Socio-Economic Impact of Coca-Cola in Europe The Case of

AmCham meeting

Prague, April 14th 2015

Socio-Economic Impact of Coca-Cola in EuropeThe Case of the Czech Republic

Contents

Introduction1

Measuring socio-economic impact2

Socio-economic impact of Coca-Cola in EU3

The case of Coca-Cola in Czech Republic4

2

Why am I doing economic impact assessments?

3

4

• Strategy and economic consultancy since 2000

• Represented in Amsterdam, Barcelona and Washington DC

• Focus on integrating sustainability and quantifying impact

• Global track record in Agriculture, Mining, FMCG, Finance

Making Business Work for Society

Contents

Introduction1




5

Fundamentals of measuring socio-economic impact

What’s a firm’s socio-economic impact?

Impacts are changes caused – directly or indirectly – by business due to its activities in a local economy. Socio-

economic impact is usually measured in terms of

6

Value added

Sum of salaries, taxes and profits

(comparable to Gross Domestic Product)

Employment

Formal and informal jobs in full-time equivalents

(comparable to total labour force)

How does it occur?

Impact is generated directly, at the level of the company itself, and supported indirectly, driven by the company’s

local procurement and investments

Directly

Supported as a company hires employees, pays

salaries and taxes and generates profits

Indirectly

Supported as a company purchases goods and

services from local suppliers, and as the latter

spend on their own suppliers

Our studies quantify the local socio-economic impact by following money flows

7

Coca-Cola Systemrevenues

Expenditures

Tax revenues

Company profits

Employee salaries

Final and intermediate demand

Value added (i.e. incomes generated for employees, companies and governments)

Trade sectorrevenues

Employeesalaries

Tax revenues

Companyprofits

Trade sectorexpenditures

Supplierrevenues

Tax revenues

Employee salaries

Company profits

Supplierexpenditures

Consumption of Coca-Cola beverages

Direct and indirect effects are divided into four rounds

8

Direct (0th round) impact(The Coca-Cola System)

+

Indirect (1st round) impacts(direct suppliers and trade)

+

Indirect (2nd round) impact(suppliers’ suppliers)

+

Induced (3rd round) impact (employees’ consumption decisions)

=

Coca-Cola’s total economic impact

Stated separately

Local Impact of Coca-Cola System depends on several factors

The impact of the Coca-Cola System on an economy depends on

• Per capita consumption of Coca-Cola products

• Trade margins and consumption patters:

• Margins in on-trade (cafes & bars) vs off-trade (markets)

• Distribution of consumption: on-trade vs off-trade

• Degree of local production & procurement

• Labour productivity of the economy

9

Contents

Introduction1




10

We have done impact studies for Coca-Cola in more than 20 European markets

11

And in 2012 we conducted a EU-wide impact study

12

… and supports 600,000 employees in its value chain.

Made in EU

Coca-Cola produces 659 products locally across Europe.

The System employs 48,000 people directly…

It supports €30 billion in value added…

… of which €14 billion in taxes to EU governments.

Use of results varies from policy dialogue to monitoring local footprint over time

13

Competitive supply chain

Monitoring the footprint

Policy discussions

Localness campaigns

Contents

Introduction1




14

The Coca-Cola System’s impact in the Czech Republic

15

Value added impact

Coca-Cola System supports

CZK 6.9 billionvalue added

or 0.2% GDP

For 1 job at the System there

are 8 other jobs in CZR

That means the System supports

8,000 jobs

Employment impact

Profits

Taxes

Salaries

:

has

1 production plantand

12 administration & distribution centers

in the Czech Republic

The total impact on value added supported by Coca-Cola is at least 0.2% of Czech GDP

16

Breakdown of value added by recipient (in million czk)

519

882

634

2,034

Total

3,071

293

2,144

6,941

764

4,143

1,236

Govermnent (taxes)

Companies (profits & savings)

2,117

Households (salaries)

1,753

471

763

0th round: Coca-Cola system

1st round: Direct suppliers and trade

2nd round: Suppliers’ suppliers 0.2% of GDP

Source: total GDP from Eurostat (2013) 3,884 billion czk

0.4% of taxes

The value added supported by Coca-Cola CZ is spread over many sectors

17

Breakdown of value added by economic sector (in million czk)

2,034

748

495

Transport, communi-

cations

317

Coca-ColaSystem

CZR

764

Public services

65

Business services

1,002

Utilities, construction

262

Manu-facturing

Total

6,941

764

4,143

593

Agriculture

78

1,088

1,218

VAT

1,221

On-trade

693

Off-trade

1,452



2nd round: Suppliers’ suppliers

CZK 1supports additional

CZK 8

The Coca-Cola System in CZ supports 8,000 jobs in its supply chain, mostly in trade

18

1 jobsupportsadditional

8 jobs

2.0

0.5

0.5

0.4

Coca-Cola CZ

0.9

Public services

0.1

Business services

0.7


Off-trade

2.1

1.8

Total

8.0

0.9

5.0

On-trade

2.5

2.4

0.1

Agri-culture

0.5

0.9

Manu-facturing

0.2

Transport, communication

0.2% of labour force

Breakdown of employment by economic sector (in FTE 000)

In addition, the Coca-Cola System CZR supports about 2,000 jobs due to re-spending of salaries




Source: labour force from Eurostat (2013) 5,200,000 people

Coca-Cola’s economic impact is spread throughout the Czech Republic

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Karlovy Vary

Plzeň

Ústi

Liberec

Praha

Central Bohemia

Hradec Králové

South Bohemia

Vysočina

Pardubice

Zlín

South Moravia

Olomouc

Moravia-Silesia

CCH supplier

CZK 275,000

CZK 810,000

Income level

GDP per inhabitant

Source: GDP per inhabitant per region from Eurostat (2011); local suppliers list from CCH

Substituting local production in CZ by imports would lead to a loss of at least 0.03% of GDP…

20

-644

Total

-1,183

-371

-168

Govermnent (taxes)

-338

-122

-216

Companies (profits & savings)

-445

-150

-295

Households (salaries)

-401

-99

-133

-168




-0.03% of GDP

Import scenario: change in value added (in million czk)

…and 0.02% of the workforce

21

Manu-facturing

-0.59

-0.15

-0.44

Agriculture

-0.05

Total

-1.20

Coca-Cola CZ

-0.36

Public services

-0.01

Business services

-0.06


-0.08

Transport, communi-

cations

-0.02

Off-trade

-0.00

On-trade

-0.36

-0.49

-0.35

-0.03




-0.02% of total labor force

Import scenario: change in employment (in FTE 000)

Take-aways

The Coca-Cola System is of major importance to the Czech economy, supporting

• employment = 0.2% of the labour force or 8,000 jobs

• profits, taxes, and incomes = 0.2% GDP or CZK 6,941 million

• government revenues =0.4% of total tax revenues or CZK 3,071 million

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The Coca-Cola story speaks to the importance of competitive manufacturing to support economic growth and employment

Steward Redqueen B.V.Kinderhuissingel 4A/B

2013 AS Haarlem, The NetherlandsTel: +31 (0)23 553 0400

www.stewardredqueen.com - [email protected]

The model uses Coca-Cola financials and official Czech data to calculate value added and employment results

24

Coca-Cola Hellenic audited financials

Czechmacro-economic

statistics

Economic input-output model based on the Czech national accounts

Value added(taxes, salaries, profits)

in value chain

Employment in value chain

IMPACTSINPUT MODEL

The Coca-Cola Company audited expenses

Appendix: Social Accounting Matrix

25

Households

Taxes… … …

…

…

…

Manufa

ctu

ring

Manufacturing

Co

ca-C

ola

syste

m

Coca-Cola system

Non market

Incomes

ConsumptionTransfers

Agric

ultu

re

Reta

il

Household

consum

Export

Investm

ents

Agriculture

Retail

Taxes

Imports

Dividends / savings

From

To

Rows indicate how each sector / stakeholderreceives money

Columns indicate how each sector / stakeholderspends money

Consumption induces production leading to

Transfers of money between sectors leading to

Incomes for households and governments

The VAT paid on Coca-Cola beverages is the largest tax item in the value chain

26

Breakdown of taxes in the Coca-Cola value chain (in million czk)

634

1,221

246

365

312

29363971176

634

3,071

TotalTotal taxes

paid by Coca-Cola

System CZR

Taxes paid by

suppliers

293

2,144

Taxes paid by

suppliers’ suppliers

VAT on Coca-Cola beverages

Taxes paid by on-trade

Taxes paid by off-trade

Other taxes

Environ-mental

fee

Corporate tax

Payroll tax




0.4%of total Czech tax receipts

Source: total tax receipts from Eurostat (2012) 750,000 million czk. 2013 data not yet available

Documents

Socio-Economic Impact of Coca-Cola in Europe The Case of