Section: BUSINESS Page: B1 Date: Sunday, January 24, 1993
NO REDEMPTION ALBANY BEVERAGE COMPANY REFUSES TO ACCEPT COMPETITOR`S EMPTIESBY CHRISTOPHER RINGWALD Business writer
Mark and Joe Crisafulli have a problem: Two truckloads of cans and bottles the local Pepsi-Cola bottler refuses to take off their hands. The Crisafullis call the action revenge for their company`s efforts to circumvent Pepsi-Cola Allied Bottling Inc.`s delivery and supply business. They describe it as a restraint of free trade, given Allied`s monopoly as a bottling franchise on Pepsi production in this region. At the same time, Allied - located at 1 Pepsi-Cola Drive in Latham - has been charged by the Department of Environmental Conservation with violating the state bottle law, which governs the return of recyclable containers. The law requires a manufacturer or bottler to accept empties for any product it sells, even if it did not bottle the specific container, according to an EnCon spokesman, R.W. Gronemann. In this case, EnCon argues, Allied should accept all Pepsi product empties even if they were bottled elsewhere.
The Crisafullis allege the troubles began when their Albany company, John J. Oliver Beverages Inc., expanded into a full-service delivery business. Through its attorney, John Mitchell, Allied has denied any wrongdoing. He declined to comment on the company`s practices because Allied is involved in litigation with EnCon over the issue of Oliver`s empties. The litigation between Oliver`s and Allied and between Allied and the state exemplifies the hardball played on all fields of the carbonated beverage business. Both also highlight the struggle among bottlers, state officials and environmentalists to define and enforce New York`s bottle bill. "Pepsi stopped selling to us because their drivers would go to stores in Arbor Hill and other places and the owners told them `we already bought from Oliver`s,`" said Mark Crisafulli.
The brothers started buying Pepsi through other dealers and out of state. Bottlers, who usually also deliver, frown on competition in their region. Along with beer wholesalers, the bottlers also are loath to redeem containers purchased from other manufacturers, since they lose a nickel and a competitor gains a 5-cent profit. "It`s a major problem when empties migrate en masse from one area to another," said Michael Vacek, who represents the New York State Beer Wholesalers Association. When one bottler is forced to redeem containers from another bottler of another product in sufficiently large quantities, said Vacek, the losing company has to hike prices to keep in business. "Prices are artificially manipulated through the bottle bill," he said. Since last fall, at least, Allied has avoided the problem of redeeming Pepsi containers that Oliver`s may have purchased from other bottlers or out of state by not accepting any of the Crisafullis` empties.
In all, the Crisafullis report, the outlet annually receives about 4 million containers, a quarter of which are Pepsi products including Mountain Dew, Slice and Schweppes. Meanwhile, huge plastic bags and large boxes of cans and bottles are stacking up in a wooden warehouse in North Albany. "We`re already out $10,000 we paid in deposits for empties Pepsi won`t take back now," said Joe Crisafulli. He also reported losing dozens of customers whose empties they can`t accept. The struggle between Pepsi-Cola, Allied Bottling and Oliver`s offers a peak into the fiercely competitive world of soft-drink sales, distribution and production. Since John Strachan and David Weir bought the Albany Pepsi bottling franchise in 1953, their firm has grown through acquisitions and good management into one of the largest independent Pepsi bottling franchise in the United States. By 1988, it owned 12 franchises in four states and employed 820 workers.
The Crisafullis bought Oliver`s, located at Colvin and Central Avenues, in 1986 and expanded from cash-and-carry wholesale into a retail, delivery and storage/transportation business on behalf of other dealers. Annual sales have risen from $300,000 to "several million," said Mark Crisafulli. The brothers also own Westmere Beverages on Western Avnue in Albany. The struggle begins at the top. PepsiCo Inc. and Coca-Cola Co. compete around the world, winning countrywide franchises and negotiating massive deals with heads of state. In the U.S., Coke leads with 41 percent of cola sales to Pepsi`s 33 percent. Closer to home, Pepsi has whittled away at the huge lead Coke once had. According to Strachan, Pepsi has 35 percent of the take-home sales in the Capital Region while Coke has 25 percent. Others industry sources estimate Pepsi Cola outsells Coke three or four to one.
Independent bottlers such as Allied have their own hassles, with Pepsi and Coke eager to take back as many franchises as possible. "It`s not easy to get a franchise away from someone, but the company uses every means at its disposal to edge you out unless you produce," Strachan said in a previous interview. The companies operate about one-third of their bottling franchises and the total number of bottlers has shrunk by half since the 1970s to 807. "The whole industry has been consolidating," said Helen Berry of the Beverage Marketing Corp. In 1981, the federal Soft Drink Interbrand Competition Act, hastened the centralization of the soft drink business by protecting franchises. The law legalized "exclusive territorial licenses" to make and sell "trademarked soft drink products," provided there is competition with similar products.
But the attorney representing the Crisafullis, Randall Kehoe, charged that Allied Bottlers has used its exclusive territorial license to "snuff out the competition." He claims the law has had the unintended effect of exempting Allied from competing with other Pepsi sellers, such as Oliver`s Beverages. "The Soft Drink Act was never intended to provide for unfair and unreasonable restraint of trade," he said. The net effect, said Kehoe, has been for Allied to "monopolize and unilaterally raise their prices since it denies buyers the chance to get lower prices."
Struggles between bottlers and stores for the best deals are not new. Last year, Stewart`s Ice Cream Co. Inc. yanked Pepsi products from its nearly 200 convenience stores. Stewart`s president, William Dake, said Coke offered a better price for exclusive rights. At Allied, which supplies a region from Rochester to New Haven, Strachan termed the move business as usual and calmly noted that Stewart`s accounted for less than 1 percent of his sales. "That`s typical," Mark Crisafulli said of Strachan`s response. Aside from the hard-nosed tactics typical of the beverage business, he charged Allied with "using the bottle bill to restrict free trade." Frustrated, the Crisafullis called EnCon`s law enforcement division. After investigating, said Lt. William Farley, EnCon charged Allied with refusing to redeem Pepsi containers from Oliver`s. The civil charge, with a maximum penalty of $250, will be answered in Albany City Court on Tuesday Lt. Farley said. Allied`s lawyer, John Mitchell, would only confirm that the matter is in litigation.
The Crisafullis claim Allied is out to stifle a potential competitor. The reason: "We`re a full-service deliverer who`ll bring 30 different brands to a store," said Joe Crisafulli. The move threatens major brands for whom delivery routes are key to controlling their business from top to bottom. Beyond that, the Crisafullas claim offering an alternative to Allied benefits the mom-and-pop stores dotting downtown neighborhoods. "A lot of them are minorities and foreigners who get treated badly by the major distributors," said Mark. "Many don`t speak English. Some are the ones whose checks bounce and you have to go back the next day and get cash." Several corner-store owners said they liked Oliver`s for its ability to deliver most brands as well as its prices. "They`re a lot more reasonable than the Pepsi people," said Yvette Salih, who runs the Clinton Market in Albany`s West Hill neighborhood with her husband, Tarik. Indirectly, Oliver`s predicament is also impeding an innovative charitable venture.
Gus Bondi, a 59-year-old General Electric employee, collects and returns empties and hands over the deposits - $31,000 since 1990 - to a children`s hospital in Memphis, Tenn. He liked bringing his unsorted empties to Oliver`s, which redeemed most brands. But since Pepsi cut off Oliver`s, the beverage center has turned away almost half of Bondi`s empties. Of the 15,000 empties he brought on average each month to Oliver`s, 40 percent were Pepsi products. Now Bondi must sort out and remove the Pepsi empties for redemption at other stores. "Pepsi is making my life miserable and they`re making Oliver`s life miserable," said Bondi. "It`s like David and Goliath."\