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Teamsters Leak Details of 7-Eleven/Coke Distribution Plan

NEW YORK -- Some details of 7-Eleven's test of an alternative delivery system for typical DSD (direct-store delivery) products came to light this week when Teamsters officials complained that use of a third-party logistics company would eliminate hundreds of union jobs.

According to a Reuters report, Coca-Cola Enterprises is testing a new method of delivering soft drinks to 7-Eleven convenience stores in southern California, using Costco Wholesale Corp. as an intermediary.

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."

In the typical DSD model, Coke ships drinks from its bottling facility to an adjacent warehouse, where they await shipment to a distribution center before being shipped to individual stores. The inefficiency of the current DSD system has been a focus of attention for 7-Eleven CEO Joseph DePinto, who told Convenience Store News in 2008: "The convenience channel's distribution system was built for the grocery industry, and the way product is delivered today is basically the same as 30 years ago -- but costs are higher -- labor, credit card fees, distribution costs, fuel."

For the past two years, the largest c-store retailer has been testing a new distribution system in southern California. Besides moving away from the traditional DSD method, the most notable change is the test brings together different brands onto the same truck for delivery to each 7-Eleven store from a single warehouse.

Reuters reported that David Laughton, director of the Teamsters' Brewery and Soft Drink Workers Conference, told reporters on a conference call that the Coke plan is "dangerous" and could lead to a work stoppage. "We will fight for our jobs," said Laughton, according to the report.

A spokesman for the Coca-Cola bottling affiliate in southern California said the pilot has resulted in the loss of only eight net jobs. He declined to speculate on whether the test would be expanded to other markets, said Reuters.

Coke is also in the process of acquiring its largest bottler in an effort to streamline the supply chain. PepsiCo recently completed a similar deal.

Officials from 7-Eleven and Costco did not return Reuters' calls seeking comment on the story.

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