Coca-Cola’s in trouble worldwide

The news that San Miguel will renegotiate its Coca-Cola franchise for better terms is not surprising. Even if Coke is still the premier soft drink brand in this market, it is obviously in trouble. While greater health consciousness is at the root of Coke’s troubles in the West, in this country, the problem is economic, weak purchasing power. That’s why Coke finally decided to face this problem with a five-peso Coke bottle. That’s one way of making it affordable.

News reports have it that among other things, San Miguel will seek better advertising and marketing support to help it stem Coke’s bleeding market share. I also suspect that Ramon Ang, SMC’s CEO, whose sense of timing had been extremely good in dealing with Coke, feels San Miguel has the upper hand now in dealing with the multinational brand.

Ang did a marvelous turnaround move some years back with regard to San Miguel’s relationship with Coke Amatil. He sold back San Miguel’s equity in the Australian bottler just in time, making a tidy profit in the process instead of losing a bundle as Amatil stock price subsequently plunged. Now that San Miguel has its own soft drink brands, notably Cosmos, as well as other more healthful beverages, Coke needs it more than San Miguel needs Coke.

The declining market share of Coke in the Philippine market is nothing unusual for the brand. Coke’s head office in Atlanta had been having management problems, aside from serious marketing problems for some years now. They have even recalled a retired Coke executive who once served in the Philippines to head it and hopefully lead it somewhat more successfully.

Coke’s Chairman and CEO, Neville Isdell, said at a recent shareholders’ meeting that "we have got to change a culture that has simply forgotten what it’s like to win". Recent reports tell of falling sales in Europe and little headway being made in North America. Sale of the company’s soft drink brands have been down markedly in the UK.

For oldtimers in marketing, it is difficult to imagine Coca-Cola, one of only a handful of truly global brands, in trouble. But it is true. For one, Coke has been hit by the explosion of the obesity time bomb! According to a report on the Internet, Coca-Cola’s share price has taken a nose dive amidst adverse media coverage and concerns about the sugar content of its core brands (www. open2.net/ money/ briefs_20051118_coca_cola.html). Worse still, industry experts are accusing the company of panic as it struggles to bolster market share with a host of new product launches.

The health concerns that bedevils Coke worldwide, has also hit junk and fast food brands. The problem for Coca-Cola is that these health concerns are hitting sales of its core brands such as Coca-Cola and Sprite. Schools are switching off branded vending machines, campaigns to promote healthy lifestyles are in full flow and bans on junk food advertising, including soft drinks, may be just around the corner.

Given its problems, Coca-Cola has two options: make its existing products healthier or diversify. Unfortunately, Coke’s effort to diversify had not been happy. In fact, it has turned desperate: it is even attacking the practice of drinking tap water in the US as a violation of its intellectual property. Weird! Absolutely weird!

The Internet reveals that Coke has launched a school program that aims to keep kids away from drinking ordinary tap water. "This is an issue of intellectual property," said Soft Drink representative Bob Shruggers. "By drinking water, these pirates are stealing from the hard workers who developed such drinks as Ramblin’ Root Beer, Sprite Tropical Remix, Vanilla Coke, and Vanilla Lemon Coke."

Check out www.commondreams.org/headlines04/0304-04.htm <http://www.commondreams.org/headlines04/0304-04.htm>. This is simply incredible. They are claiming that "drinking bottled water can be a moral decision. (It is ok) if the water is a drink such as Coca-Cola branded Dasani water. Otherwise drinking water is as bad as stealing from a blind widow, and kicking her cat."

The funny thing is, another Internet article reports Coca-Cola admits Dasani is nothing but tap water. "UK version of Coca-Cola’s Dasani brand bottled water comes out of the London public supply should hardly have come as a surprise." The controversy hit the press when a complaint was made to the British Food Standards Agency over Coke’s use of the word "pure" in its Dasani marketing. The complaint hinges on the charge that the marketing implies that tap water is ‘impure’.

In the developing world you usually buy bottled water because tap water is often suspect, or because of the chlorine taste of tap water. In the west, it’s a "lifestyle choice". Most consumers in developed countries would accept that the water that comes out of their taps is clean enough and good enough for cooking, washing or even drinking. That’s not good for Coca-Cola, now as pitifully down and out as a blind widow and her cat.

Given Ramon Ang’s fabled negotiating savvy and Coca-Cola’s defensive posture, buying San Miguel stocks now should be a good idea.

CNG buses

This is the problem with the tendency of this government to mistake photo op as the program itself. Remember the big thing they played up about the CNG buses – public buses powered by natural gas from Malampaya? After the start up ceremonies in Malacañang, the follow through was less than desirable. Now, the bus operators who borrowed good money to buy these buses are complaining because the program is not really ready for implementation.

According to the magazine of the Makati Business Club, CNG bus operators have been complaining about the continued delay of the start up of the filling stations since they are paying loan interests on their newly acquired CNG buses. Although only 7 CNG buses have been delivered to operators so far, more units will arrive in the coming months. The CNG-fueled buses were supposed to run their routes starting September, when the refilling stations were scheduled to open.

The Malampaya consortium, composed of Shell Philippines Exploration B.V., Chevron-Texaco Malampaya LLC, and Philippine National Oil Co.—Exploration Corp., is responsible for the construction and management of the mother station in Batangas. The Shell group will operate the CNG refilling station in Laguna.

I e-mailed Ed Chua of Pilipinas Shell and here is his response.

Thanks for getting our side on this matter. Both the mother and daughter station are mechanically complete but when our consultant inspected the facilities (specially the mother station), said consultant found serious safety issues which need to be addressed. Note that CNG has a vapor pressure which is eight times at least that of LPG. And considering that this is the first time we are introducing CNG to the transport market in the Philippines (i.e. we have no experience locally) we do not want to take any risk.

This unfortunately means that the much awaited launching will have to be postponed until such time when our consultant is satisfied that the contractor has addressed all our safety concerns. We are hoping that this happens soon but at this point in time, I cannot yet give a definite date.

Yun naman pala. So, why the premature hoopla? And what about the poor bus operators who must pay interest on a non-performing loan? This government must learn that premature press releases or photo ops can erode what little credibility they still have. And they must take care of those bus operators who believed their schedule. Otherwise, who would believe future government programs that need early adaptors?

Din din is ready

Here’s Dr. Ernie E.

The newly married man came home from work to find his new bride stretched languorously on the sofa, dressed in a very skimpy negligee. "Guess what I got planned for dinner," she asked seductively? "And don’t you dare tell me you had it for lunch today."

Boo Chanco’s e-mail address is [email protected]