Customers with overloaded shopping carts may not have noticed the 50 percent increase in the price of soft drinks in the past two days, which has prompted the Ministry of Commerce to call on over 30 soda and soft drinks companies to hold off on any further price hikes. The 50 percent increase which may slim the public waistline is, according to some, set to double by the end of 2009. Many have called for improved profit margins with less volume. “I never finish a bottle of soda,” said an anonymous blogger. The new prices will encourage people to cut back on soft drinks, cutting their daily calorie intake by at least 10 percent, the blogger said, which is a great benefit “if the obesity rate, a major cause of diabetes, stroke, and heart attacks in the Kingdom is considered”. The price increase, which has been effective since Tuesday in many places, was fueled by inflation-related losses the companies incurred over the past four years and the high cost of ingredients, the companies said. Abdullah Al-Olyan, spokesman of soft drinks giant PepsiCo Inc. in the Kingdom, said that the new price tag was triggered by the unbearable high cost of the final product. “We have used all possible means to keep the price unchanged for a long time by absorbing the cost ourselves. We are obliged to keep the product in the market, but at a price that reflects its true cost,” he said. “If, over the years, we had gradually increased the price as inflation hit the region, our soft drinks would cost much more than they do now,” he said. Over the past 20 years, the prices of daily consumables like rice, flour, and sugar have increased by 300 percent, he added. PespiCo Inc prices in the Kingdom have only increased by 1.5 percent over the past 30 years, he said. There are four local Pepsi manufacturers across the Kingdom with over 7,200 employees. Some superstores and wholesale stores, however, have kept the old price tag waiting for their current stock of soft drinks to be sold out and to receive instructions from the Ministry of Commerce. The companies delayed the increase for a couple of years as they feared customers were not used to dealing with fractions of the riyal, which require coins, said Mahmoud Rashwan, a member of the National Commercial Committee at the Council of the Saudi Chambers of Commerce and Industry. Currently only a half riyal is available in coins. Rashwan also cite the high cost of ingredients in the international market as contributing to the price rise. “Soft drink companies have incurred huge losses trying to keep the prices unchanged. But they could not do it any longer,” he said. Even bottling has become expensive, he said. SABIC has raised its plastic prices, and the price increase would have been higher had the raw materials been imported, he said. “If the plastic bottles were imported, the companies would pay at least 20 percent in customs and that would, in the end, come out of the customer's pocket,” he said. Silica glass sand used in soft drink bottles is costly, but soft drink companies get it at very low prices from the government keeping the product at an affordable price. The true cost of the final product including filling and bottling is much more than what the customer pays, he added. Aluminum sheets for bottling are also dependent on the international market, Rashwan said. A kilowatt of power for factories has jumped from 12 cents to 26 cents, another factor contributing to the 50 percent increase, he said. The price tag for imported soda was SR2 up to the late 1970's, but went down to SR1 with the establishment of local soda factories. The Consumer Protection Association (CPA) has attacked the sudden “unjustified” increase. Official permission should have been granted to soft drink companies before they raised the prices of such highly-consumed products, said Muhammad Al-Hamad, chairman of the CPA. “And even if permission were granted, the price increase should not exceed 10 percent,” he said. Companies should have announced their intention to raise the prices before actually putting on the new price tags, he said. Al-Qusaibi Pepsi-Co in the Eastern Province told wholesales dealers the new price would be effective as of Wednesday, said Ahmad Al-Zaher, a foodstuff trader. Coca Cola Company has not changed its original prices. But the move taken by Pepsi-Co may encourage other companies to change their prices, he said.
