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Brand, Distribution Channel Conflict, Marketing Strategy, Uncategorized
Who needs whom more? Costco vs. Coke
You might have seen the following if you were shopping for Coke during your Costco run over the last week or so ” At present we are not carrying Coke products because we cannot provide the value our customers deserve.”
A devoted Diet Coke fan and Gold card carrying member of Costco, it is probably no surprise to you then that I buy my diet coke at Costco. So imagine my surprise last Wednesday, the day before Thanksgiving, when I couldn’t buy my Diet Coke during my Costco run.
I guess Coke won’t provide Costco the preferred pricing they had in the past citing conflicts with their local bottlers. As a result, Costco pulled all Coke products from their shelves.
So a stand-off ensued.
I understand Costco’s perspective. Their value to their members is wholesale or seemingly wholesale prices. It is the primary reason why people join wholesale clubs.
I understand Coke’s perspective, pricing when you have a complex distribution strategy is always tricky.
The stand-off will come down to who needs who more. Does Costco cave and not deliver on their brand promise offering Coke products at a price that I can get them at the grocery store? Or does Coke upset the apple cart with their local bottlers or perhaps make pricing adjustments in other channels in order to eliminate or minimize this channel conflict just so they can keep Costco as a distribution point? From Coke’s perspective, they have almost 100% household penetration in the U.S. across their product lines. Will losing Costco impact their market share? As much as I enjoy my Costco membership, I have to think that it won’t. But with their desire to be ubiquitous, this can’t be an easy decision for them either.
But for Costco to accept pricing no more advantageous than other Coke distribution points (and there are many), means they have to forgo their promise to their members. Is having Coke products in the stores just as a convenience worth the price of their brand promise? Making concessions with Coke could put Costco on a slippery slope with other suppliers and cast doubt in the minds of their member about their resolve to deliver on wholesale type pricing.
Despite being a Diet Coke fan who is sensitive to the recent increases in Coke products, I hope that Costco holds it ground because I expect them to provide me products and services at a discount or additional value over other places I shop.
In the meantime, I’ll get better at watching for Diet Coke specials because I don’t think I should pay $4.99 for a twelve pack. With the new year upon us, perhaps switching to water could be a good New Year’s resolution to add to my list.
What do you think?
