Bottlers pour into new exchange

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A group of 140 independent Pepsi-Cola Co. bottlers this week will introduce a global supply chain Internet marketplace.

CPG Pepsi Bottlers Inc., a buying corporation jointly owned by the bottlers, is developing the site. The marketplace will let Pepsi’s bottlers do their $600 million worth of annual purchasing and truck routing online. Today, they do nearly all their buying by phone and fax.

The move comes as Pepsi’s rivals, The Coca-Cola Co. and Dr Pepper/ Seven Up Inc., are also developing e-marketplaces. Coke’s and Dr Pepper’s, however, will connect with retailers, not suppliers. Neither returned calls by press time on whether they are planning supplier hubs.

CPG Pepsi and its competitors are pursuing a variety of e-marketplace plans as the soft drink bottling industry undergoes marked change. Globalization, increasingly treacherous commodities markets and harsh competition are putting bottlers under pressure to cut costs by improving efficiency. They consider marketplaces a way to do so, quickly and decisively.

Looking for a hub

The bottlers, which include Pepsi’s biggest throughout the U.S., Canada, Mexico and South America, went to CPG Pepsi seeking a marketplace. "We had bottlers call us up and say, 'Hey, what are you guys doing with e-marketplaces?’ " said Terry Wallace, exec VP of CPG Pepsi.

CPG Pepsi executives fretted that if they didn’t build a hub, a technology vendor might do so, bypassing the Atlanta-based company. "If we don’t establish the marketplace, someone else might," Wallace said.

Their worries were likely over-blown. The indie bottlers probably wouldn’t have forsaken CPG Pepsi to hand over their purchasing to a technology vendor that didn’t understand the clubby world of bottlers and suppliers. It’s unlikely suppliers would have taken their business to anyone but CPG Pepsi, with which they’ve dealt since 1990. "The biggest challenge of all within b-to-b is to build a sense of trust and community, and [CPG Pepsi] already has that down," said David Park, an analyst at Boston-based Delphi Consulting Group Inc.

Moreover, the suppliers are keen on the marketing advantages of an e-hub, something that CPG Pepsi’s executives certainly had in mind. "There are advantages from a supplier’s side because they can use this as a tool to market with," Wallace said.

Being able to reach 140 bottlers across two continents with nothing but mouse clicks should be especially appealing for small companies.

Supplier resistance

The new marketplace faces for-midable hurdles, however.

Suppliers across all industries have been reluctant to move to the Internet, and CPG Pepsi’s suppliers are no exception. "We have some customers saying, 'The phones and fax work fine. Why should I change something that’s not broke?’ " said Vito Laudicina, president of San Jose, Calif.-based Sand Hill Systems Inc., which is developing the marketplace. "It’s a lot bigger bear to skin than we thought."

Some 125 bottlers have signed on so far. While the marketplace will initially only allow bottlers to buy from suppliers, it will eventually allow bottlers to trade among themselves. Today, they already do a good deal of trading offline, mostly involving used equipment.

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