Coca Cola Greece: Hit by Recession or Punished by Consumers?

News wires report today about  Coca Cola Hellas  weak profit figures and the bottler’s consideration not to pay out dividend on 2010 profit. Coca Cola 3E blames the government imposed windfall levy on corporate earnings and tax on dividends, says Reuters.

Second-quarter figures show a net profit dropped to E172m, while sales volumes were down 2% to 578 million cases.   CCH recorded lower sales of its single-serve package sales, which more than offset cost savings and a turnaround in Russia. The company recorded poor demand in Greece, Italy, Bulgaria and Romania.

The bottler did not give any guidance on full-year profit but kept its target for a free cash flow of about E1.5bn until 2012. It added, “While economic conditions remain challenging in certain of our key markets, we are encouraged by some early signs of economic stabilisation in a few of our countries of operation. We continue to expect that the timing and degree of economic recovery will differ across our markets”.

A Coca Cola is a Coca Cola is a Coca Cola….

 “A coca cola is a coca cola is a coca cola” is a paraphrase of famous Gertrude Stein’s quote “A rose s a rose is a rose” meaning “things are what they are”.  According to this logic a can of  carrying the brand name Coca Cola contains the same product and should be more or less sold at the same price whether in Greece, Paris or New York.  Beginning of the week I was reading an article on Eleftherotypia Sunday edition about the “price hats” multinational companies add to their products when they sell them in Greece. In fact I wanted to write about it since Monday  but the truckers’ strike kept me quite busy. 

This news about the ‘prices hat’  was nothing new especially for Greeks having lived abroad and having compared prices on goods consumers buy every day. But Eleftherotypia published also a nice and very updated list comparing products and their prices  sold within the euro zone. The list came from the Greek Finance Ministry as it currently investigates why same products have higher prices in Greece.

Cola Cola  metal can 330 ML is sold for  € 0,53 in Greece, 0.49 in Spain 0,45 in Germany and 0,40 in France

Dove Cream Oil Silk 500 ML is sold 4,95 in Greece, 3,76 in Spain and 3,45 in Germany

Danone Activia 3×200 gr is sold 2,57 in Greece, 1,86 in Spain and 1,49 in France

Maxi Pampers Active Fit  48 pieces is sold for 19,29 in Greece , 12,51 in Germany and 11,76 in Slovenia

I name only  a few because the list contains more than 70 items.  Greece is the winner with consumers buying their products most for the same product.

So if I get 1,5 Liter Coca Cola for 1,1o at the supermarket why should I buy a can of 330 ML for 0,53?

The newspaper reports that  the General Secretariat of Commerce investigates the reasons why the range of  given prices is so wide.  Officials say that is not only because of  competition problems  like intra-company price fixing, or taxation that leads to overpricing but it lays also in the absence of  strong consumer awareness. To this point I have to add that consumers’ awareness changes rapidly due to the dramatic economical situation and rising of unemployment. A fact that multinational companies should take into consideration.

Soft Drinks vs. Fresh Tap Water

Soft drinks industry is facing a blow, as consumption continues to record negative, falling by 15% in the first half of 2010. Imerisia newspaper reports that the worst months were May and June with consumption having dropped down to 20%. The market expects year’s average to be -17%. The loss of consumers’ interest to soft drinks has started already to threaten small local companies. The market is expecting the situation to worsen especially if the government proceeds to a tax raise for soft drinks from 11% to 23%. The tax was raised from 9% to 11% in July 2010. According to Imerisia there is a price war among the bottler companies in restaurants, cafes, bars and the shelves of the supermarkets. And market leader Coca Cola 3E appears determined not to lose more units form the main competitor Pepsico – HBH If prices in consumers’ goods  – not only in soft drinks but in general – will not decrease, we can stick to fresh tap water and bread with cheap cheese. Coca Cola is only the example. The reason is consumers’ prices are high and people have simply run out of money….