail like Walmart. In conclusion, we can clearly perceive the decrease in revenue associated with this disturbed supply chain.

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