Retailing giant Costco has cut off inbound shipments of beverages from the Coca-Cola Co. due to unresolved price negotiations. While negotiations between retailers and their suppliers are very common, it is rare that a retailer will stop ordering a certain product line in the name of negotiation.
It’s a bold move – Costco is risking ticking off its customers who pay for the privilege of shopping at its stores and expect to find their favorite items there in huge quantities – but, as I’ve learned throughout my purchasing career, sometimes it takes a bold move to get the results you want.
Not only is Costco making Coca-Cola “feel the pain” by cutting off its stream of orders, it is publicly shaming Coca-Cola. According to Yahoo Finance, “Costco has been aggressive in putting up signs on store shelves and notices on its Web site,” including an alert that stated “Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve.”
Cutting off orders? Publicly denigrating a supplier’s brand?
Negotiation doesn’t get more hardball than that.
Is Coca-Cola telling Costco that it can keep its money?
Actually, they are handling it gracefully with a clear hint that they aren’t strong enough to give Costco a take-it-or-leave-it ultimatum. In the above-linked article, Coca-Cola said in a statement that “Costco is an important customer and that it is committed to working with it ‘in a spirit of fairness.’”
My guess is that this situation will be resolved soon and the relationship will continue as if this squabble never happened. But you gotta love the way that Costco’s procurement is committed to their values – you may recall that I reported last month that Costco insists on testing its beef ingredients despite a supplier’s unwillingness to supply them under such conditions.
Let’s continue to watch Costco as its procurement strength continues to garner national publicity.