I don’t care about the specifics, the back room negotiations or whatever happened in Kirkland. Coca Cola has won a resounding victory, not just in retail distribution but in branding, brand power and market muscle.
Of the three players in this comic drama, Costco is cast as the petulant child who reluctantly is forced to apologize, Pepsi as the alternative girlfriend, and Coca Cola as the winner and still champion.
This incredible retail story has lessons for market leaders, challengers and retailers. Where to start.
Look at the facts.
Costco announces a public spat with Coca Cola, saying it won’t drop its prices and throws them out of their stores. Costco brings in Pepsi products – but hangs a sign over the pallets saying that Pepsi is there because they’re having a hissy-fit with competitor Coke. A week later, another press release comes out saying that the afore-mentioned hissy-fit is now over and they’ve made up. Pepsi is kicked to the curb. All is well in Coke-Costco land.
Look at the implications.
Pepsi, according to Costco, is the brand you date when you’re angry with your girlfriend. If you had actually broken up, you would have had Pepsi pallets in front of the store for the next ten years. You would have announced that you’ve switched colas, like many have over the years, and now embrace only Pepsi products. You would have said, in so many words, that the move was a good one. Alternatively, you would have turned to a private label maker and launched Kirkland brand cola, handing out gallons of samples in the aisles, doing your own Kirkland Taste Test.
Costco didn’t do any of this – they brought in Pepsi because they couldn’t get Coke. Then, a short period later, Coke was back. Why? If Pepsi had performed well, they would have been there until the current roster of merchants had retired. Anyone who remembers the Sony / Costco cold war in the mid 90’s – caused, we’re told, by a fist fight at a CES show between then Sony CEO Vanderdeusen and then Costco CEO Senegal (seriously, a fist fight) – recalls that when Costco gets angry, they hold a grudge for a long, long time.
Coke not only returned to Costco “with its dignity intact,” it returned to the ring as undisputed world champion. I can’t imagine this has gone over well at Pepsi.