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Monday, 27 June 2005

COKE TO SHARE SHELF SPACE WITH TIDDLERS


This curiosity comes from the European Commission last week: the European Commission has has taken binding commitments from Coca-Cola concerning its stranglehold on soft drinks. These commitments, which will remain in force until 31 December 2010, will increase consumer choice in shops and pubs by preventing Coca-Cola entering into exclusive agreements with shops and pubs, offering them target or growth rebates or forcing them to take less popular products with its stronger brands. According to Competition Commissioner Neelie Kroes:

Neelie Kroes: has consumers' interests at heart
“This decision will benefit consumers by improving competition in the markets for carbonated soft drinks in Europe. Thanks to the Commission’s decision, consumers will be able to choose from a larger range of fizzy drinks at competitive prices".
The commitments offered by Coca-Cola and its three major bottlers relate to carbonated soft drinks (CSDs). They provide as follows:

* Coca-Cola customers must remain free to buy and sell carbonated soft drinks from any supplier of their choice (but where large, private sector customers or public authorities organise a competitive tender for their supplies and Coca-Cola provides the best offer, it can still be the only CSD supplier).

* Coca-Cola may no longer offer rebates that reward its customers purely for purchasing the same amount (or more) of Coca-Cola’s products than in the past. This should make it easier for Coca-Cola’s customers to purchase from other CSD suppliers if they so wish.

* Coca-Cola may not force a customer that only wants to buy one or more of its best-selling brands (e.g. regular Coke or Fanta Orange) to purchase other Coca-Cola products such as its Sprite or its Vanilla Coke. Similarly, Coca-Cola will no longer offer a rebate to its customers if the customer commits to buy these other products together with its best-selling products or to reserve shelf space for the entire group of products.

Coca-Cola: the European market is drinking out of its chiller cabinets

* Where Coca-Cola provides a free cooler to a retailer and there is no other chilled beverage capacity in the outlet to which the consumer has a direct access and which is suitable for competing CSDs, the outlet operator will be free to use at least 20% of the cooler provided by Coca-Cola for any product of its choosing.

The Commission can impose a fine amounting to 10% of Coca-Cola’s total worldwide turnover if Coca-Cola breaks its commitments.

The IPKat thinks this is almost a complete waste of time. The vast majority of purchasers of Coca-Cola at retail do so voluntarily because they have become so mesmerised by the sheer power and hype generated by Coca-Cola's vast advertising spend, which its competitors cannot match. Until it's cool and desirable for consumers to buy other products, making them more accessible in the freezer cabinets or marginally cheaper in the corner store is a cosmetic gesture that misses the power of the brand.

Merpel says, "Vanilla Coke?! Surely not ..." She's willing to bet that, by 31 December 2010, Coca-Cola's European market share will be even bigger than it is now.

11 comments:

Ilanah said...

I don't think you're right here. If Coca Cola leverages its position in a way that no other drink is available in a large number of stores/bars etc, then even those who want to purchase other drinks will be unable to do so.

Jeremy said...

Frankly I don't think it much matters that other drinks are available, when people all seem to be giving them up for international standard products like Diet Coke or Dasani.

Ilanah said...

Even if you're right - and I don't concede that you are - the fact that Coca Cola has a competitive advantage through its considerable brand power does not mean that it should be immune from antitrust action in where it leverages its power. To grant such immunity would be like saying that we'll take action against relatively unsuccessful monopolists but successful monopolists will be able to get away scot-free.

Jeremy said...

This measure addresses the consequences of Coca-Cola's market power, not the cause. If Coca-Cola had only 1% of the soft drinks market, no-one would care much if it engaged in the sort of activities the Commission is objecting to now. Realistically the only way to give consumers more choice is to make Coca-Cola pay for its tiddly little competitors to advertise, or consumers won't know that there exist the sort of alternative products, with their own aspirations or lifestyle imagery, that are actually in competition with Coke.

Anyway, "I'm right, you're wrong, I'm right, you're wrong, I'm right, you're wrong ..."

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