April 16, 2010 / 5:25 PM / 10 years ago

UPDATE 2-Teamsters say Coke pilot plan could cut jobs

* Coke bottler to test new plan w/7-Eleven, Costco

* Teamsters say hundreds of jobs could be on the line (Recasts; Adds details of pilot program)

NEW YORK, April 16 (Reuters) - Coca-Cola Enterprises Inc CCE.N is testing a new method of delivering Coca-Cola (KO.N) drinks to 7-Eleven stores in Southern California, using Costco Wholesale Corp (COST.O) as an intermediary.

The test was first disclosed by officials from the Teamsters labor union, which said it had the potential to eliminate hundreds of union jobs, since it involves the use of a third-party logistics company in addition to employees of Coca-Cola Enterprises, which produces, bottles and distributes Coke drinks.

Bob Phillips, a spokesman for the Coca-Cola bottling affiliate in Southern California, said the pilot will result in the loss of 10 jobs and the addition of two, for a net loss of eight jobs. He declined to speculate on whether the test would expand to other markets.

David Laughton, director of the Teamsters’ Brewery and Soft Drink Workers Conference, said on a conference call with reporters that Coke’s plan is “dangerous.”

“Although no one wants a work stoppage when the economy is in such terrible shape, we will fight for our jobs,” Laughton said.

Coca-Cola, the world’s largest soft drink maker, is planning to acquire the North American operations of Coke Enterprises in a bid to have more control over its distribution, which would allow it to cut costs and be more flexible. PepsiCo Inc PEP.N recently completed a similar deal. [ID:nN26197710]

Analysts have speculated that once the soft drink makers control the bulk of their distribution, they may seek to distribute more products through warehouses, rather than directly to stores, which is currently how the bottlers operate.[ID:nN26208650]

Under Coke’s current direct-store delivery model, drinks are shipped from the bottling facility to an adjacent warehouse, where they await shipment to a distribution center. They are then shipped to individual stores.

Under the test program, drinks will be shipped to a Costco business center, where a third-party logistics company will pick them up and deliver them to a warehouse. Then, when 7-Eleven stores need replenishment, the drinks will ship to the stores with other products as well.

Officials from 7-Eleven and Costco did not return calls seeking comment.

The Teamsters said they are very concerned about the outcome of Coke acquiring its bottling operations.

“It may appear on paper that it may decrease costs, but the risk of failure is too high as things get more and more complex,” Laughton said. (Reporting by Martinne Geller, editing by Gerald E. McCormick, Bernard Orr)

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