STRATEGY & DIGITAL
especially if there isn’t another store within close proximity – not even for their favourite soft drink.
Bargaining power
In January 2020, we saw first-hand what happens when a major retailer is taken off the shelves. Supermarket chain Edeka (the largest retailer in Germany) started delisting Coca-Cola products from its thousands of stores across the country. But how can a retailer – one that is not gigantic on a global scale but nonetheless a large regional player – decide to remove the world’s largest beverage brand from its portfolio? The answer lies with AgeCore, a European buying group that managed to put negotiation pressure on Coca-Cola in several countries, including France and Germany. Although the negotiation group is young (having been founded in 2015), it has already exchanged blows with global giants like Nestle, ABInBev and Mars. AgeCore’s approach involves demanding yearly price improvements and pushing manufacturers to agree to the conditions. If one of the manufacturer’s country business units does not accept the new prices, AgeCore will boycott and remove key products from all five countries it operates in – Belgium, France, Germany, Spain and Switzerland.
Apparently, this trick worked pretty well in the past, so AgeCore started putting pressure on CocaCola – still by far the market leader in most European countries. If even the beverage giant struggled to use its market position to push for negotiations that worked for its agenda, what could a medium-sized manufacturer hope
44 | Beverage Essentials Handbook
to achieve? Unless the product is extremely niche and does not have any direct private label alternative, smaller producers would have to accept any conditions imposed or be left with 25–30% less distribution potential. The retailer will almost always find a way to offer the consumer an alternative offer that the majority of shoppers would not think twice about buying. Having heard the story of AgeCore and Coca- Cola, you might ask how such coordinated ‘bullying’ is even possible. EU competition law prohibits putting suppliers in disadvantaged positions or enforcing the acceptance of conditions that are unrelated to commercial usage. But, unfortunately, these criteria are extremely difficult to prove. Most industry players would describe AgeCore as a ‘cartel agreement’ but, legally, its goal is to protect consumer interests. If that was true, and its members negotiated with major brands to get the best outcome for shoppers, would this not mean that we would notice prices going down rather than up? With this in mind, what can smaller manufacturers do to improve their negotiating power? There are not many viable options: they can innovate, find alternative distribution methods or accept minimal profits. None of these options give small brands a clear path to success – there is a high probability of medium-sized manufacturers folding due to financial difficulties, bankruptcy or acquisition by international giants with higher negotiating power. The retail landscape in developed countries may be forcing producers to play the survival game with very dim legislation perspectives. ●
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