Jeffrey Klineman from BevNet.com reported that premium coconut water manufacturer ZICO has decided to switch their distributor to the Coca-Cola network (link here). This is happening in the Southern California and Boston areas and if successful, may mean full integration into the Coca-Cola distribution network everywhere else in North America.
Though this is not happening in Canada yet, it is still interesting to note the distribution system for newly acquired smaller beverage makers. When a small or regional beverage manufacturer distributes products, the original method may be to partner with a third-party operator (TPO) to have their product come off the TPO’s trucks, delivered directly to the store. The simplifies the delivery system for the customer (grocery stores and convenience stores) because in addition to receiving their regular products off of a TPO, they also get these beverages. On the manufacturer’s end, they can leverage the TPO’s distribution network to gain listings with more customers in addition to promoting with their own sales and marketing staff.
Klineman’s article mentions that new products being distributed through the Coca-Cola network faces complications. In addition to the product focus reason (selling 12pk Sprite or Diet Coke is a lot easier than convincing the retailer to carry new products), Coca-Cola’s distribution network will increase volume and exposure significantly for ZICO. For ZICO, this means that the production must be scalable to handle increased demands for the product. Also, Coca-Cola’s delivery trucks normally carry numerous products to be distributed into the stores, and packing on a few additional cases of ZICO coconut water may seem harmless since it’s just a few cases here and there. However, each truck carries the delivery order for at least 5-6 customers (in Canada anyway) and the trucks are fully packed before making a trip out of the product warehouse, so a few cases here and there do add up (especially when your original customer base is around 5000, and now becomes 15000 or 20000).
The good thing is that Odwalla (and ZICO) is not distributed through Coca-Cola’s main delivery network in Canada. This means that the same trucks that deliver the pallets with 2Ls, 12pks, 24pks, 591 bottles etc are not the same ones that distribute the Odwalla premium juices. Odwalla’s distribution network involves delivery trucks that have a chilled refrigeration system to keep the beverages cold compared the regular delivery trucks that is simply a big metal box on wheels. Another product delivered through chilled refrigeration is milk, where the delivery network has an increased focus on the delivery method to limit breakage and damages since the product’s packaging is more fragile. For ZICO, this means that their products will be given greater attention and care unlike the regular Coca-Cola beverages. There will be an increased emphasis from the delivery standpoint to ensure the products arrive safely and in commercial condition.
So will this delivery model work in Canada? I believe the integration will work well on the chilled refrigeration system. With Coca-Cola realizing that consumers are trending toward healthier beverages, focusing on developing a strong network to handle products through this method will be valuable for other brands in the future. Odwalla is a good example of a beverage that is being managed effectively through this system, and converting other acquired premium products into this delivery network will help the Coca-Cola system. The only product then becomes a discussion with the grocery store that they should prepare for two separate deliveries from Coca-Cola every delivery cycle – one for the regular set of 2Ls, 12pk cans and juices, and another for Odwalla, ZICO, and other future premium products.