08 September 2011

Coca-Cola vs France

Ladies and gentlemen, it's getting chilly here in France.  Like the weather we're experiencing, indicating that we will soon be in autumn, the relationship between Coca-Cola and France is also becoming rather frigid.

Why?

Well, France needs some money.  Growth has stagnated, like many other European nations.  Public deficits are too high.  The country needs to bring its spending in line to meet European standards for 2013.  This isn't an easy task and is very much a balancing act.  How much government spending do you cut without hurting the fragile economy and discouraging growth?  Where do you increase your revenues, especially when your population might just strike at the whisper of cuts to social services?

Why not tax the companies that are making your people fat?

A French passion...and now a money maker for the government?
Photo:  Coca-Cola France


That's what French Prime Minister François Fillon decided when he announced a tax on drinks that have additional sugar added.  Coca-Cola Classic, Pepsi, Orangina, and fruit juices that add sugar are all facing a dramatic tax rate increase from 5.5% to 19.6%.  The French government is hoping to not only raise some much needed funding (estimations are around 120 million Euros) but also cut some of that junk in the trunk of many Frenchies.  Apparently, the average weight of the French people has gone up 3.1 Kg, indicating that obesity is becoming a greater problem.  How could this not be a brilliant solution?  Make money by taxing a segment with enormous shopper pull in France's supermarchés all while saving the French people from their unnatural sugar and soda addiction?  Sounds almost too good to be true like those late-night infomercials telling me that I can make money in my pyjamas while eating cookie dough.

To the soft drink and food industry, this tax seems totally unjustifiable.  Coca-Cola and other companies signed an agreement with the government to improve its formulations so as to reduce the sugar content in beverages here in France.  They lived up to that promise (I can attest...when I drink a Coke in France, it is not as sweet as the one I would drink in the USA.  No HFCS helps too.)  Now they are being taxed?  Furthermore, why wouldn't you then tax other fatty/high caloric culprits, such as chips, McDonald's, candies, and other processed foods?  Calls of scandal ring in the halls of these companies and come through lunchroom conversations.

But then there are other unintended consequences.  Health officials interviewed in newspaper articles have agreed that things need to be done to tackle France's growing obesity problem, and that the spirit behind this is well-intentioned.  However, you won't get consumers to stop making bad beverage choices.  They'll just switch to generic brands.  Plus, the tax won't increase the price of a can of Coca-Cola that significantly.  You're talking a couple of cents at best.  It's not enough to persuade consumers to abandon their soda.

Another, as was seen today in the press all throughout France, is corporate retaliation.  Faced with unexpected higher costs to prepare for in the next fiscal year, Coca-Cola Enterprise is supposedly suspending a planned 17 million Euro investment in a canning factory in the south of France.  (Although now they are saying that it was a communication error.)  This has caused outrage by local politicians because they see it as a shocking retaliatory action.  Well.  Yea.  You're levying what appears to be a discriminatory tax on a major company.  Of course they are gonna exercise a little muscle rather than just bending over and taking it.

The unfortunate aspect of this really is the timing.  This tax is coming at a time when the government needs to find money to increase its revenues and reduce its deficits.  So it looks more like the French government is imposing the tax to fill up its treasure chest rather than fight obesity.  Plus, if it is to fight obesity, then put the money you earn from that tax towards that and make it public that that is what you intend to do.  Put it towards educational measures to make people aware of better dietary choices (school programs maybe???).  Or perhaps fund the opening of less expensive gyms and more community exercise activities?  Oh, and don't just tax sodas and sugary drinks.  Doesn't seem like this is your only culprit for obesity.  (Hello France being one of McDonald's top markets outside of the USA...)  I'm not expert but the whole tax effort seems awkward. 

I'm all about healthy eating and lifestyles.  But ultimately consumers make their own choices.  Does anyone else feel like this tax reeks of slight discrimination?  What do you all think?

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