U.S. giants riding out overseas storms - multinationals mostly immune to economic crises, so far
WASHINGTON (CBS.MW, 9/4/98) -- While many U.S.-based multinational companies have seen their business in Asia and Latin America catch a chill from the economic viruses in those regions, few seem concerned about the potential for full-blown pneumonia...international companies have lots of experience with overseas turmoil and know how to adjust. Take Coca-Cola (KO), the world's largest maker of soft drinks. Even though sales fizzled in Japan, Indonesia and Thailand in the second quarter, the company's saw overall volume jump a healthy 10 percent. And the Japanese slump can be traced to the first price increase in that country in years, said Bill Hensel, a company spokesman.
Hensel said the economic troubles in Asia, which accounts for 23 percent of Coca-Cola's sales, and Latin America, which accounts for 11 percent, have their benefits, too. Since Coke tries to buy most raw materials in the countries in which it operates, it pays less for sweeteners, packaging, advertising and the like when local currencies decline against the dollar.
Coke has also taken advantage of the decline in currencies to step up investment in many of the more than 200 countries in which it hasoperations.
"We've had a lot of experience," Hensel said. "We've got a pretty good handle on how to do this."
Indeed, after the peso crisis in 1994-95, which led to a sharp devaluation, Coke took a series of steps aimed at reducing the cost of its drinks with the goal of retaining the loyalty of Mexican consumers whose incomes had fallen. Since then, the company has boosted its share of the Mexican market to 68 percent from 57 percent.
Interesting article about Indonesia in today's New York Times.
"Rice currently sells at the market for 17 cents a pound, more than double the Government's target price. For a family of five to buy 22 pounds of rice per capita each month, it would cost $18.70. About 40 percent of Indonesia's families earn less than that, meaning that nearly half the population cannot afford even a minimum supply of rice. "
"People are in survival mode. They're not interested in buying designer jeans. They're interested in buying the next kilo of rice."
I don't reckon they are interested in buying too many Coca Cola's either.