The Tribune

Coca-Cola’s Bahamian manufacturer yesterday pledged there will be “no knee jerk reaction” on consumer prices to “considerable” energy cost hikes “in the ball park” of around 20 percent.

Walter Wells, Caribbean Bottling Company’s president and chief executive, told Tribune Business the company does not over-react to any major input cost rises and instead “tries to let the dust settle” and determine whether the impact is short or long-term before making any price adjustments.

Revealing that Caribbean Bottling “doesn’t look too hard at pricing on a regular basis”, with stores and end-consumers seeing the last increases near 2022 year-end due to post-COVID inflation, he explained that it will wait out the latest electricity bill hikes and assess whether Bahamas Power & Light’s (BPL) new base rate structure will spark consistent long-term increases.

Confirming that the drinks producer’s light bill has seen a similar increase to that detailed by Super Value’s owner, Rupert Roberts, following the implementation of BPL’s so-called Equity Rate Adjustment (ERA) tariff structure from July 1, Mr Wells told this newspaper: “Our bill jumped up considerably.

“I saw the figure you reported on today of 20 percent, and it is in much the same ball park as ours. Of course, we have to take that in the context it covers one of the hottest months of the year. I haven’t gone back and checked the numbers and compared it versus the numbers last year.”

The Government and BPL recently said increased consumption, due to the summer months and increased air conditioning and other appliance use, may offset the reduced base rates that are targeted at all customer classes other than the largest users known as ‘general services customers’. Manufacturers such as Caribbean Bottling, which consume significant energy, fall into this category.

Mr Wells yesterday said he has not analysed how much of the energy bill increase is due to the increased base tariffs for general service customers as opposed to greater consumption. “I know it went up. How much of it is the price increase, and how much is increased consumption because it is July, I would be remiss in saying,” he added.

“I don’t think all the increase we saw was consumption. I imagine that applies to most companies. It’s obviously hotter, your air conditioning units are working harder, and you have longer days with sunshine. All these things factor into the equation so we cannot say that it’s all related to the BPL rate increase yet. If it’s not related to BPL consumption, I’ll certainly find out sooner rather than later.”

Asked about the financial consequences for Caribbean Bottling of a 20 percent light bill increase, Mr Wells used the hypothetical example of a company previously charged $100,000 per month for energy usage. A 20 percent jump, he pointed out, translated to a $20,000 monthly increase and an annual rise of $240,000 or close to a quarter-of-a-million dollars cost increase.

However, Mr Wells echoed Super Value’s Mr Roberts and other food stores by affirming that Caribbean Bottling will seek to first absorb such expense rises within its operations, and that passing it on to Bahamians via increased consumer prices is a last resort option that is some way off.

“You could say ‘let me try and pass it on to the consumer’, but we don’t change the pricing every time the price of inputs changes because we’d be changing the prices every week,” Mr Wells told Tribune Business. “We try to let the dust settle on increases of this nature to give us time to see if these are short-term increases, or will improve over time over the course of the year.

“You don’t want to have knee jerk increases around increases of this nature. The last time we looked at pricing would have been towards the end of 2022 when we were in the throes of the biggest inflationary period we had seen for many years post-COVID.

“We tweaked prices moderately and haven’t looked at them since then. We don’t look too hard at pricing on a regular basis. We only do it when we have no choice in the matter.” Mr Wells added that any increase in the cost of one input, or factor of production, is often offset by reductions in others.

Pointing out that virtually all Caribbean Bottling’s raw materials are imported, with freight representing a significant cost, he added: “We only change prices if total input costs increase. At the end of the day, they are usually pretty much the same. You cannot knee jerk react to one component because you will be jumping all over the place.

“Once a customer gets the wrong impression around any particular product that is over-priced, even if you lower the price because, say, inflation has gone down, you have to recapture that consumer to buy your product and you will have difficulty in bringing them back if they have the wrong impression.”

The Davis administration, in unveiling BPL’s new tariff structure, only increased base rates for the utility’s several hundred ‘general service’ customers who it said represent less than 1 percent of the total 113,000 customer base.

This category, which includes the likes of hotels as well as food stores, now have to contend with a base rate that has increased by 14.9 percent for the first 900,000 kilowatt hours (KWh) of energy consumed - from 8.7 cents per KWh to 10 cents. And, for consumption above 900,000 KWH, these businesses have seen the tariff rise by 45 percent from 6.2 cents per KWh to 9 cents.

The Equity Rate Adjustment structure, as published on the Prime Minister’s Office’s website, shows that all other BPL base rates - those for residential, commercial and temporary supply customers - have all been cut or remained the same.

Residential customers now receive the first 200 KWh per month free, which translates into a saving of about $21-$22 per months or around $250-$260 per year, with the Government hailing this as a reward for low energy users and a means to aid the most vulnerable low income families.

It has also adjusted BPL’s fuel charge. All customers are now enjoying a 2.5 cent discount on the first 800 KWh of energy consumed, but then having to pay an additional 1.5 cents levy on top of the calculated fuel charge above this threshold, with the Davis administration touting this as a further incentive for Bahamians to reduce energy consumption.

The Government previously said all BPL customer categories, apart from the likes of Super Value and other ‘general service’ users, should enjoy a reduction in their energy bills as a result although it was quick to add that this may not be seen immediately - and costs could go higher initially - due to the extra summer consumption more than offsetting the reduced rates.

Mr Roberts on Wednesday pledged that Super Value will take a 20 percent hike in its energy costs “on the chin” and not pass the increase on to consumers, and will instead “roll with the punches”.

He described the Equity Rate Adjustment (ERA) tariffs as a ploy whereby “big business will subsidise the voters”, and agreed it could result in other businesses passing these higher costs on to shoppers with small and medium-sized grocers now likely to be in a position where total expenses exceeding gross profits.

Mr Wells yesterday said he is “very anxiously looking forward” to the reduction in energy costs, and shift to more reliable, cleaner power, that has been promised by the Davis administration with its energy reforms given that The Bahamas is likely one of the higher-cost jurisdictions in the Caribbean.

“If there’s any way we can improve on that I believe it’s a significant benefit to every consumer, hospitality and tourism business. Everything benefits from it. I have every confidence it will come down in due course,” the Caribbean Bottling chief said.

Christian Knowles, Aquapure’s operations chief, yesterday said that while he had not studied the bottled water manufacturer’s energy bill recently his “personal one is higher by quite a bit”. He added: “We do use quite a bit of power. It is a thing. I know I was paying attention to the announcement from the Prime Minister when he said to check your bills in July. That was the famous guarantee.”