Round-Up with Russell - The Week in Soft Drinks
A round-up of the week's soft drinks news
News that France intends to introduce a soft drinks tax has caused a stir beyond the country, raising questions as to whether other nations will follow.
Last week, France's General Assembly confirmed that it had voted in favour of a tax hike on added sugar soft drinks and a lesser rise on drinks containing sweeteners. This week, Coca-Cola Enterprises (CCE), which has a major presence in the country, voiced its firm opinion on the implications of such a move.
The tax proposal was the main topic of conversation on the Coca-Cola bottler's nine-month earnings call yesterday (27 October). During this, group CFO William Douglas slammed the idea of a tax, labelling it "unjust, unfair and not the best way to proceed".
Douglas told analysts that the 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", a pressure most, if not all, soft drinks producers in the country will also face.
Stifel Nicolaus analyst Mark Swartzberg said a tax will affect around 30% of CCE's total sales.
So, should we brace ourselves for a flood of other governments, both in and beyond Europe, following suit? The US has widely discussed the possibility of a 'fat tax' for some time, with New York City mayor Michael Bloomberg a particularly a strong supporter of such a tax. Soft drinks firms in the US have so far managed to avoid any such implementation as a result of much lobbying.
Like all soft drinks firms operating in this shaky global economic environment, much discussion time has been filled with commodity cost talk and forecasts for 2012.
Both DPSG and Arca Continental gave optimistic outlooks for the year ahead, despite facing cost pressures from rising raw material prices.
DPSG said that its focus remains on building its leading brands, and that the company is in the process of putting together marketing plans for next year.
The newly-formed Arca Continental was also upbeat about the next 12 months, informing analysts that the company is in a "strong financial position" to invest in further mergers or acquisitions, should the opportunity present itself.
Which leads us onto Coca-Cola's announcement yesterday. The soft drinks giant, like its rival PepsiCo, has sought to gain more control over it bottling operations in the US. Therefore, its latest purchase of US bottler Great Plains Coca-Cola Bottling for US$360m, will come as little surprise to many.
PepsiCo is also taking another chance with it's Duke's brand, with a relaunch in India, six years after discontinuing the line in the country.
Next week will see the publication of Cott Corp and Hansen Natural's nine-month and third-quarter earnings results. Stick with just-drinks for all the latest happenings.
PepsiCo was never going to win many prizes for its first-quarter showing, but management is keen to show that its mammoth restructuring plan is a case of 'so far, so good'....
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