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JimVanMeerten (67.58)

Can Costco kick the Coke habit?

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November 17, 2009 – Comments (7) | RELATED TICKERS: KO , COST

As I was reading financial stories on the Internet I had the TV on and heard in the background that Costco (COST) had quit carrying Coke (KO) products. I knew that for years Coke was rumored to pressure stores and restaurants to carry only their products. Even today it's hard, almost impossible to find a restaurant where you can get both products.

I'm amazed as I go around to volume retailers how much Coke products vary in price. There seems to be no rhyme nor reason for this. You would think that Wal-Mart, BJ's, and Costco all pay the same price?

Both the Associated Press -- "Costco nixes Coke products over pricing dispute" and Bloomberg --"Costco stops restocking Coca-Cola products in dispute" have short articles but both Costco and Coke won't say much other than they are in price negotiations. Both stories quote a release from the company website that seems to have been taken down: "Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our customers deserve."

This is a dispute that will pay out behind closed doors but will effect many of us. My bet is that Coke won't budge. I think Costco needs Coke more than Coke needs Costco but either way I doubt if we will ever know if Costco got as good a deal as Wal-Mart. What do you think?

Disclosure: I do not hold positions in either company at the time of publication

Jim Van Meerten is a investor who writes on financial matters her and on Financial Tides. Please comment below or email FinancialTides@gmail.com

7 Comments – Post Your Own

#1) On November 17, 2009 at 1:56 PM, brickcityman (< 20) wrote:

As a Costco member I know I am pissed about this... I hope it will be resolved soon...  As in before my stock of Vitamin Water is depleted.

 

Personally I'd be all for them raising the price and being very public about the reasons why...  Costco buyers are already price concious so why not arm them with the information and let them choose?

 

 

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#2) On November 17, 2009 at 2:12 PM, mawnck (< 20) wrote:

I'm just baffled as to why anyone would change their shopping habits over sugar water. Guess that's why I ain't rich.

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#3) On November 17, 2009 at 2:30 PM, brickcityman (< 20) wrote:

RE # 2, to me its not so much about the products in question... its not like I'd threaten to cancel my membership over this one thing.  Its more a matter of principle.

 

COST apparently wants to have it both ways... They want to protect their margins and not have them exposed in the process. 

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#4) On November 17, 2009 at 3:20 PM, bcnu6 (29.82) wrote:

I don't think Costco needs Coke.  My impression is that Costco has always sold far more Pepsi products.  They normally do not carry competing brands (e.g., you don't see both Skippy and Jif peanut butter next to one another on the shelves), so it fits the Costco business model to discontinue Coke.  I am glad to see Costco holding the line on prices.

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#5) On November 17, 2009 at 3:25 PM, AndreylikesMTL (97.78) wrote:

I am a HUGE Costco fan, and a member from 1990

But Lately…

In my opinion Costco is getting less and less attractive L

They do not have any more brand name goods.

If you look in Tools for example

Before there was Vise-grip, Channel-loc, Crescent, Makita…

Now, they just have imported, Cheap (staff)

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#6) On November 17, 2009 at 4:09 PM, Gemini846 (82.65) wrote:

The only company I think that can really make manufacturers bend to thier will is Walmart. Its surprising that there hasn't been an anti-trust suit over the whole thing.

Walmart gets around it by having manufacturers build similar but slightly cheeper products for its stores. Comparing 2 big screen TV's last Christmas I found similar models at Walmart and circuit city. The CC tv was $40 more than the Walmart one but the walmart one had slightly worse aspect ratio. 1:8400 vs 1:10000 or something like that.

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#7) On November 17, 2009 at 7:59 PM, groceryguy85 (< 20) wrote:

As the owner of a supermarket I can tell you that Costco is doing the right thing. Coke has had more price increases in the last four years than they had in the 15 years prior combined. Our company has kicked Coke out of our stores briefly twice in the last two years. Both times it resulted in Coke reducing our cost which we passed on to the consumer. Costco is doing the consumer a favor. Consumers need to do their part by buying private label or Pepsi until Coke comes to the table with better prices.

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