SCDigest editorial staff

The News: Court filings in a lawsuit show Coca-Cola was worried failure to change its distribution methods to meet Wal-Mart requirements for its PowerAde sports drink could lead the retail giant to establish its own private label brand.

The Impact: Growth of private labeling in both retail and wholesale continues to have a huge impact on how manufacturers interact with their channels.

The Story: We continue to keep tabs on the lawsuit between 55 small independent Coca-Coca bottlers against Coke itself and its largest bottlers, Coca-Cola Enterprises, which is substantially owned by Coke itself.

As we reported in SCDigest, the basis of the suit is strong pressure from Wal-Mart to change from direct store distribution of Coke’s PowerAde sports drink line to shipment to Wal-Mart distribution centers. (See Suit over PowerAde Distribution Highlights Changes Dynamics in Beverage Distribution). The smaller bottlers, fear the change will eventually lead to direct distribution by Coke or Coca-Cola Enterprises nationally to Wal-Mart and other large retailers.

In papers filed in relation to the suit, Coca-Cola said that among the reasons for its interest in meeting Wal-Mart’s request was a fear that a failure to do so would lead the world’s largest retailer to create its own private label brand in the category.

“This was no mere idle threat,” Coca-Cola said in the court filings, and posed a “serious risk” to PowerAde sales.

Private label goods at retail and wholesale continue to eat into branded product share, and also help create ceilings on prices for the branded products. What’s interesting of course is that in many cases it is the branded manufacturers themselves who produced the private label product, though in many categories there are also non-branded specialists who produce only for private label, often bidding in “auction-like” competitions for the business.

How are private label goods at retail and wholesale impacting companies and their supply chains? What if anything should branded companies do? Let us know your thoughts.