You bring up the often repeated point that people are turning away soda drinks for health reasons. This trend has been known and discussed for some time. CCL and TCCC are well aware of this. They are currently trying to diversify the product mix, add new products and move away from relying purely on red Coke. The success of Coke Zero and the new smaller cans is an indication that they have been at least a little bit successful in listening to the market and responding. This is happening in the US also
"To keep pace with changing tastes, Coca-Cola has diversified and owns an array of brands including Honest Tea and Zico coconut water that better fit with prevailing health trends. It also recently began the national rollout of Fairlife, a pricier milk that promises more protein and less sugar."
The alternative would be to do nothing and really watch the business crumble. Based on this, you need to give some credit to CCL management. This is not another case of Kodak where they are too slow to respond to market demand. Management are working on it. Read the Annual Reports. Read the announcements from management. They are not trying to deny this and they openly say that it will not change overnight. Remember that Coke is one of the top ten largest brands in the world that has been around for in various forms since 1886. Moving away from that sort of legacy will take time.
As for your scenario above, it doesn't seem to fit with economic theory as we currently know it. Let me explain why. A market with smaller fragmented manufacturers will have HIGHER fixed and variable costs relative to a larger business like CCL. They have fewer products to spread the cost over and as such will need to either sell more or charge higher prices. This is the reverse of economies of scale and I can't think of any food and beverage businesses where there is a shift towards fragmentation.
If you are talking about smaller fragmented market from the point of view of buyers, then this is a bonus for manufacturers. Buyers have LESS bargaining power and therefore CCL can charge higher prices. It's interesting to hear your story as a vending operator. I am presuming you had a small(ish) account with them and you got to experience first hand how a smaller fragmented market really works. Whilst I don't advocate being rude or nasty to anyone, if you are only responsible for 0.001% of Coke sales, do you expect them to roll out the red carpet for you? In order for retailers to get a better a deal with CCL they need to be bigger, sell more and eventually get big enough that they have the power in negotiation with them. This is what is happening with Coles and Woolworths right now.
CCL Price at posting:
$10.42 Sentiment: Buy Disclosure: Held
