Price Fight: Coke Isn't It At Costco

STEVE INSKEEP, host:

This week, Costco, the nation's largest wholesale shopping club, took Coca-Cola products off its shelves. The two companies are in a fight over prices.

Susanna Capelouto of Georgia Public Broadcasting has more.

SUSANNA CAPELOUTO: This week, Costco posted signs in its soft drink aisles that said: At present we are not carrying Coke products because we cannot provide the value our customers deserve. Tim Rose with Costco justified the public posting even as negotiations continued.

Mr. TIM ROSE (Vice President, Costco): We are having some pricing disputes with Coke and have removed Coke products from sale at Costco.

Mr. DAVE DANIS: I guess they're looking out for us.

CAPELOUTO: Outside of Costco, in Coke's hometown of Atlanta, Dave Danis(ph) loads early Christmas presents for his two daughters into his Jeep. He's a regular here and says while he enjoys Coke, it's not all he drinks.

Mr. DANIS: I drink Pepsi. I mean, I go to Taco Bell and they don't serve Coke, so I'll either get Pepsi or Dr Pepper.

CAPELOUTO: Things are different for Michelle Kelley(ph), who rolls a shopping cart to her car just a few spots away. She says she buys Coke products regularly at Costco.

Ms. MICHELLE KELLEY: My husband drinks it daily, at least three or four cans a day of Sprite.

CAPELOUTO: This is not the first time Costco stopped selling a product over money. Gerry Khermouch(ph) is with the trade publication Beverage Business Insights. He says Costco temporarily pulled Capri Sun earlier this year after Kraft Foods reduced the amount of juice per pouch and apparently raised prices, and that, Khermouch says, shows that mega-stores are getting bolder.

Mr. GERRY KHERMOUCH (Editor, Beverage Business Insights): We're really talking, you know, a power struggle between retailers who are increasingly powerful as the retail segment consolidates, and marketers. So you know, Costco kind of has a reputation for throwing its weight around.

CAPELOUTO: But Coke is no lightweight either. Its products have what analysts call close to 100 percent penetration. That means almost every U.S. household buys some kind of Coke product. So Coke knows that retailers need its soft drinks. John Sicher of Beverage Digest says that's why this dispute is remarkable.

Mr. JOHN SICHER (Editor, Beverage Digest): Usually these kinds of negotiations between a Coke and Pepsi and a Costco or a Walmart or a Sam's Club, you know, play out in private. What was unusual was the public nature of this.

CAPELOUTO: Coke is not commenting on this dispute or its pricing structure. Analyst Gerry Khermouch says the beverage giant's goal in mega-retail negotiations is to protect its bottlers.

Mr. KHERMOUCH: Coca-Cola has to be very careful not to offer Costco such good deals that the small retailers who might otherwise go to the local Coke bottler finds himself or herself compelled to go to Costco to buy their product instead.

CAPELOUTO: Squabbles between large retailers and suppliers could become more common. In this economy consumers are looking for the best bargains and retailers want to offer them - all this while product marketers are not seeing their costs go down.

For NPR News, I'm Susanna Capelouto in Atlanta. Transcript provided by NPR, Copyright National Public Radio.