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‘Profits are sent to the corrupt West!’ Russian Communists push for Coke, Pepsi sanctions

By Ben Bouckley+

11-Aug-2014
Last updated on 11-Aug-2014 at 16:06 GMT

Coca-Cola: In the shadow of the Kremlin (Gregor Fischer/Flickr)
Coca-Cola: In the shadow of the Kremlin (Gregor Fischer/Flickr)

Coca-Cola Hellenic says it's too early to comment after the Russian Communist Party called for sanctions on Coke and Pepsi, whose profits the party insists ‘are sent to the corrupt West’.

Last Thursday Russia’s Communist Party published a letter on its website alongside a grotesque caricature (see a screenshot below) of what is presumably a Western monkey, drinking beer and reading pornographic literature.

Signed by Central Committee members Vladimir Rashkin and Sergei Obukhov, the letter (available here, albeit in Russia ) references last Wednesday’s Russian state decree imposing sanctions Western products – namely flat bans on imports of Western fruit and vegetables, meat, poultry, fish and milk/dairy products.

But the hard-line opposition party urges the Russians government to go further and target Western sodas, spirits and (in comments that will unnerve firms like Carlsberg, which have a significant market exposure), foreign beer brands.

“The abuse of beer…is recognized as one of the terrible events of public life,” the letter reads, adding that abuse is difficult to cure because beer is not considered a serious alcoholic beverage.

‘Protect the Russian gene pool from second-class liquor’

Spirits? Well, banning them will strengthen domestic producers, support the industry in Crimea and “most importantly, protect the health and gene pool of Russians from poor and second-class ‘liquor’.

“Similar measures should be extended to the…import, production and sale of carbonated beverages such as Coca-Cola, Fanta, Sprite and Pepsi Cola – the profits are which are sent to the corrupt West,” the letter continues.

However, Igor Rudensky, head of the State Duma Economic Policy Committee warned last Thursday that sanctions on Coca-Cola – specifically an excise duty – would be “impossible for the economy in principle”, after the Communists proposed tabling a bill to this effect in Russia’s parliament this autumn.

Warning that such a move would “outrage” Russia’s fellow WTO members Rudensky said such a measure was inadmissible under the organisation’s rule, although he accepts that the Duma will debate possible measures.

Duma committee head criticizes proposals

“Secondly, it will be odd if we impose sanction selectively on products made on the territory of Russia,” Rudensky added, noting that one difficult question was whether a tax should apply to Coke, say, but not native Russian soft drinks?

Last week, Coke’s resident Russian bottler Coca-Cola Hellenic (CCH) reported group sales of €1.852bn ($2.45bn) for Q2 2014 down 5%, while net profit rose 6% to €135m.

However, for H1 2014 net sales fell 6% to €3.183bn, while net profit fell 11% to €99m.

CCH CEO Dimitris Lois blamed the quarterly year-on-year decline in volumes and sales on the five specific markets - Italy, 'developing markets' Czech Republic and Poland and 'emerging markets' Romania and Russia.

‘It’s far too early to comment’ – CCH CEO Dmitri Lois

Emerging markets turned in a mixed Q2, with a Nigerian recovery offset by weak performance in Russia, Ukraine and Romania – divisional volume sales fell 2%.

Sales fell low-single digit in Russia after growth in Q1, with management blaming the unstable geopolitical situation that hit consumer sentiment – all major categories bar juice suffered volume declines (Coca-Cola -5%, sparkling overall 4%) and they expect this to continue into H2 2014.

“In Russia, the escalation of the geopolitical situation and the decelerating microeconomic trends have adversely affected consumer spending and led to a sharp decline in underlying demand,” Lois said.

Asked by analyst Edward Mundy about the Communist Party’s taxation proposal on last week’s earnings call, Lois replied: “At this point in time, it’s definitely far too early to comment…I think it’s probably unlikely we’ll see this row developing.”

Contacted this morning by BeverageDaily.com, CCH declined to comment further.

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