A rant about the cost of soft drinks.

In January this year, the cost of Bebzi and Coke products jumped from 100bz a can to 150 bz a can, or 600bz a 6 pack to 850bz a 6 pack.

Now, Oman Refreshments SAOG have announced their H1 results to the Muscat Securities Market which has finally allowed me to get some real facts before going off on my tirade against the soft drinks manufacturers for jacking the price of a fizzy pop by 50%. I'm going to get a bit technical and slightly geeky and talk about numbers and stuff, but I have a real point to this so please bear with me.

The Pepsi (bebzi) franchised brand is owned in Oman by Oman Refreshments SAOG, and they are listed on the MSM here. Unfortunately, the owners of the Coke franchise are private and so do not report their financials publicly, but one imagines that their margins are similar, but their sales volumes are probably lower. You can click this link and find Oman Refreshments in the list and download their H1 (Half 1) 2011 earnings on the MSM website.

To save you actually having to do that, here's the facts:

1. In 2010, their profit for the year was RO 3,357,752, up from RO 2,139,332 in 2009 (source)
2. In the first half of 2011 their profit is RO 2,254,196 on reduced sales volumes from 2010.

Now, back in January, Bebzi and Coke jacked up their prices because of "increasing material prices", yet when you analyze the information, it is apparent that their material/production prices have actually dropped since last year. Here's how I broke it down:

In H1 2010, 9.7 million cases were sold to create a profit of RO 913,227 (approx 94 Baiza profit per case)
In H1 2011, 9.3 million cases were sold to create a profit of RO 2,254,196 (approx 242 Baiza profit per case)

The increase in profits is, even if we take like for like (9.7 million cases in both years) more than a 50% increase, which would be 913,227*1.5 = RO 1,369,840. Yes I know this is a rough calculation and that there are other factors in play such as bottling costs variations and distribution/marketing costs too. My point is though, that their profits have soared, and their overheads have dropped (which was their given reason for jacking the cost of their products up so much).

Add to this the blatant collusion with Coke and you have a situation which in other countries would land them in court. But, of course, nothing like that will happen here. And so my top tip is: Buy shares in Oman Refreshments SAOG - increasing population = more drinks sold = more profits as the margin per unit is so much higher, and ultimately their share value and disbursements will increase. Totally unethical, but might as well take a punt with them if you have a few years to sink some cash in with them. What do you think?

Enjoy the weekend, and perhaps I'll see you tonight at Yolanda Be Cool.

le fin.
A rant about the cost of soft drinks. A rant about the cost of soft drinks. Reviewed by Sythe on Wednesday, July 27, 2011 Rating: 5


  1. Funny I wass looking at this last night, Al Fair, 6 pack 900bzs, When I first came here you got a Slab (24) for around RO 1, still I supose we cannot realy complain, Heathrow 1 x 500cl bottle 1.50 gbp, = around 900bzs for one

  2. Yeah I know the overall costs are still fairly low, but a lot of people here are on relatively rigid incomes, and the UK's soft drinks prices are ludicrously high when compared with those in US or Canada.

  3. Pepsi is not ORC's only product. I'm sure the increase in price has given them an increase in margin on the canned carbonated drinks, but it might not be in the proportions you've suggested: they have a lot of other brands aside from the PepsiCo drinks range.

    Anyway, if more people decide that water is more affordable than sweet fizzy drinks, maybe that's a good thing...

  4. The price of soft drinks was increased from 100 to 125 baisa in February 2006, however at that time most hypermarkets chose to absorb the price increase and continue selling at 100. With this year's second increase to 150 baisa, it was no longer sustainable even by hypermarkets and the increase was passed on to consumers.


  5. If you don't like the price increase, drink water instead!

    Also one thing most of the public does not understand is that Hypermarkets never absorb the price increase. The actual reason people are now paying higher prices for all items is because Hypermarkets are the price setters.

    Hypermarkets work on rebate rather than cost + margin. Which means that no matter what the cost of the product, they will always get their 5% or 10% or 15% on that products. They squeeze the margins out of the supplier. Therefore, the supplier has to build in the hypermarket rebate into their cost. Its a difficult concept to understand.

    But to make it simple. You should try and get a hold of the financial accounts of Lulu and Carrefour. If you can't, then just count the number of outlets Lulu has opened in the past few years. Their owner is now a billionaire. And the new outlets are also opened by money from the suppliers, disguised as 'opening fee'. It ranges from RO 3,000 to RO 10,000 per company. Guess where the supplier recovers this money from...???

    Hypermarket and to some extent the suppliers have jointly increased prices of goods. Remove the hypermarket from the equation and you have cheap affordable goods.

  6. So wait, I don't live in Oman any more, do you have to pay 150bz into the vending machines to get a Bebzi or Coke? If that's the case, it will have serious repercussions on my collection of 100bz notes which I have hoarded from every subsequent visit back to Oman in the hope that should an eventuality arise when I needed to purchase many Bebzis or Cokes, I would not be found wanting in my hour of need. Adding an extra 50bz has thrown a right spanner into the works of several years savings!

  7. mcgillianaire - it's a conspiracy to handicap you! They are indeed now 150bz :P

  8. Greed is a direct result of the capitalist world that the majority have signed up to, either willingly or unknowingly.

    Anyway, my view is that the Government should stick duty on the likes of soft drinks that are probably as detrimental to health as are smoking or alcohol, .


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