The Soda War Begins
Earlier this year, Coca-Cola Enterprises Inc. (CCE), Coke’s largest bottler, began delivering shipments of its Powerade sports drink to a Wal-Mart warehouse in Texas. This might sound fairly typical, but it actually breaches a century-old tradition in which the independent bottling companies deliver directly to the stores, stock the shelves and erect merchandising displays.
By agreement with Coca-Cola Co., local bottlers have traditionally had exclusive rights to handle sales and distribution in their territories. As you can imagine, this has built a strong relationship between the bottlers and the retailers, which the bottlers feel drives local sales and their ultimate success.
Most Wal-Mart stores receive deliveries twice a day, with merchandisers visiting the stores up to three times a day to stock shelves and set up displays. Some bottlers have even developed systems to access checkout-sales data every 15 minutes so they can feed product with even better precision.
About 10 percent of Coke’s U.S. sales flows through Wal-Mart, but Coke is hoping the new delivery system will increase its slow 2006 start. As part of the deal, Wal-Mart committed to giving Powerade more shelf space, a big enticement when sales of your core product have slipped 10 percent over the past five years.
Terry Marks, president of CCE’s operations in North America, told the Wall Street Journal that CCE remains committed to direct-store delivery, adding that there are no plans to expand the Wal-Mart test to other drinks or stores. Marks’ assurances have come as little consolation to smaller bottlers who fear losing personal relationships with stores and warehouse delivery spreading to other stores.
According to the Wall Street Journal, direct delivery is unique to Coke and Pepsi, but it sounds pretty familiar to me. Isn’t direct delivery what growers do every day?
We always say our product is different from everything else and can’t be handled the same, but if Coke, the last bastion of direct delivery, is falling, what does that mean for floriculture?
Signs of a Bubble
One housing industry group predicts a decline of 5.7 percent in existing home sales in 2006. New home sales are expected to drop 7.7 percent. Mortgage rates and list prices continue to increase. And commercial building starts are expected to decline as well.
By all indications, the housing bubble is on the verge of bursting. This would mean fewer new homes and office buildings in need of annual planting and landscaping. It could also mean trouble for home improvement stores that base a large part of annual sales on the success of the housing market.
Does Lowe’s Have a New Trick?
Home improvement giant Lowe’s seems more like a neighborhood specialty store when it talks about a new concept to target the expanding do-it-for-me segment.
“There’s nothing like being able to put…a few shingles on the roof and see what it will look like. It gives customers a lot more confidence in their choices,” Greg Bridgeford, executive vice president of business development for Lowe’s, told the Miami Herald.
No, he is not talking about the installation services now a standard offering at home improvement giants. Bridgeford is commenting on the benefits of a program currently being tested in Home Depot’s backyard. This new concept will go way beyond installation and actually offer in-home consulting and planning services, and the customer never even has to step foot in the store. A Lowe’s employee will go to the homes of customers needing roofing, fencing, siding, room remodels, etc. and help determine what the customer wants and what looks best.
Considering the do-it-for-me market could grow 25-30 percent over the next two years (some predictions are even higher), the Lowe’s move doesn’t seem so strange. Of course, full rollout would be a ways off, if it ever happens, and the garden center will surely be one of the last areas to implement, as usual…but oh, the possibilities. Imagine landscape architects or design/build contractors working up major projects and supplying the job with your product. That’s the beauty of this whole concept; the home improvement store employs the designer, so when they need product, where are they going to shop?
Lower Your Risk
The global rise in the market price for steel and aluminum has sent scrap metal prices soaring. Items once thought theft proof are disappearing at an alarming rate. Even items that carry a deposit fee such as aluminum and steel beer kegs are no longer immune to theft when the $20-$25 scrap value far exceeds the $5-$10 deposit fee.
In broad daylight, handrails and crossbeams were dismantled from a short bridge in Oregon, and aluminum guardrails and plumbing pipes are disappearing from highways and construction sites all over the country.
Those stacks of empty delivery carts behind Home Depot, Lowes, Wal-Mart and grocery stores this spring season could be mighty tempting!