Julian Hunt Wholesalers are resisting Coca-Cola Enterprises' efforts to force down the case price of its flagship brand. Under its initiative ­ details of which were first revealed in last week's issue ­ CCE is withdrawing promotional support from the wholesale sector and instead focusing all its activity on lower prices. If wholesalers agree to sell the cola at a significantly reduced price ­ believed to be about £4.29 a case ­ they will be given quarterly performance bonuses based on the volumes they sell. If the wholesaler fails to hit the agreed volumes, or display and availability targets, it misses out on the bonuses. But the volume growth targets are said to be anything up to 45% ­ well in excess of the growth being enjoyed by the soft drinks market as a whole. Leading trade figures also claim the bonuses on offer do not make up for the loss of overriders and other promotional support they have received in the past. In addition, they complain the new terms were unilaterally imposed on the sector, rather than negotiated. One wholesaler told us the terms were "hostile and unwanted" and that they would "undermine the brand". He added: "It is all very well to play the everybody gains from a price cut' card, but distribution of the brand depends on each part of the supply chain making a margin to cover costs and stay in business. "These new terms will restrict investment and support behind the sector ­ hardly the actions of a forward thinking brand owner." One trader said: "For such a blue chip company, their tactics are unbelievably badly thought out." He added: "Coke is trying to make wholesalers use their own money to fund a low cost price and as a result we have always thought they were going to have some difficulty." A leading wholesaler told us: "They are trying to drive volume while cutting our margins and incentives." And he said there was a simple reason why the industry was resisting CCE's plan: "We have been hit by the loss of forestalling revenues on tobacco and now we are being hit by the loss of overriders and promotional money from Coke. "If Pepsi and others follow suit there will be even more money taken out of the wholesale sector because we work on such low margins." There is also growing concern that CCE is trying to turn the wholesale sector into a free distribution channel for its product. CCE has told the industry that one of the main reasons it is introducing the new trading initiative is to combat the growing problem of grey market sourcing. The company hopes lower prices in the cash and carry and delivered wholesale sector will eliminate the problem and so drive up its volumes in the UK, which have clearly been hit by the amount of stock being imported from the continent. But wholesalers say CCE's plan is dangerously flawed. They point out they can acquire grey market stock, with English language labels and sell it on for as little as £3.50 a case. And our sources are warning that even more wholesalers will now be encouraged to start stocking grey market Coke, rather than deal with CCE. Nobody at CCE was available for comment as The Grocer went to press. {{NEWS }}

Topics