June 11, 2009

Report: Consultants to Blame for Venezuela-Coke Fiasco

Financial Rant

Venezuela Bans Coke Zero,
Citing Health Concerns

Calls for Invasion Grow
A "Rare Win" for Embattled
Brand Managers

CARACAS -- The Venezuelan Government yesterday banned the sale and distribution of Coke Zero, citing health concerns about the popular zero-calorie drink, in a move expected to cause "considerable distress" to the drink's bottler, Coca-Cola FEMSA SA de CV, and the Venezuelan people.

Health Minister Jesus Mantilla announced the move through the government's news agency.

It's unclear what led the Venezuelan Government to ban Coke Zero. Oddly, however, some observers in the South American nation are casting blame towards Coke brand managers Irwin Cholmondeley and Edward "Ned" Callahan. Those in the capital say Messrs Cholmondeley and Callahan appeared on President Hugo Chavez's popular television show, "Alo Presidente!" and encouraged the Venezuelan leader to take swift action against Coke Zero.

"Yes, I remember it," said Caracas bricklayer Hernan Martinez, as he was headed to work yesterday morning. "It was during the 27th hour of Chavez's marathon session last week. These two guys came on and started going on about infraccion del gusto and capitalismo imprudente. Then, when I went into the corner shop this morning, these men from the distributor were taking the Coke Zero away."

"Also, they took away the beer," Martinez said. "Something about -- how do you say it? -- 'taking back the High Life.' "

ALO PRESIDENTE! A video still from state-owned Corp. Venezolana de TelevisiĆ³n shows Messrs Cholmondeley (left) and Callahan elaborating on the "fundamental, capitalist evil known as Coke Zero" during President Hugo Chavez's weekly television program. President Chavez was reportedly quite alarmed to hear about how Coke Zero had created poor health among those exposed to it. Symptoms, according to Messrs Chomondeley and Callahan, included "anxiety, disturbed sleep, minor instances of paranoia, and concern over how certain people would pay their mortgages."

A clip of the show also shows Mr Callahan complaining of sore ribs and neck pain, which reportedly resulted from being tackled by a Coke Zero-crazed Troy Polamalu.

Reaction to the Government's move has been swift and strong in some quarters. Edison Paez, a Maracaibo storekeeper, complained the Government was robbing him of considerable profit.

"What the hell?" Paez said. "First they nationalize the staple good producers, and now they're forbidding honest Venezuelans from drinking Coke Zero -- a beverage, I might add, that was one of the few profitable things I could sell after the Government imposed price controls. Now what am I supposed to sell? Frescolita? The stuff tastes like bubble gum, for God's sake."

"If this keeps up, my store's going to have less stock than a Russian department store in 1985," Paez said.

However, not everyone was opposed to the move. Irina Tucupita, a hospital nurse, said she understood why the Government acted as it did.

"Those poor men. I saw them on the broadcast, and clearly this Coke Zero drove them entirely insane," Tucupita said. "So I can see why the Government decided to ban it."

WARNINGS: The Government has posted signs like these in major cities to spread word of the ban.

In the United States, observers said they thought the Venezuelan Government's move would have "minimal impact" on Coke Zero as a brand, but agreed it was "a rare win" for Messrs Cholmondeley and Callahan.

"These guys have been getting their asses kicked from Anchorage to Kuala Lumpur," said soda industry analyst Mark Piotrowski, of High Water Mark Brokerage LLC in New York. "Although this victory is a small one for them, it is a victory nonetheless, and as such it must be appealing."

When asked if rival PepsiCo Inc. could gain market share from the dispute, Piotrowski said, "I don't understand."

But opposition to the move is growing in Washington. A mid-level State Department official warned that, although Venezuela "really wasn't on our radar screen," other elements could take swift action to deal with the situation.

"We've got enough problems on our plate without worrying about how Chavez is going to further destroy his country's economy," the official said. "But it's not us he has to worry about. For one thing, taking any carbonated beverage product away from regular citizens will cause considerable societal discontent. For another, he doesn't seem to realize who he's dealing with. I mean, he's going to have to answer to the Coca-Cola Company."

Posted by Benjamin Kepple at June 11, 2009 12:57 AM | TrackBack
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