First Major Bottlers’ Lawsuit Against The Company In Over 80 Years
SPRINGFIELD, Mo., Feb. 14 – LAWFUEL – The Law News Network — A group of approximately 50 Coca-Cola bottlers filed a suit in U.S. District Court here to prevent The Coca-Cola Company and Coca-Cola Enterprises Inc. (CCE) from shipping PowerAde to customer warehouses instead of delivering the product directly to
individual stores – a system that has been in place for over 100 years. Coca-
Cola bottlers will also seek a preliminary injunction to stop CCE’s PowerAde
warehouse delivery plans until the legal action is resolved.
A similar suit is also expected to be filed today in Circuit Court of
Jefferson County in Birmingham, Ala., by an additional group of bottlers
bringing the total number of bottlers involved to nearly 60.
The suits, the first major legal actions by a majority of independent
Coca-Cola bottlers as a group against The Coca-Cola Company in over 80 years,
contend that an agreement negotiated in 1994 between the bottlers and the
company specifically prohibits warehouse delivery of PowerAde to retailers
like Wal-Mart.
“The plans for a large scale rollout of warehouse delivery of PowerAde
fundamentally alters the system that has made Coca-Cola the most recognized
global icon and one of the world’s most valuable brands,” said Claude B.
Nielsen chairman, president and CEO of Coca-Cola United Bottling Company,
Birmingham, Ala., — the third largest Coca-Cola bottler in the United States
— and a member of the executive committee for the Coca-Cola Bottlers
Association.
Nielsen said the bottlers and The Coca-Cola Company have worked for months
to come to an acceptable resolution of the issue of PowerAde warehouse
delivery. “Unfortunately, despite our best efforts, we have not been able to
reach a solution with either the company or CCE and we are left with no
alternative but to initiate legal action,” said Nielsen.
The bottlers are also concerned that the warehouse delivery of PowerAde
violates the principles that underlie the bottlers’ perpetual contracts with
The Coca-Cola Company. Throughout their 100-year history, bottlers have served
all of their customers directly, large and small, by utilizing their own
employees and trucks to deliver product to store shelves within their
exclusive territories.
In the 1970s, that system was challenged by the Federal Trade Commission
in part because of objections that the exclusive territory system made it
impossible for large customers to use their warehouse delivery systems.
Congress intervened and passed the Soft Drink Interbrand Competition Act in
1980, concluding that the bottler system should be preserved because of its
benefits to competition, consumers and local communities including smaller
retailers.
“All Coca-Cola bottlers, first and foremost, seek to provide the best and
most reliable service we can for our customers,” said Edwin C. Rice, chairman
and chief executive officer of Ozarks Coca-Cola Bottling in Springfield, which
saw its PowerAde volume grow by 121 percent in Wal-Mart stores in its
territory in 2005. “Regrettably, this action involves one of our most valued
and largest customers. It is our commitment to provide Wal-Mart with excellent
service and local promotional activity that will continue to build the
PowerAde brand.”
“We believe that DSD continues to provide retailers, both large and small,
with the most efficient and effective distribution of Coca-Cola products,”
said Rice, whose family has been a Coca-Cola bottler for 85 years. “Combined
with superior merchandising, local brand development and strong local
relationships, DSD has had a tremendous impact on the overall success of the
PowerAde brand.”
Research shows the bottling system played a key role in the doubling of
PowerAde sales volume between 2000 and 2004. While PowerAde trails the market
leader in isotonic drinks nationally by a wide margin, several of the
plaintiff bottlers, which have over 10,000 employees collectively, have built
PowerAde into either a leadership or strong contender position in their local
markets.
“The value that the bottling system brings to the Coca-Cola Company and
our customers is without question,” said Rice. “We believe the ultimate
success measure for retailers is increasing PowerAde sales, which is more a
matter of operational performance on the part of the bottler than warehouse
delivery. Getting the product to the warehouse is not the goal. The goal is
getting the product into the hands of more consumers more often.”
The Coca-Cola bottling system began in 1899 in Chattanooga, Tenn., when
two young attorneys obtained the exclusive right to bottle Coca-Cola across
most of the United States. By 1909, more than 400 Coca-Cola bottling plants
were operating, most of them family-owned business. In the 1970’s and 1980’s,
The Coca-Cola Company encouraged and invested in a number of bottler
consolidations including CCE, which is approximately 36 percent owned by The
Coca-Cola Company.
Today there are 76 Coca-Cola bottling companies in the United States
accounting for approximately 30 percent of The Coca-Cola Company’s global
total beverage volume.
