Coca Cola 3E: Profits up by sixfold and two decades of wrangling with the Competition Commission

Coca Cola 3E Hellas ABEE, a subsidiary in Greece of the Coca Cola HBC group, ended 2021 with almost six times net profits but lower revenues compared to its pre-covid performance.

At the same time, the company’s 20-year feud with the Competition Commission continues, as, according to what the 2021 financial report shows, the decision of the independent Authority has not yet been issued for any violation of articles 1 and 2 of Law 3959/ 2011 as well as Articles 101 and 102 of the Treaty on the Functioning of the European Union, in the non-alcoholic beverages market.

Coca Cola 3E has been fined for similar charges at least twice in the past, in 2002 and 2006. In addition, in 2020 it was fined again, this time for obstructing an audit by Competition Commission inspectors, in its branch in Rhodes.

Sales of 471.8 million euros

Regarding the financial situation of the company as such, the net sales revenue of Coca Cola 3E increased by 17.7% compared to 2020 and reached 471.8 million euros, approaching the turnover of 2019 which was at 475 million euros.

Sales volume in 2021 increased by 16.1% compared to 2020 to 103 million cases, compared to 111.7 million cases sold in 2019.

Multiplying profits

In terms of profitability, the company’s performance was particularly positive, as pre-tax profits showed an increase of 39.4% to 27.2 million euros compared to 19.5 million euros in 2020, while net profits almost quadrupled to 17.1 million euros against 2.9 million euros in 2020.

Capital expenditure for the year amounted to €9.1 million, compared to €10.5 million in 2020, while total liabilities stood at €137.1 million compared to €100.3 million in 2020, an increase which came about mainly from trade obligations.

Strict oversight of working capital

“In 2022 we expect the macroeconomic and financial environment in Greece to remain volatile, however showing a significant improvement compared to 2021. Disposable income is expected to increase compared to 2021, while unemployment rates have fallen to 12.8% in December 2021 compared to December 2020 which was at 15.8%,” the company notes about its business outlook for this year.

The powerful bottler’s strategies remain focused on boosting sales and tight working capital management in the direction of shielding liquidity in a hyper-inflationary environment.

Despite the volatile environment, the powerful bottler is keeping its business model strengthening strategies unchanged, aiming to boost sales through a more aggressive multi-channel plan.

Absorption of Tsakiris

It should be noted that during last fiscal year, the board of directors of Coca Cola 3E decided to proceed with the absorption of the subsidiary company Tsakiris Standard Snack Industry.

This fact, among other things, led to the increase of the share capital of Coca Cola 3E by 9.3 million euros to 50.5 million euros.

Sustainable development

Sustainable development is a fundamental principle of the company’s business strategy. In 2021, the Coca-Cola HBC group announced the commitment to achieve a zero balance of carbon dioxide emissions throughout the value chain by 2040.

In this direction, the electricity supply of the Coca Cola Tria Epsilon factories in Greece already comes from 100% renewable energy sources, while 62.3% of the total energy comes from renewable clean energy sources.

In 2021 the company says it has accelerated its path towards a circular, lower-carbon packaging approach by eliminating plastics in secondary packaging with a €4m investment to phase out plastic film in aluminum multipacks through the new KeelClip multipack type.

A running feud and fines

Regarding the course of Coca Cola 3E at a competitive level, the case started following the complaints of the AGNI firm and the Panhellenic Association of Soft Drink Manufacturers against the company for abusing its dominant position in the soft drinks market and in particular for imposing unfair trading conditions, abusive discounts, imposition of unequal terms on equivalent benefits at the expense of non-exclusive vendors and dependence of the conclusion of contracts on the acceptance by the parties of additional benefits, disproportionate to the main provision.

The Competition Commission unanimously found in its decision that, during the period 1991 – 1999, Coca Cola 3E abused its dominant position:

1. a) by implementing a sales target discount system,
2. b) with the discretionary treatment of gas stations and retailers based on the exclusive cooperation with it,
3. c) by making the provision of free refrigerators to retailers dependent on the acceptance by policyholders of the obligation to exclude competitive products and
4. d) by imposing a condition of exclusive use of refrigerators on retailers who cannot install an additional competing refrigerator.

For these practices the Competition Commission imposed on Coca Cola 3E a fine of 2,934,702.86 euros and obliged it to remove the condition of exclusive use of refrigerators in the utility loan contracts. The Administrative Court of Appeal of Athens, on appeal, reduced the fine to the amount of 1,800,000 euros.

The General Directorate of Competition (GDA) conducted a compliance audit of Coca Cola 3E in decision EA 207/III/2002, following which decision no. 309/V/2006 was issued. The Committee imposed on the company a fine of 8,662,644 euros, for not removing the exclusivity clause from the utility loan contracts and for the unequal and discriminatory treatment of the exclusive retailers and wholesalers.

The appeals court confirmed the judgment of the Competition Commission and reduced the fine to the amount of 5,904,000 euros, a decision ratified by the Council of State.

Contingent liabilities

According to what is mentioned in the company’s financial report, “in relation to the decision of the Hellenic Competition Commission of January 25, 2002, one of our company’s competitors filed a lawsuit requesting compensation of €7.7 million.

The court heard the case on January 21, 2009 and dismissed the lawsuit. The plaintiff appealed against the decision and on December 9, 2013 the Athens Court of Appeal rejected the plaintiff’s application.

By virtue of no. 55683/2012 deed of separation, the Company absorbed the production, bottling and marketing branch of Coca-Cola Hellenic Bottling Company SA. and took over the trial.

Irrevocable decision

The plaintiff did not challenge the decision of the Athens Court of Appeal, which has now become irrevocable.

On April 19, 2014, the same plaintiff filed a new lawsuit against Coca-Cola Hellenic Bottling Company SA. claiming compensation of €7.5 million raising allegations of anti-competitive behavior by Coca-Cola Hellenic Bottling Company S.A. between the years 1994 and 2013.

The two lawsuits partially overlap in terms of the time period for which the plaintiff is seeking damages.

By virtue of no. 55683/2012 deed of separation, this case was continued by the Company. This new lawsuit was set to be heard on January 17, 2019.

Meanwhile, on 21/12/2018, the Company was served with a statement of the plaintiff’s resignation from the said lawsuit, and therefore, on the day of the hearing of the case (17/01/2019), the discussion was aborted.

New lawsuit

On June 20, 2019, the same plaintiff filed a new lawsuit against the Company claiming damages of €10,168,853, raising allegations of anti-competitive behavior by Coca-Cola Hellenic Bottling Company S.A. between the years 1994 and 2013.

The parties’ motions were to be filed with the court by October 29, 2019. The parties’ motions and evidence were filed with the court and the case was heard at the hearing on November 18, 2020, postponed from the originally scheduled hearing of 04.01.2020 .

On 16.07.2021 the decision of the Multi-Member Court of First Instance of Athens was issued, in which the above action was partially accepted and it was recognized that the Company is obliged to pay the plaintiff the total amount of €859,413.75 with legal interest from 31.12.2003 and €13,000 as court fees.

Appeal

Coca Cola 3E Hellas ABEE and the plaintiff have appealed against the above decision. Both these appeals have been determined to be discussed during the hearing on 19.01.2023.

On September 6, 2016, the Hellenic Competition Commission started an audit of the activity of Coca-Cola 3E Hellas SA, as part of an investigation into the non-alcoholic beverages market.

In the context of the above audit of the General Directorate of Competition regarding the commercial practices of the Company, on 05.07.2022 (s.p. apparently by mistake it mentions 2022 and not 2021 which is correct) the Report of the Reporter Maria Ioanna was communicated to the Company Radou for any violation of articles 1 and 2 of Law 3959/2011 as well as articles 101 and 102 of the Treaty on the Functioning of the European Union, in the market of non-alcoholic beverages.

The hearing before the Plenary of the Hellenic Competition Commission for the aforementioned case concluded on 29.11.2021, without a decision having been issued to date”. The management estimates that any liability arising for the company, as a result of the above cases, will not have a significant adverse impact on the operating results, cash flows or its overall financial situation.