Palatinose - Soft Drinks International

Soft Drinks International – February 2011
Finns face tax
FINLAND introduced its controversial tax on soft drinks and sugared
products in January despite robust resistance from a hostile
drinks industry which maintains that the initiative will force sales
down, while distorting price competition in the beverage market
segment.
The government hopes to raise €80 million from the tax in 2011.
Producers have already raised prices to reflect this added cost to
manufacturing and distribution. In effect, the tax will be levied at a
rate of €7.5 cents per litre on sugared and unsugared soft drinks,
including bottled water.
Contentiously, the Confectionery And Soft Drinks Tax (CASDT) is
also being levied on a limited range of confectionery products, such
as ice-cream. The Federation of the Brewing and Soft Drinks Industry
(FBSDI) had lobbied strongly, but unsuccessfully, to have bottled
water excluded from the tax.
“The government promoted this tax initiative as being motivated
by its efforts to encourage healthier consumption. The fact that the
tax also includes bottled water shows that this is not the case. This
tax is simply a new revenue raising exercise. This tax will have a negative
impact on soft drinks and bottled water sales,” said Elina Ussa,
the FBSDI's Managing Director.
The Federation said the government was using the tax to randomly
target a number of similar product groups. “We have no
problem with taxation per se, only the arbitrary way in which this
tax is levied on only a few companies in the food and drink industry,
while leaving similar products and their manufacturers outside its
scope,” said Ussa.
The excise tax penalises sugar-free spring and mineral waters, as
well as products containing Xylitol. However, many products with a
high sugar content remain outside its scope, including biscuits, cakes,
yoghurt drinks, sweet fruit soups, sweetened and flavoured milkshakes
and milkshake drinks, and sweetened coffee drinks sold in
powdered form.
With fresh parliamentary elections scheduled in April, the FBSDI is
hopeful that the next government will adopt its proposal to change
the existing tax format to a fairer tax based on the sugar content of
a product.
More russian speculation
IN A speculative deal motivated by PepsiCo's expansion in Russia,
East Capital Explorer, the publicly listed Stockholm-based investment
group, has acquired an equity foothold, costing the company €7 million,
in the Russian foods company Wimm-Bill-Dann.
The capital investment is directly linked to the acquisition of
Wimm-Bill-Dann (WBD) by PepsiCo, and a five-year plan to expand
WBD's core range of dairy-based drinks and desserts across Russia.
Last December, PepsiCo paid US$3.8 billion to acquire a 66% shareholding
in WBD. The US soft drinks giant expects to obtain full
approval for the deal during the first half of 2011.
In accordance with Russian law, PepsiCo is required to purchase
the remaining 34% of shares in WBD within 35 days following the
closing of the transaction at a buyout price that is not below the
deal price. East Capital Explorer acquired its holding prior to the
PepsiCo offer, and is expecting to achieve a 20% return on the
shares it holds in WBD.
“We see the Wimm-Bill-Dann investment as a good opportunity
to maximise returns in the short term while we have cash waiting
for completion of other investments. We expect to realise a healthy
premium above the average price of US$ 117.46 we paid per shares
on completion of the buyout from PepsiCo,” said Gert Tiivas, East
Capital Explorer's CEO.
www.softdrinksinternational.com
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12 – 18 May 2011
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