COMMENT: EU seeks to end Coke's fizzy gravy train
The European Commission has welcomed Coca-Cola's plans to change its sales practices in Europe.
The long-running antitrust case between Coke and the EC is still not finalised, despite the US firm proposing a change in its sales tactics to the EC. Even if the case is soon resolved, Coca-Cola still faces a number of challenges in the European soft drinks market.
The main accusation in the case centres on the way in which Coke's products are displayed in retail channels. The EC alleges that the company offered retailers financial incentives to display its products more prominently than rival brands and essentially to deprive them of valuable shelf space.
Coke has consistently claimed that offering retailers rebates to display a company's products on special racks, as part of promotions or new product launches, is normal practice. The manufacturer equally believes that the ever more highly consolidated retail sector is benefiting from growing bargaining power, enabling it to retain consumers through keeping prices low - perhaps artificially. One particularly prominent example of this is the Wal-Mart-owned retailer Asda in the UK, with its commitment to Everyday Low Prices.
Coca-Cola has now submitted a suggested settlement to the EC, essentially proposing to ensure all its products are displayed in shops with equal prominence to those of its rivals.
The Commission has become very active in recent years in implementing European anti-trust laws, which are geared towards ensuring healthy competition between all the players in a given market, rather than simply delivering the lowest prices for consumers.
Yet the very fact that Coca-Cola found itself embroiled in such a regulatory wrangle is perhaps indicative of how the company is struggling to maintain its traditional domination of the drinks market. Growth in carbonated soft drinks has suffered from the general maturity of the sector, and from growing consumer concerns regarding the less than healthy attributes of many fizzy drinks.
Many consumers are favouring bottled water and fruit juices instead, a trend that has brought its own problems for Coca-Cola: it lacks a strong juice brand such as PepsiCo's Tropicana, and its launch of the Dasani bottled water in the UK was little short of an embarrassing failure.
Dairy, functional and premium juices were the winners, water continued to grow, whilst carbonates and squashes lagged behind in the 2004 UK soft drinks race, according to the recently published Britvi...
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As forecast earlier today, the Coca-Cola Co. has had restrictions placed on its sales practices by the European Commission....
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