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Coca-Cola joins Pepsi in huge price hike
Increases of 50 percent on some lines as raw material cost finally catches up with consumers. But are hikes justified?
December 31, 2010 12:29 by Samuel Potter
Coca-Cola will be hiking its prices by as much as 50 percent from next week. The move coincides with a similar mark-up by Pepsi Cola, announced this week and reported in the Khaleej Times.
Khaleej Times reports that Dubai Refreshments Company (DRC), Pepsi’s distributor for Dubai and the Northern Emirates, sent a letter to customers on December 27 informing them that prices would be rising. According to the paper, the price of a 355ml can will go up by 50 percent to AED 1.50, and the retail price of a 2.25 litre bottle will go up by 25 percent or AED 1 to AED 5.
Now Kipp has learned that Coca-Cola has also planned a rise. A source with one of the major retailers tells us that Al Ahlia Gulf Line, manufacturer and distributor of Coca-Cola products in the UAE, issued letters at the same time as DRC confirming similar rises.
The moves are not unexpected. Earlier this year Gulf News reported that the two companies had applied to the Ministry of Economy requesting permission for a price rise. Back in February, Antoine Tayyar, Public Affairs and Communications Director for The Coca-Cola Export Corporation, Middle East said, “We have maintained our price in [the] UAE for the past 22 years but with an increase in almost all raw materials and costs involved in the manufacturing of products …there should be now a price review.”
Evidently they now have approval – in the letters from both DRC and Al Ahlia Gulf Line the companies confirm they have permission.
In its letter to customers Coca-Cola says, “The current economic situation and ever increasing manufacturing, selling and distribution costs have significantly impacted our business.” And in its article this week, Khaleej Times quotes the letter sent by DRC to customers. It says, “After exhausting all viable means to absorb the incremental cost of raw material, manufacturing and distribution for the longest period possible, it is no longer economically feasible to keep our current pricing structure.”
According to our information, the Ministry of Economy has insisted that cans and bottles sold in retail outlets will have the new price displayed on packaging, so that consumers know the hikes are coming from Coca-Cola and Pepsi, rather than each retailer.
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