Belgian supermarket chain Colruyt is taking a stand against one of its biggest suppliers: empty spaces on the beverage shelves are appearing where products from Coca-Cola used to be. This is the result of an escalating conflict between the soft drinks producer and European purchasing alliance Agecore. What is going on in the background?
How it started
The fact that this difference of opinion between the two parties is now also becoming evident in Belgium, is not entirely unexpected. It all began last month, when Coca-Cola stopped deliveries to French supermarket chains Intermarché and Netto, because no agreement could be reached about a commercial collaboration. The retailer went to court, and the verdict went its way: the soft drink producer had to temporarily resume deliveries. The intention was to give both parties time to resume negotiations and reach an agreement.
On the contrary, the dispute seems now to be escalating: in Germany, market leader Edeka has also stopped ordering 120 products from Coca-Cola: the stores are not taking the full range for their shelves, but rather individual products here and there. The same thing is now happening at Belgian Colruyt. It is a question of solidarity: all of the retailers involved are members of Agecore, who in recent times has also had some tough clashes with manufacturers like Nestlé, PepsiCo and Mars.
What is the conflict about?
Usually, the parties involved do not openly discuss trade conflicts; after all, you are supposed to solve them behind closed doors. In this case, however, an internal note by Intermarché chair Thierry Cotillard was leaked. This note illustrates that there are two reasons for the dispute: firstly, Coca-Cola unilaterally implemented a price increase in November – and price increases are never to the liking of retailers. Secondly, the dispute also revolves around the hugely dominant position of the soft drink producer.
Cotillard claims Coca-Cola forces retailers to take the full – and ever-growing – product range, as a condition for obtaining favourable terms. Intermarché, on the other hand, would like to reduce that range in order to free up more space in the shops for healthier products. After all, sales of soft drinks are declining. Meanwhile, both in France and Germany, Coca-Cola has published a press release intended to calm matters, in which the brand manufacturer states they regret the conflict, but also stress that talks are continuing and that further cooperation is a priority.
Can Agecore win this battle?
The fact that the purchasing alliance now also dares to increase the pressure on its largest supplier, is remarkable. After all, empty shelves are costly to the retailer, especially when it comes to a dominant brand such as Coca-Cola. Do the Agecore negotiators really believe that they can bring the manufacturing giant to its knees?
Although little concrete information is available, analysts are assuming that there will be no winners in this type of trade dispute. In 2016, a paper from the Belgian university KU Leuven stated that conflict delistings is a no-win for both parties. “In their fight to win the argument, they must not lose sight of the consumer. When consumers change supermarkets to obtain the unavailable item elsewhere, the retailer loses income. If consumers change brands within the same supermarket because of unavailability, the producer loses revenue.” According to the research, the retailer would incur the largest losses, and the producer the smallest. However, both will lose.
But is that right? Agecore has been there before, and the fact that the purchasing alliance is daring to compete with Coca-Cola could indicate that the earlier power struggles with Nestlé, PepsiCo and Mars did end up in a satisfactory result. In any event, this is a case that the entire sector is looking at with great attention.
Trade disputes are on the increase
Moreover, this is not an isolated case. Earlier this year, Christian Verschueren – Director-General of the retail federation EuroCommerce – predicted in an interview with that RetailDetail tensions between retailers and manufacturers would increase further. The causes are obvious: the market is stagnating and retailers’ margins are under severe pressure due to stronger competition and the rise of online activities. On the other hand, manufacturers are being forced by activist investors to seek ever-higher returns, and are therefore seeking refuge in price increases. That results in a clash.
The war is ongoing: a while ago Coca-Cola was already banned in Germany by Lidl. Edeka is fighting another battle with Jacobs Douwe Egberts and Nestlé, while Real refuses to stock products by dairy producer Milram. Furthermore, hypermarket chain Kaufland (belonging to the same group as Lidl) is in conflict with dairy company Zott.
Observers see an escalation, which is also confirmed by Lebensmittel Zeitung: in the past, delistings were merely a threat, but now supermarket chains do not shy away from actually removing products from shelves. Germany is no exception and in Belgium, we recently saw a clash between (once again) Colruyt and Jacobs Douwe Egberts. It promises to be a stormy year…
