What's Behind Costco's Power Struggle with Coca-Cola?

Costco finds itself embroiled in a pricing dispute with Coca-Cola. Unhappy with pricing the beverage giant is giving the warehouse club chain, Costco has responded by not restocking Coke products on its shelves. The company has taken its dispute public, saying "At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve."

What is Costco up to by publicly calling out Coca-Cola on its unwillingness to negotiate more favorable prices? This move would seem to allow Costco to score points with consumers. After all, all customers want lower prices for products. Costco is portraying itself as champion for its customers, doing battle with a corporate giant like Coca-Cola. Beyond gaining favorable publicity for calling for better pricing from a supplier, there may be little benefit of such a move long-term.

Costco may have picked the wrong brand to battle. Coca-Cola is a high equity brand. It has more leverage in the marketplace than Costco. Customers who are unable to buy Coke products at Costco will likely make their purchases at another store. How does that help Costco? Coca-Cola has profit responsibilities to its stakeholders, and it is resisting efforts by one of its customers to alter its business strategy. Manufacturers have been pushed around a great deal by retailers in recent years. It will be interesting to see how, or if, Coca-Cola pushes back in its feud with Costco.

Comcast.net - "Costco Nixes Coke Products Over Pricing Dispute"

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