Soda Costs Jump, Forcing Vendors to Find New Strategies

Soda suppliers are raising prices more than usual this year. Operators in many parts of the country are finding they are unable to absorb the higher prices, but are also unable to raise their own prices enough to cover the increases. Many are contemplating new cold drink strategies.

Coca-Cola Enterprises Inc. (CCE), the nation's largest bottler, is seeking price increases this year due to what officials call unprecedented increases in raw goods and aluminum costs. The increases vary by geography and have caused many vending operators to seek alternative products to reduce exposure to the higher prices.

CCE's case price increases have been as high as 30 percent on 20-ounce bottles in some markets. In many instances, vending operators must raise prices to $1.25, which is a 25 percent increase.

The prices for cans has also increased more than normal this year, and in some markets, suppliers are seeking a bigger percentage increase for cans than bottles. In most markets, however, bottlers are seeking bigger percentage increases for bottles.

By the time this article goes to press, operators who get Coke rebates from the Better Vendors Association buying cooperative will no longer receive rebates under an agreement signed between BVA and CCE in January. BVA was the only buying cooperative that had a program with CCE.

Many operators worry that Coke's competitors will match the price increase, although this has not happened in most markets as of this report. In select markets, Coke competitors have sought higher price increases than Coke.

"The numbers are just staggering," said Len Salzman, owner of S & S Vending Inc., Melbourne, Fla. "This is the biggest increase in the history of vending in Florida." He recently began buying Coke cans for $5.25 a case at a warehouse club. His bottler wants $7.10 a case.

Unfortunately, the clubs don't sell 20-ounce bottles, and this is where the market is moving.

Salzman doesn't think he can get $1.25 for a 20-ounce bottle. The highest he has gone is $1.15. "I increased other things to make up for soda," he said.

Changers must be retrofitted to pay correct change
Besides customer resistance to a $1.25 price point, Salzman said he would need to retrofit his machines with 4-tube changers in order to pay out proper change. "One of the big obstacles is changers," he said.

Ted Bilger, who operates Bilger Vending in Minden, Nev., also noted the problem with reconfiguring his changers.

Bilger said he plans to minimize his exposure to the higher prices by only buying the "core" products from the companies that have raised prices, which include his major bottler suppliers. He will buy more juice-based products from sources other than his bottler suppliers.

This strategy was cited by many vendors interviewed for this article, but it is not expected to be a cure all. The "core" products represent the fastest and highest volume sellers.

"I would have never dreamed that they're getting from us what they're getting," said Vic Pemberton, who operates Pepi Food Services in Albany, Ga. In raising his prices from $1.00 to $1.25, unit sales have declined between 8 and 18 percent. The can prices have not increased as much.

Imperial Companies, a Tulsa, Okla.-based operation serving several markets, noticed that CCE recently softened its demands a bit, but his Coke prices are still his highest, noted Paul Tims, president of Imperial Companies. Hence, he is reducing his orders mainly to Coke and Diet Coke. "Pepsi Bottling Group and PepsiAmericas didn't do that (raise prices as much)," said Tims. "It would have been devastating."

"Anytime you give somebody a 25 percent price increase, it's a slap in their face," Tims said.

Tims was among several operators who noted that the higher Coke prices is another incentive to add more non-carbonated products. "We're trying to go to juice and new age drinks anyway," he said. "Coca-Cola raised our price $3 a case. It's a justification for going to other selections."