First with Financial Comment from Arabia

UAE Pepsi and Coke prices to rise finally after 22 years

with one comment

Duopoly price fixing is supposed to work to the advantage of the companies concerned but not in the UAE for Pepsi and Coca-Cola.

For 22 years a stalemate in a price war has left the price of a can of Coke or Pepsi at AED1 (27 US cents), an astonishing bargain. The precise reasons for the price war are a bit lost in the mists of time, rather like a family dispute that is so old nobody can remember why it started in the first place.

Price rise

But yesterday the Ministry of Economy issued a statement saying that it had received a request from both companies for higher prices that is being sent to the higher committee for consumer protection for approval.

However, officials said that the price increase was likely to be less than 100 per cent, so it does not seem likely that the duopoly will be allowed to double prices to AED2, not an unreasonable sum to pay for a can of soft drink.

An official statement from Coca-Cola Export Corporation, Middle East noted that sugar prices are up 199 per cent since 2004 and that ‘there is probably no other consumer product which has kept the same price for more than two decades’.

Coke chooses to see the price rise as an ‘adjustment’ rather than an ‘increase’ in view of the circumstances. But a dirham more is a dirham more, however you describe it.

Duopoly case study

Local business schools are bound to size on this 22-year price freeze as a case study in a duopoly gone wrong. How did it happen? Why did the stalemate last so long? Were the protagonists losing money all that time?

How much of this price adjustment will be past onto consumers in practice remains to be seen. Restaurant prices of AED10-12 per can of soft beverage already have a massive profit margin that ought to absorb the increase, and not double to AED20-24.

But the end of the longest running price war in the UAE, and surely a competitor for a world record, is a moment to remember and something for scholars to study in the future.


Written by Peter Cooper

February 17, 2010 at 9:09 am

Posted in Culture, Hotels, Restaurants

One Response

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  1. Just think how much Coke could sell if they could legally put the cocaine back in it. Like back in the old days, before William Randolph Hearst began his racist newspaper crusade to get all drugs banned. (The story was on the History Channel. The cocaine ban targeted Southern blacks, the marijuana ban targeted Mexicans in the Southwestern USA, and the opium ban targeted Chinese on the US West Coast. His newspapers intimated that drug use would promote inter-racial sex and rape. It shows you the power of the mass media to misinform, and therefore control, the uneducated. Remember WMD in Iraq? It still works. Hearst has cost society trillions of wasted dollars. But HE sure got rich doing it.)
    A few milligrams of cocaine, and you talk about a hot stock! Your new jet awaits. And the GNP would go up 5% overnight. (Of course, all the extra delivery trucks might cause a fuel shortage.) Sugar growers would love it too. And if the Government required it be in glass bottles, the glass business, and natural gas exploration and drilling companies, would boom. Pretty soon, we would be back at full employment. See how easy economic problems are to fix, if you just think outside the box.
    I’ve never touched the stuff. Pure cocaine hydrochloride is way too dangerous. But how much ‘Old Coke’ could I drink? Well, let me put it this way. Kidney stones caused by too concentrated urine, would probably not be a problem.

    Bill Simpson in Slidell

    February 17, 2010 at 10:54 am

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