Coke Bottler Warns Against Soda Tax

Coca-Cola Femsa says that the proposed tax on soft drinks by the Mexican government would hurt sales and reduce jobs.

October 28, 2013

MEXICO CITY – Coca-Cola Femsa, Latin America’s largest soft drink bottler, expects Mexico's proposed tax on sweet beverages to reduce its volume sales in the country and result job loss, reports the Wall Street Journal.
The Mexican Senate is currently debating the tax, which could vote on the measure in the coming days. The proposal calls for a 1-peso tax increase per liter (8 cents U.S.). Mexican President Enrique Peña Nieto proposed the tax on sweetened soft drinks in an effort to combat obesity, notes the newspaper.

Coca-Cola Femsa CFO Hector Trevino told analysts during a conference call last week that if the Mexican government approves the tax increase, the bottler would have to reconfigure prices in order to sustain earnings. The company says the proposed tax could curb its volume sales by about 5% next year.

Trevino said several production lines would go idle, as well as eliminate the need to purchase more delivery trucks or invest in more coolers for retailers. He added that Coca-Cola Femsa and the rest of the bottling industry would likely pass the price increase on to consumers, with Coke seeing the average price increase at 12% to 15% for non-diet sugary drinks, writes the newspaper.

"We need to look for the magic price points, "Trevino said, calling the proposal a "heavy tax."

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