Lynne Kiesling
I recommend this recent Grant McCracken post about Coca-Cola in the U.S. and Mexico. Grant asks if the reason more Americans are buying Mexican Coke (and Coca-Cola is trying to stop it) is about taste. Perhaps. But several of his commenters hit on the crucial distinction between the two formulations: Mexican Coke still uses cane sugar (sucrose), while U.S. Coke has switched to high-fructose corn syrup (fructose, from corn or beets, plus glucose). They do have different flavors.
But they also may have different metabolic effects, with high fructose corn syrup as a culprit for more effect on blood sugar, and possible contribution to obesity:
So what’s the big deal? Some experts believe our bodies treat high fructose corn syrup more like a fat than a sugar. They think it may even trigger metabolic changes — tricking us to eat more and store more fat.
Peter Havel, a nutrition researcher at the University of California, Davis, who has studied the metabolic effects of fructose, has found that several hormones involved in the regulation of body weight do not respond to fructose as they do to other types of sugars, such as glucose.
“Fructose doesn’t appear to signal the hormonal systems involved in the long-term regulation of food intake and energy metabolism,” he said.
Havel’s research shows that fructose does not stimulate insulin and leptin — two hormones that help turn down the appetite and control body weight. At the same time, fructose does not suppress our body’s production of ghrelin, a hormone that increases hunger and appetite.
Other studies have shown that fructose kicks more fat into the bloodstream in the form of triglycerides, which may increase the risk of heart disease.
The debate picked up steam recently with the release of a new study in the July issue of Obesity Research that suggests fructose alters our metabolic rate in a way that favors fat storage.
This research did not use the fructose+glucose blend that is high fructose corn syrup, but it is still consistent with the hypothesis that high-fructose corn syrup and cane sugar have different metabolic effects in the body.
But none of this science sheds any light on why the Coca-Cola Company would seek to limit the import of Mexican Coke into the U.S. I can’t think of a good, logical reason without sinking into conspiracy theories, such as they have such a lucrative long-term contract with Archer-Daniels-Midland for HFCS that they will fight to keep up domestic demand in the U.S. But that’s not rational …
My guess is that Coca-Cola is trying to limit importation of Mexican Coke to protect its bottlers. I believe that the Coca-Cola Company owns at least one major bottling company, and its relationships with the others probably has territorial exclusivity requirements which are violated by sale of Mexican Coke in the US.
At least in border cases, it’s possible that Mexican Coke is cheaper, using world-market prices for cane sugar instead of protected prices for HFCS. The price difference may have an effect on the profitability of selling Coca-Cola syrup to American bottling companies in border areas.
One thought might be who actually owns Mexican Coke. Is it a bottler (ie a franchise)? Is US Coke a franchise? Or directly owned?
I don?t know enough about the company but I can imagine that they are both franchises. So that while Coke the main corporation might be indifferent (although it may not be, collecting different franchise fees from each) it might also be contractually bound to protect one franchisee?s market from others.
This is pretty much a guess but I?d suggest that the reasons lie somewhere in there.
My guess, too, would be that they are trying to protect a bottler/distributor’s territory.
“Mexican Coke is produced by 13 company-authorized bottlers, but Coke condemns its importation as the work of bootleggers. That’s because the company has a network of individual bottlers throughout the world with their own exclusive territories. U.S. Customs and Border Protection agency officials don’t seize or turn back the Mexican shipments because they aren’t counterfeit.”
From the front page story in the WSJ on the subject last week. See full text here
http://www.azcentral.com/business/articles/0111wsj-mexican-cola11-ON.html
Also, food blog Accidental Hedonist had a few postings and comments about the story last week. HFCS is cheaper than the cane sugar used in Mexico–and ideed tastes worse.
Global food brands generally oppose the practice of what is called parallel importation – the importation of licensed production from one country into another where separate licensing arrangements hold. Parallel importation is essentially an arbitrage opportunity based on production costs, and is different from piracy or counterfeiting (although the IP lobby do try to conflate them). Companies with IP or brands disdain the practice because it undermines profit margins in lower volume markets where they have production facilities.
As the report points out, in this case Mexican Coke and American Coke aren’t necessarily the same thing so the imports are driven by product differentiation. And yes, it tastes better, as does Coke in 95% of the rest of the world that uses cane sugar in processing. Yet another reason to despise the Soviet supply management of the US sugar program.
Global food brands generally oppose the practice of what is called parallel importation – the importation of licensed production from one country into another where separate licensing arrangements hold. Parallel importation is essentially an arbitrage opportunity based on production costs, and is different from piracy or counterfeiting (although the IP lobby do try to conflate them). Companies with IP or brands disdain the practice because it undermines profit margins in lower volume markets where they have production facilities.
As the report points out, in this case Mexican Coke and American Coke aren’t necessarily the same thing so the imports are driven by product differentiation. And yes, it tastes better, as does Coke in 95% of the rest of the world that uses cane sugar in processing. Yet another reason to despise the Soviet supply management of the US sugar program.
Hmmm..if it actually tasted better, wouldn’t sales go up if Coke used cane sugar rather than corn sugar? Even if corn sugar was cheaper via a contract with ADM or something, do we really think that Coke would forgo sales on a product with cola’s profit margin to save 1/10 of a penny per 12oz?
JBP
The problem is that the difference isn’t 1/10 of a penny per 12 oz. The NY No. 14 price of sugar (the US domestic price) is held over 22c/lb by the Farm Bill, and the NY No. 11 price (the world trading price) is consistently less than half that. If the difference was 10c/lb as it has been most of the last fifteen years it would make it much cheaper for Coke to divert into HFCS, which trades at around 14 c/lb. Right now world sugar prices are at an 11 year high, in part because Brazilian production is going into ethanol as a petroleum substitute.
Sturt,
Are you sure?
Lets say there are 32 grams cane sugar in 8oz of Cola (which was an old claim). 1 Pound is 453 Grams. So, there are … 48 Grams per 12oz. Or, approximately 1/10 of a pound per 12oz cola or, 2.2 Cents worth of sugar per can of Coke.
If Coke used HFCS, then you get 1.4 Cents worth of HCFS per can of Coke. OK, I was wrong, there is 8/10 of a cent gain per can for using HFCS.
So, I will guess Coke wholesales at about 30 cents a can. If one more coke is sold, Coke makes up the sugar pricing differential of 37.5 Cokes.
So…I guess the question is, would using cane sugar really get you that extra sale? If it does, then your profits go up 3750 % (vs. losing that sale due to HFCS). I would take that investment if I were Coke. Then again, it might all taste the same. Either way, I would guess that Coke has does some market reasearch there, beyond conspiracy theories involving ADM, helping them to make the profit seeking decision.
JBP
FYI I live in an area where we can get Mexican Coke. We did side by side taste tests and it tastes much better; not as sweet, more “cokey.” My 3 kids are not allowed to have soda very often because of the HFCS, but I let them have Mexican coke more often…and it’s no cheaper, except when we drive down and pick up a couple of cases.
Quick Sandy-call the Coca Cola Company..the largest single product marketing company in the world could be making a ton of money based on your research. Don’t let them off cheap.
JBP
I also live in an area where Mexican coke is in all the stores (you have to look in “ethnic foods”). Since coke locally just changed their formula again to be more like “New Coke”, it is pretty much the only thing my family drinks. The taste and the sugar instead of HFCS makes that a given. Now if only the local stores would also carry Old Doc’s Dr. Pepper from Texas which is also made from Sugar…
I also live in an area where Mexican coke is in all the stores (you have to look in “ethnic foods”). Since coke locally just changed their formula again to be more like “New Coke”, it is pretty much the only thing my family drinks. The taste and the sugar instead of HFCS makes that a given. Now if only the local stores would also carry Old Doc’s Dr. Pepper from Texas which is also made from Sugar…