I think the big retailers (Woolies and Coles) need CCL as much as CCL needs them and therefore eventually this battle will find some form of equilibrium.
In fact I think the worst of the disagreements between Woolies and CCL has already passed - it was fever pitch in 2011 when Woolies reduced end space and promotions over a 4-5 month period.
Coca Cola on promotion pulls shoppers through the doors the trouble though from the retailers perspective is that their margin on promotion price points has been squeezed by CCL to the point that there is no margin! They are quite capable of reading CCLs accounts like the rest of us and have noted that around 5 years ago CCL was able to lift and maintain a higher EBIT margin, which now sits around 18%. Therefore they are looking to apply some leverage into the relationship to secure a fairer deal.
Brand Coca Cola has been so successful that it has no competition and therefore has uniquely been able to dictate terms with the Grocery giants which is something they don't appreciate. Now we have Asahi -who owns the distribution rights to Pepsi in Australia, providing the supermarkets with another weapon in the battle with CCL - heavily discounted Pepsi (now around 10% under Coke). Pepsi to me has almost become an upmarket house brand, sure its not 99c Homebrand Cola but its nowhere near the real deal either. It needs to be sold an an increased discount to Coke in order for it to achieve volume share -Pepsi has been dieing a slow death since the mid 90's.
Anyway I find this battle quite fascinating, and believe that eventually the market will dictate a solution - customers want Coke, the margin just needs to swing ever so slightly back to the retailer.
Disl. Hold WOW, would like to buy CCL
CCL Price at posting:
$13.32 Sentiment: Hold Disclosure: Not Held
