just On Call - Coca-Cola Enterprises slams "unjust, unfair" soft drinks tax

Coca-Cola Enterprises (CCE) has labelled the proposed French soft drinks tax as "unjust, unfair and not the best way to proceed".

On Friday (18 October), France's General Assembly voted in favour of a tax hike on added sugar soft drinks and a lesser rise on drinks containing sweeteners. The tax of EUR0.02 per 33cl can is expected to raise at least EUR240m for the depleted French Treasury.

Speaking on CCE's earnings call today, the company's CFO, William Douglas, told analysts that the company is opposed to these kinds of "discriminatory and regressive taxes".

"We do not believe that a tax that singles out one category of products is rational or effective," Douglas said. "A tax increase of the magnitude proposed would result in a meaningful increase in the retail price [of soft drinks] and would negatively impact the purchasing power of French consumers."

Douglas added that the current tax proposal would impact almost all of its French drinks portfolio, resulting in an additional 8% to 9% price increase "just to cover the tax alone".

Last week, Stifel Nicolaus analyst Mark Swartzberg said that the inclusion of artificially-sweetened drinks for the tax has "come as a surprise". For CCE in particular, he said that the tax will affect virtually all of its France sales and around 30% of its total sales. If the tax had included only added sugar drinks, around 18% of CCE volumes would have been affected, he said.

"Assuming the tax is fully passed on at retail, we estimate an added 3% to 4% increase in the average retail selling price of soft drinks in France and a 2% to 3% adverse impact to...CCE's 2012 earnings," Swartzberg said.

Speaking on the earnings call, CCE's CEO, John Brock, said that the company would work to oppose the tax in France, which is set to be implemented on 1 January. "We have been very successful in the US in defeating most of these tax proposals and the reasons is because we have had a very industry-wide approach," Brock said.

Earlier today, CCE recorded an increase in profits in the first nine months of 2011, partially driven by consumer demand for energy drinks.