If I may just pick up two salient points from your usual excellent post, namely the lost of sales from corner shops, and that WOW and WES will never compete against coke.
The first point is a validation of the retailing power of WOW and WES. The corner shops are just buying from the supermarkets instead of directly from CCL. The reason is because WOW and WES are squeezing and squeezing, and then using the lower prices to compete against one another. Which brings us to the second point. It is not so much WOW and WES competing with Coke with another brand or homebrand, it is just the fact that WOW and WES are now getting a bigger slice of the pie from the value chain, the portion of which previously belongs to CCL. CCL cannot raise prices against WOW and WES. Unless they have the gumption to say, yeah screw you, we will not supply to youse two, we will go direct to the moms and pops, the independents and the pubs (which are steadily being taken by WOW and WES anyway). That is not going to happen. Therefore, in Australia, the structure of the market is such that CCL's distribution power actually benefits WOW and WES in the value chain. The excess value from the distribution network does not stick to CCL's ribs, it goes to WES and WOW.
Even if we accept that the brand will rebound, that will just mean volume increases. The same structural "dynamics" (to quote Watkins) vis a vis WES and WOW still remains. It does not matter how much the consumer is willing to bear in their purchases, as you will find the excess value will end up with WES and WOW, not CCL.
CCL Price at posting:
$9.49 Sentiment: None Disclosure: Not Held
