The customer comes first. At least that is how Coke and several of its key US bottlers explained their agreement, reached in mid-February, to settle lawsuits over the distribution of Powerade to Wal-Mart stores.

The lawsuits were filed about a year ago by some 60 bottlers, representing about 10 percent of Coke’s US volume, against The Coca-Cola Company and its largest US bottler, Coca-Cola Enterprises, after the two began testing a new system that circumvented the bottlers’ direct store distribution (DSD) of Powerade into Wal-Marts. The system has CCE instead delivering Powerade to Wal-Mart’s regional warehouses, putting the responsibility of distribution and merchandising in the hands of the retailer instead of the bottlers. The plaintiffs in the case said the practice undermines their core DSD duties, essentially altering the franchise partnership between The Coca-Cola Co. and its bottlers.

While most of the settlement agreement is confidential, the parties did say that Coke and the US bottlers agreeing to the settlement will work together to develop and test new customer service and distribution systems to supplement their DSD system. “What we and the bottlers have agreed to do is establish a process to test various new route-to-market service systems to deliver our products to customers,” explains Coke spokesman Dan Schafer. “We just are not going to disclose what we are going to do and how we are going to do it at this point.”

He adds that the Powerade system with Wal-Mart which led to the lawsuits will continue under the new agreement reached with the bottlers. “Both parties knew that finding new ways to serve the needs of our customers was an issue that we had to address as a system and we knew that the agreement that we have come to allows us to have those discussions together and to do it in a way where we can determine how best to meet those customer needs for the benefit of everyone in our system,” he says.

Hager Rand, president of the Coca-Cola Bottlers Association, adds that the details of the agreement do not involve any service and distribution systems that are “unknown to the retail and foodservice industries. We will simply be exploring the use of non-DSD systems that may match up to the needs of certain customers,” Rand says. “What we believe [The Coca-Cola Co.] has said is that we need to look at the needs and unique characteristics of each customer and channel in light of the products that we sell in partnership with those customers to be sure that the entire portfolio of services that are typically involved in DSD is value-added for those customers and products. We fully endorse that viewpoint and look forward to working with them and our customers to find solutions that optimize value-added customer service for each product.”

Rand explains that the bottlers were keeping an “open mind” on the issue of when DSD best fits a customer situation. “The Coca-Cola Company has utilized other distribution methods for certain of its products for several decades and bottlers have supported and agreed to various forms of non-DSD distribution for certain products that are distributed by bottlers for a number of years. Our new arrangement will explore other opportunities to utilize non-DSD or modified-DSD distribution for some of those products. It is too early to say which particular products and situations will present the best opportunities although the characteristics of particular products are only a minor factor.”

Rand adds that the lawsuits could be re-filed if need be. “Most, but not all, of the plaintiffs have agreed not to restart or re-file the lawsuits for a period of time while we explore the opportunities that are created by our arrangement,” he says. Adds Schafer, “Substantially all of the bottlers have agreed to this process and we are optimistic that everyone will participate.”

BA: Craft Beer Up Nearly 12 Percent

The US craft beer market grew by 11.7 percent in 2006, according to figures released by the Brewers Association (BA). It’s the fourth consecutive year of significant growth for the segment and the first time in a decade that it cracked the double-digit barrier. Over the past three years the segment has grown 29.5 percent. The association estimates that 2006 sales by craft brewers totaled more than 6.6 million barrels, up from just under 6 million barrels in 2005, an increase of more than 690,000 barrels or 9.5 million case equivalents. Total retail sales, BA notes, equaled about US$4.2 billion. Its market share was 3.2 percent by volume and 4.7 percent by dollars. The association counted a total of 1,396 craft breweries in the US.

Meet Max

Pepsi-Cola North America (PCNA; Purchase, NY, USA) has announced its plans to launch Diet Pepsi Max, a zero-calorie cola with extra caffeine and a touch of ginseng. It’s specifically designed, PCNA says, to help adults get through the day. The company is targeting 25- to 34-year olds and transitioners—those switching from regular to diet colas. It will be available in 20-ounce bottles, 2-liter bottles and 12-packs of 12-ounce cans at retail locations across the United States in June.

B-F Completes Tequila Acquisition

Brown-Forman Corporation (Louisville, KY, USA) and Grupo Industrial Herradura have announced that the former has completed its previously announced acquisition of the Mexican tequila company for US$776 million. The purchase price originally was agreed to be US$876 million, but was subsequently amended by mutual agreement of both parties. The final price is subject to customary post-closing working capital adjustments. Brown-Forman CEO Paul Varga says the company expects the Herradura brands will help the company advance its business within the growing Hispanic population in the US, while fortifying its position in the Mexican market.

90-Proof Milestone

Woodford Reserve Bourbon in January passed the 100,000-case milestone for global depletions. Marketed by Brown-Forman (Louisville, KY, USA), Woodford Reserve is billed as “The Official Bourbon of the Kentucky Derby” and is available in 32 countries around the world.