Attention Coke lovers: It's safe to shop at Costco again

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Less than a month after Costco (COST) said it was going to clear Coca-Cola's (KO) products from its shelves, the warehouse retailer has changed its mind. According to Costco Chief Financial Officer Richard Galanti, the two companies have resolved their issues and Coke will be back in the cavernous stores on Monday.

Costco's original problem was that Coke refused to meet its pricing requirements. At the time, the company's website presented this as a matter of competition, stating that "Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve."
While competition certainly played a part in the decision, much of the issue lay in Costco's incredibly thin profit margins. Currently running at approximately 2.5%, it works out to roughly one cent on the dollar after taxes, which means that even the slightest shift in the price of Coke will have massive repercussions for the retailer.

Costco hasn't released details on the agreement, but it seems likely that Coke caved into the retailer's demands. Denied access to thousands of consumers, Coke probably realized it had a lot more to lose.

What is particularly interesting about this tempest in a two-liter, however, is that both parties allowed it to go this far. Generally, disputes over price are kept under wraps, and Costco's decision to go public suggests that the tough realities of competing for recessionary income may be changing the rules of engagement for producers and retailers. In an environment where unemployment is over 10%, even the Walmart model of aggressive negotiating may not be strong enough to guarantee a profit.

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