CORRECTED COPY - COKE PREPARING RETURN TO LAOS

UNCLAS VIENTIANE 000113

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS USTR FOR BISBEE
COMMERCE FOR HPPHO

E.O. 12958: N/A
TAGS: ECON EINV ETRD PREL LA
SUBJECT: CORRECTED COPY - COKE PREPARING RETURN TO LAOS


1. (SBU) On March 3 econoff met with Bjorn Jensen, Director
of Strategic Planning for Coca Cola in Southeast and West
Asia and Ernest Bower, founder and previous head of the
U.S.-ASEAN Business Council, who is currently a partner in a
Washington-based consulting firm. According to Mr. Jensen,
Coke learned on March 3 that the Ministry of Planning and
Investment (MPI) had approved an investment license for
Coca-Cola. Although many details remain to be decided, this
license will likely be given to a regional Coke bottling
company, which will then receive a license from Coca-Cola to
produce Coke products in Laos starting in February 2011.
Working Qh a local partner, Coke has already identified a
future site for the bottling plant, to be located near Tiger
Beer's new brewery north of Vientiane.

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Cheap Smuggled Coke a Threat
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2. (SBU) The license allows Coke to begin domestic
production and sales of Coke products in February 2011, after
the GOL-sanctioned ten year Pepsi monopoly ends. Prior to
February 2011, Mr. Jensen believes Coke will be allowed to
legally distribute Coke products, which are currently
available throughout the country on an unofficial basis.
Jensen said that one key issue will be the 30% duty which he
said nominally applies to imported soft drinks. The current informal
suppliers of Coke do not pay the duty and thus can undercut
"legal" Coke if the duty must be paid. Coke intends to
import cans and plastic bottles. Glass bottles, which make
up the majority of soda sold in the country, are not
profitable to import.

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Axis of Un-Cola
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3. (SBU) According to Mr. Bower, MPI had been unhappy to
hear that Laos was one of only five countries where Coke was
legally unavailable, and that the other four were Burma,
Syria, Iran, and Cuba. This is not the company Laos wishes
to be keeping. Prior to the 1975 communist takeover, Coke
was bottled in Laos by the same company which produced Beer
Lao. Over the past few years, Coke has worked quietly with
the Phonesack Group, led by a Mr. Van Hoang Dau, on securing
an investment license. We believe Mr. Dau is allied with the
family of former President Siphandone, who is understood to
favor a close relationship to Vietnam and an openness to
foreign investment. One of Mr. Siphandone's daughters is a
partner in Beer Lao and Pepsi, while another is a partner in
Tiger Beer, a Singaporean company that in 2008 ended Beer
Lao's domestic beer monopoly.


4. (SBU) COMMENT: We unofficially confirmed that Coke has
indeed received an initial investment license approval from
MPI.
HUSO