Coca-Cola in tax tiff with France

McClatchy NewspapersSeptember 12, 2011 

WASHINGTON — The relationship between Georgia-based Coca-Cola Enterprises, Inc, and the French government has fizzled in recent weeks after that nation proposed adding an extra tax on sugary soft drinks.

The French finance ministry said when it announced the proposal late last month that the move to levy a 1 euro cent per can tax was "motivated by a public health goal." One 12-ounce can of Coke has 39 grams of sugar, and the country's health ministry is concerned about expanding French waistlines and a spike in obesity rates.

Coca-Cola, which is based in Atlanta and has bottling facilities in Macon and Columbus, Ga., cried foul and threatened to hold off on a planned $24 million investment and an annivesary party for its factory in Pennes-Mirabeau in southern France — a position from which the company backed away last week. The company employs about 3,000 people in France.

However, the company maintains that the tax would focus too narrowly on soda. It "unjustly targets the purchasing power of the French people and one category of beverages under the pretext of addressing public health concerns," said Hubert Patricot, president of the European Group for Coca-Cola Enterprises, said in a statement last week, according to media reports. The company even took their message to consumers by creating the (at)AntiTaxeSoda Twitter account.

U.S. industry analysts say the proposed tax was a financially motivated attempt to pay down the French government's debts. France's debt is nearly $4.7 trillion, and the country's government, like its counterparts across Europe and the United States, has looked for places in the federal budget to trim the fat and raise revenues.

The proposed tax, which is pending parliamentary debate, would go into effect next year and potentially generate 120 million euros in revenue.

"Countries are scrambling to do a lot of things to plug their deficits," said Ray Hill, associate professor of finance at Emory University in Atlanta. "Someone in France said, 'Soda isn't very French. Let's put a tax on them.' But someone didn't put two and two together and say, 'Hey, Coke is building a plant here.'"

Officials from Coca-Cola did not return calls for comment Monday.

This isn't the first time the relationship between Coca-Cola and France has caused a bit of indigestion.

In 2009, Philippe Folliot, a member of the French parliament who represents many Roquefort cheese producers, said the country should hit Coca-Cola with heavy import taxes in retaliation for increased U.S. tariffs on the blue-veined French cheese. The increased cheese tax set off a trade battle known as the "cheese wars."

The opening salvo in that dispute came previously, when the European Union banned imports of American hormone-treated beef.

In 2005, France dubbed Danone, a French company that produces yogurt, a national treasure when Coke competitor PepsiCo flirted with a takeover. In the late '90s, a French court rebuffed Coca-Cola's attempt to buy Orangina.

Some of the perceived tension has to do with heightened European antitrust concerns, Hill said.

Then again, in a country famous for its wines, the proliferation of pop is a sensitive issue.

"There are issues that France takes a little more seriously than some other countries," said Ali Dibadj, a New York- based analyst for Sanford C. Bernstein & Co, an investment research and asset

management company. "France has such a culinary focus. Food is part of the culture, so anything having to do with food they take a little bit more seriously."

In the meantime, Coca Cola decided to proceed with the previously cancelled party plans to celebrate the southern France plant's 40th anniversary. But employees there may have to hold off on popping celebratory bottles; the company has yet to announce a date for the fete.

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McClatchy Newspapers 2011

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