Coca-Cola Consolidated Moves Into New Territory
October 1, 2006
Coca-Cola Consolidated Moves Into New Territory
By SARAH THEODORE
Soft drink bottlers are used to expanding into new markets, but Coca-Cola Bottling Co. Consolidated, Charlotte, N.C., is taking its business in new areas that go far beyond geography. The company, which is the second-largest Coca-Cola bottler in the United States, is developing its own technology and brands to create new business niches for itself.
Earlier this year, Coca-Cola Consolidated formed a new company subsidiary called Beverages and Beyond Brands, or BYB, with the intention of acquiring and licensing beverages for national distribution. The move is significant in that it adds the title of brand owner to that of bottler and distributor. And now, through another new subsidiary called Swift Water Logistics, the company is rolling out a new distribution system designed to make direct store delivery more efficient and less labor intensive.
More than equipment
At the heart of the new system is the CooLift, a delivery lift cart developed by Coca-Cola Consolidated that runs on CO2 and is intended to make delivering products less strenuous. With the CooLift system, orders are palletized prior to delivery, allowing delivery personnel to move complete orders of product from the truck to the store at one time, without reaching for and lifting cases to assemble orders.
But the new system includes more than just a piece of equipment to deliver product. Coca-Cola Consolidated began looking at ways to transform its warehouse and delivery system several years ago, according to company President and Chief Operating Officer William Elmore. He explains that throughout the production cycle, improvements have been made over the years to increase speed and automation, “but from the minute the pallet is built, everything that goes on in the warehouse and the way you operate is like the old days,” he says. “None of that has changed at all. We thought we ought to apply the same critical eye from the end of the palletizer to the customer that we’ve applied from the raw materials up to the palletizer.
“In our history in the soft drink business, we looked at full pallets of product as finished product,” he says. “Now it’s evolving — finished product is when you have an order and it’s customized for an account and it’s built and staged and put on a truck. It’s everything you do from the back end of the palletizer to the truck that you’re changing here.”
“We’ve applied a lot of centralization and a lot of ‘systemsy’ stuff to our internal operations at Consolidated,” adds Tina Fischer, president of the new Swift Water Logistics division. “We started looking at the next step — how do we continue to make ourselves more efficient and continue to take costs out of the system and make this as effective a distribution system as we can while still providing the quality and service that our customers expect.”
The company looked at several options in use throughout the direct store delivery system, including a cart-delivery system that sparked the idea for the CooLift. Traditional direct store delivery requires drivers to assemble orders for customers after they have arrived at the retail location. With a cart-delivery system, orders are assembled in the warehouse, specific to each retail customer, and placed on the truck in the sequence of the delivery route.
Coca-Cola Consolidated sought to develop a cart system that would allow it to use one cart per truck rather than one per order. The lift was not originally based on carbon dioxide, but it proved to be a natural choice for a company that already uses CO2 in its production process — not to mention a cool inspiration for the CooLift name.
Because DSD orders usually are smaller than full-pallet orders, and full pallets are too big to move through the small aisles of convenience or drug stores, Coca-Cola Consolidated designed the CooLift to carry half pallets that measure 18.5 inches by 37 inches. The CooLift pallets are put together and shrinkwrapped in the warehouse and placed in end-loaded trucks. At the retail location, the pallets are rolled off the truck with the CooLift and checked in by the retail operator. Delivery personnel do not actually touch the product until they are placing it on the shelf.
According to Coca-Cola Consolidated, the process makes it faster for retail operators to check in orders at the store, and reduces the chance of injury to personnel from lifting product. An unexpected bonus of the system is that the CooLift pallets are the perfect size for end-cap displays. Future plans are to increase efficiency even more by moving display-building activities from the retail location into the warehouse.
“We’ll build them all in the warehouse and then you drop it in and go,” Fischer says. “You don’t have to come in and build the displays because there is a lot of labor involved in that.”
Beverage delivery traditionally has been a job for the young and strong, but Coca-Cola Consol-idated is hoping its new delivery system will allow the company to retain employees beyond the age when they typically decide to move on to less strenuous jobs. This will reduce the time and money required to train new employees, and create more consistency with retail customers, leading to better customer relationships, the company says.
“One of our concepts with this was to create a more flexible workforce,” Fischer says. “You don’t have to have a 19-year-old, six-foot-two linebacker delivering product.”
In fact, she says, during development of the CooLift, Fischer herself was the guinea pig. “They kept putting it through what they started to call the Tina Test — can I push it, can I move it around, can I control it?”
The company turned to NASCAR, another industry that is prevalent in the Charlotte area, for expertise in making the CooLift as lightweight and maneuverable as possible. The company found its experts in a surprising place, a motorcycle shop with a group of technicians who had backgrounds in the racing community. The team fine-tuned the CooLift prototype to make it lighter and ensure that it could move through narrow store aisles and small spaces in back rooms and coolers.
With the intention of quietly testing the system in a local market, Coca-Cola Consolidated implemented the program in Monroe, N.C., just outside Charlotte, about a year and a half ago. But once it was on the streets, other distributors took notice and asked to learn more.
“As we started building this we said, ‘We ought to patent this stuff, and at some point, this could generate a new revenue stream for us,’” Elmore says. “We’re in a challenging business and growth is getting hard to come by, so you need to expand your footprint. But you have to do it in a way that you’re leveraging what you’re good at, your competencies. We’re good at distribution.
“Our anticipation was that we’d roll it across our whole franchise, and at some point in the future, we’d build out a sales force and get other people to take a look at it,“ he continues. “Well we weren’t even done with our pilot test just outside of town here when a local beer distributor said, ‘I want to buy that.’”
Currently, Coca-Cola Consolidated has the system operating in about half of its business, and three beer distributors have either begun or are gearing up for pilots in their own markets. Coca-Cola Consolidated does not use the system for grocery or other accounts that use bulk pallet delivery or for full-service accounts such as vending. But it does have the potential to affect delivery to some of those accounts, thanks to the use of end-loaded trucks that can carry whole pallets as well as the half-pallet CooLift sizes.
“One of the biggest components of this is not the equipment,” Fischer says. “It’s about territory planning and routing.
“I don’t have to use specialized equipment now,” she continues. “I can deliver anything I want. I can deliver to a grocery store or I can start mixing loads together. That allows us to get more geographically focused in our delivery as opposed to channel-focused.”
The new system also changes operations in the warehouse where orders are created and palletized for specific retail accounts. Fischer says this brings more of the complexity in the ordering and delivery process into the warehouse where it is less expensive and easier to manage.
“We’re looking for 30 percent increase in efficiency on the delivery and merchandising side, and a 10 percent decrease in warehouse efficiency, because now you’re building those orders in the warehouse instead of building them on the street,” Fischer says. “That’s rapidly coming down because as they’re getting used to it [in the warehouse] and they’re finding ways to make themselves more efficient, they’re getting their cases-per-man hour back up. Overall, it’s still a huge win.”
Because the work is less labor-intensive, Coca-Cola Consolidated has revised its delivery schedule to a six-day schedule that has delivery personnel working longer days, four days a week, with three days off during the week.
“If you think about how hectic life is today and all of a sudden you have a weekday off and you can go to a doctor’s appointment or a teacher’s conference or the car’s got to go to the shop … all the stuff we deal with, now you’re really a preferred employer,” Elmore says. “So the work is less demanding and you’ve got personal life flexibility you didn’t have before.
“This is one of those win-win-wins,” he says. “You get out of the customer’s store faster, so it’s better for them. The amount of productivity you can get out of a route goes up, so we win, and the quality of the work life for the employee is greatly improved.”
Swift Water Logistics is just one of Coca-Cola Bottling Co. Consolidated’s recent expansions into areas other than bottling and distribution. The company launched Beverages and Beyond Brands (BYB) early this year, with Cinnabon dairy-based coffee drinks and Respect fruit-flavored drinks. Both products were created by Brain Twist, New York, and acquired by Coca-Cola Consolidated for possible distribution throughout the United States.
Several years ago, the company also created Data Ventures, which specializes in revenue management and best practices.
Coca-Cola Consolidated President and Chief Operating Officer William Elmore says the company values innovation and realized it had the opportunity to profit from its innovations beyond the improvements to its own operations. He says each of these ventures is tied to a core area of competency for Coca-Cola Consolidated and the company has no intention of abandoning its primary business.
“What this is all about is strengthening our financial position so we can continue to be, the best bottler we can be,” he says. “While these things are exciting, fundamentally, we are and will always continue to be, first and foremost, a Coca-Cola bottler. All these other businesses exist to support that.”