A group of
bottlers sued the company over a distribution plan being tested with retail giant
The federal suits stem from a new delivery system for the popular Powerade sports drink arranged by Coke and its biggest bottler,
. The suits contend that an agreement negotiated in 1994 between the bottlers and the company specifically prohibits warehouse delivery of PowerAde to retailers like Wal-Mart. They are "the first major legal actions by a majority of independent Coca-Cola bottlers as a group against Coca-Cola in over 80 years," the bottlers said Tuesday.
The Wall Street Journal
reported Friday that Coke Enterprises last month began delivering shipments of Powerade to a Wal-Mart warehouse in Texas. That marks a departure from the typical soft-drink distribution arrangement, in which bottlers drop off drinks at individual stores, stock the shelves and erect merchandising displays. The Powerade trial more closely resembles the standard grocery distribution deal in which goods are shipped to grocers' warehouses.
Coke, the Atlanta-based maker of sweetened soda water, thundered Tuesday that "a few individuals are attempting to hijack" systemwide discussions over Coke's distribution system. Coke said it is "extremely disappointed" with the lawsuits, which it said were filed by bottlers representing 10% of U.S. volume.
Coke added Tuesday that Wal-Mart had "approached the company and its bottlers last summer, saying it wanted to increase availability of Powerade in its stores and grow the brand even faster, if the system would allow it to deliver the product to its stores through its own warehouses. In response, CCE decided to conduct a test of that proposal in some of its exclusive territories, which it is allowed to do under its contract with the company."
Coke then lashed out at the suits, filed by smaller bottlers who fear getting squashed by the mighty giants at Coke headquarters, the big Coke Enterprises bottler and Bentonville, Ark., retail titan Wal-Mart.
"These suits are actions against our consumers and our customers -- they would prevent the Coca-Cola system from strengthening its competitive position in this category and meeting consumer demand for lower cost, more efficient access to our popular Powerade sports drinks," said Don Knauss, president of Coca-Cola North America. "We are currently reviewing a complex and unrealistic proposal from the Coca-Cola Bottlers Association and have committed to responding to it by Feb. 22. These lawsuits will only shut down for everyone what we believe had been a productive business dialogue."
The bottlers didn't see it that way. "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 Claude B. Nielsen, CEO of Coca-Cola United Bottling of Birmingham, Ala., the third largest Coca-Cola bottler in the nation. He's an exec at the bottlers' association.
On Tuesday, Coke rose 54 cents to $41.28.