Coca-Cola awaits approval for price hike

Coca-Cola is still waiting for permission from the Ministry of Economy to introduce a "price adjustment" for its soft drinks in the UAE market.

The company wants to implement increases of 50 fils to Dh1.50 for small bottles and Dh1 to Dh5 for family-size bottles, and the request is being considered by the ministry.

"Our UAE partner, Al Ahlia Gulf Line (AGL), manufacturer and distributor of Coca-Cola products in the UAE, is still waiting for approval from the UAE Ministry of Economy for a price adjustment," spokesman Antoine Tayyar told Emirates Business.

"The company can't increase retail prices without permission from the ministry. AGL has been in close contact with the ministry and has held several meetings with them.

"The sugar price has gone up by almost 100 per cent and clearly this has had an impact on our business. However, the issue is much broader than sugar.

"Over the past 20-plus years, all our costs, be they raw materials or others, have increased very significantly and we can no longer carry this burden. There is probably no other consumer product that has kept the same price for more than two decades. The request is for permission to make an 'adjustment' rather than an 'increase', and if we had increased our prices in line with cost increases year on year, our prices would be much higher today."

Tayyar said if the ministry approved the request, it would decide the date when the increases would come into force.

"AGL cannot impose retail pricing on shopkeepers. It does, however, have recommended prices and the ministry plays a role in ensuring that shopkeepers sell at these levels. Clearly, different types of outlets, with different cost structures, sell our products at different levels.

"The costs associated with manufacturing form a much higher proportion of our total costs than our marketing costs. The company's marketing spend is controlled in the same way as all other costs in our business are controlled."

Tayyar said the company had implemented a number of plans to deal with the sugar shortage. "Several procurement strategies for buying sugar and other commodities are being used. Right now, sugar is trading at a 30-year high and is likely to remain in short supply, which will keep the price high. Of course, we never change the amount of sugar in our beverages – the quality of all our products is strictly controlled and it is the same in all 206 countries where our products are sold."

He denied Coca-Cola and archrival Pepsi had made a joint appeal to the ministry for permission to raise prices.

"It is not a joint appeal and all decisions related to price increases of the beverages are made by AGL alone, without any co-ordination, discussions or any form of agreement with any other party.

"In general, as an industry, all beverage producers are facing similar challenges and a price correction needs to happen because the industry cannot absorb the increases any longer.

"We are confident that the ministry will take into consideration the reasons behind the price change request, which we truly believe is a price adjustment."

Tayyar said the introduction of glass bottles by the company in the UAE market was not a cost-cutting exercise. "The introduction of the 250ml 'contour' bottle – the classic Coke bottle – has been very successful as many consumers have a clear preference for this package, which is an iconic design created in 1916 and is one of the few packages ever granted trademark status by the US Patent Office.

"Consumers in the UAE, like those in many other countries, love this package and we relaunched it in the market due to its popularity."

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