Loblaw prefers Coke

Two weeks after it came to light that Coca-Cola Beverages and Loblaw Companies have signed an agreement giving Coke products preferential treatment in Loblaw stores, there are still more questions than answers about the specifics of the deal and what it...

Two weeks after it came to light that Coca-Cola Beverages and Loblaw Companies have signed an agreement giving Coke products preferential treatment in Loblaw stores, there are still more questions than answers about the specifics of the deal and what it all means.

Both companies will speak only in generalities about the arrangement. They suggest it is no different than other deals that Loblaw has with its suppliers and that Coke has with its retail customers.

But the very least, it is understood Coke has secured exclusive-supplier status for Loblaw’s No Frills chain, displacing Pepsi-Cola Canada Beverages in the process.

No Frills is one of three Ontario grocery chains that carries only a limited number of competing brands on its shelves. The other two are Valdi Discount Foods and Price Chopper, which is owned by Oshawa Foods.

It is not uncommon for limited-line retailers to seek out exclusivity arrangements with national brand manufacturers. In fact, both Valdi and Price Chopper currently stock only Pepsi brand soft drinks on their shelves.

Ron McEachern, president of Pepsi, says his firm has had an exclusivity agreement with Price Chopper for several years. The Valdi deal was signed last year.

It is not known whether the Coke-Loblaw deal extends to other banners in the Toronto-based retailer’s supermarket portfolio. Its other chains include Loblaws Supermarkets, Loblaws Superstores, Fortinos, Zehr Market, Mr. Grocer, Freshmart and Valleymart.

McEachern says he has no idea how extensive the deal is, but he stresses that Loblaw has in no way indicated that Pepsi hads become unwelcome in its other banners.

To the contrary, says McEachern, Pepsi has continued to deal with Loblaw, business as usual.

According to McEachern, it is highly unlikely full-line grocery retailers will begin seeking out exclusivity deals with the soft drink companies because, while such an arrangement might be sweet in the short term, shoppers prefer to have a variety of choices.

‘I don’t encourage any retailer go exclusively with our products,’ says McEachern, ‘but if that’s what their strategy calls for I won’t turn them down.’

Bill McEwan, vice-president of market development with Coke, says the Coke-Loblaw deal arises out of his firm’s ‘customer specific’ approach to the market place.

There have been rumours in the business press, coming from market analysts and others, that Loblaw will reduce the visibility of its private label brands, bottled by Cott, giving prominence to Coke products instead.

McEwan declines to comment on the matter, saying only the arrangement represents a ‘joint effort to satisfy customers.’

McEwan, who will not say whether the deal involves a pricing component, adds the specifics of the deal ‘will become evident over time.’

McEwan says Coke also has preferential arrangements with the Safeway chain in Western Canada and the Sobeys chain in the Maritimes, but he refuses to give details.