Rhetorical shift sees Coca-Cola Enterprises shake French blues

By Ben Bouckley

- Last updated on GMT

Related tags Coca-cola

Rhetorical shift sees Coca-Cola Enterprises shake French blues
Despite prior gloomy predictions about the effect on sales of France’s so-called soda tax, Coca-Cola Enterprises (CCE) now says the under-penetrated country offers it ‘significant growth potential’.  

Speaking at the Deutsche Bank Global Consumer Conference yesterday, CEO and chairman John Brock discussed the $8.3bn (€6.53bn) turnover (2011) firm’s strength in major markets: colas account for 69% of volumes, sparkling flavours and energy 18%, stills/water 13%.

The UK represented more than a third of total revenues, Brock said, adding that Coke’s leading Western European bottler was working hard to capitalise upon marketing campaigns linked to the 2012 Olympics: for its red, white and silver brands, Gatorade and waters.

‘Relatively low’ market penetration

But although France represents around 30% of the CCE business – with per capita consumption of its products up more than 50%: to almost 150 8oz servings per year since 1998 – Brock said consumption “remains relatively low compared to our other territories”.

“We believe there continue to be significant growth opportunities here in France,”​ he added, despite volume and value share growth within non-alcoholic ready-to-drink beverages over the past few years, while customer service levels had also improved.

Brock said CCE’s brand portfolio and operational success meant there were opportunities for long-term growth, despite a steep VAT increase, a step change in rhetoric after he warned last December​ that the “discriminatory”​ tax would restrict CCE to modest French growth.

French VAT on sugar-sweetened beverages rose from 5.5% to 19.6% in January, a move CCE said would hit 90% of its portfolio: including CSDs and juice drinks with added sugar. 

However, Brock warned that possible new taxes on products or packaging could impact future volumes and pricing, and told analysts at the conference that CCE had raised soft drinks prices in France as a result of the VAT increase.

“For us it played out a total price increase of about 12%, 8% of which is excise and the other 4% that was our normal price increase,” ​Brock said.

“We put that in place on January 1 and immediately it was passed on to our customers. In France, our customers have chosen to play it different ways and yet it is still not fully reflected in the retail price to consumers. We think it will be over time…”

Norwegian reorganisation

The excise tax rise in Francebrought parity vis-à-vis the rest of Europe, Brock said. “I think the good news is at least right now there are no other organisations or governments out there that we think are seriously looking at it.”

Discussing performance and CCE RTD consumption in other key territories, Brock noted that Belgium– part of the Benelux group also including Holland, Luxembourg – was especially high (340 servings per capita/year).

CCE acquired Norwegian and Swedish bottling operations (12% of group revenue) from the Coca-Cola Company after the October 2010 transaction that saw the former sell its US bottling operation to Coke.

Significant ongoing changes to the Norwegian business structure (a relatively high-consuming market with 248 servings per capita) included a move from returnable packaging and direct-store delivery to non-returnable packaging and third party deliveries, Brock added.

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