No wonder Coca-Cola Co and PepsiCo are spending millions of US dollars to fight proposed taxes on sugary drinks in California.
PepsiCo on Thursday reported a higher quarterly profit as global sales rose, but one weak spot was Mexico.
The company said snacks sales volume declined 3 percent, hurt by a new tax on junk foods.
Recent declines suffered by PepsiCo and Coca-Cola in Mexico underscore why the beverage industry is fighting tax proposals on sugary drinks in in San Francisco and nearby Berkeley.
PepsiCo, which makes Frito-Lay chips, Gatorade and Tropicana, reported similar declines in its snacks business for the first half of the year, starting when the tax went into effect.
Coca-Cola, which is scheduled to report its third quarter results on Oct. 21, has also reported beverage volume declines in Mexico for the first half of the year, citing a similar tax on drinks.
Mexico has the world’s highest per capita consumption of Coca-Cola drinks.
PepsiCo chief financial officer Hugh Johnston said in a phone interview that declines in Mexico were in line with what the company expected.
To mitigate the impact of the tax, Pepsi plans to target different package sizes for different outlets.
The taxes in Mexico add one peso (US$0.07) to the cost of a liter of sugary drinks, and 5 percent of the price to foods with 275 calories or more per 100 grams.
It is not yet clear whether the taxes’ impact on consumption will last or how significant it might be over time.
While PepsiCo monitors such tax initiatives around the world, Johnston said he does not expect them to become more common.
In the US, San Francisco and Berkeley are seeking to become the first cities to pass per-ounce taxes on sugary drinks in the upcoming November election.
The measures are being closely watched because many say defeats in the Bay Area, which is known for its liberal politics, would be a major blow to advocates of such taxes as a way to improve nutrition.
Similar measures in other US cities have failed.
Health advocates have pushed taxes as a tool to cut consumption of calorie-laden junk food, similar to tactics that have successfully been used against cigarettes.
Makers of such products say they are being unfairly singled out.
During a conference call with analysts and investors, PepsiCo chief executive officer Indra Nooyi addressed the measures in California and said she believed such “discriminatory taxes [are] wrong. We will make our case and hope the voters are sensible enough to look at the right answer,” Nooyi said.
Since the start of this year, the American Beverage Association contributed US$7.7 million to defeat the proposal in San Francisco alone, according to a filing made this week.
That is considerably more than the US$391,000 in contributions reported by supporters of the tax over the same time.
Meanwhile, the beverage industry has touted its commitment to reducing the calories people consume from drinks by more aggressively marketing drinks with less sugar.
The industry has also stressed the need to raise awareness about the importance of balancing the calories people consume with how much physical activity they get.
From the customer’s perspective, car rental is a straightforward business. The only uncertainty is whether the hire company will charge you for the scratch they discover when you hand back the vehicle. Hertz Global Holdings Inc’s bankruptcy protection filing on Friday last week was a reminder that today even the simplest business models are underpinned by a lot more financial complexity than meets the eye. The proximate cause of Hertz’s demise was of course the sudden collapse in bookings caused by COVID-19 travel restrictions. The company’s monthly revenue last month fell 73 percent year-on-year, a shortfall that even the most resilient
Uber Technologies Inc, Lyft Inc and Airbnb Inc have slashed thousands of jobs. Salesforce.com Inc and Visa Inc are letting employees work remotely for months; Twitter Inc and Square Inc are allowing them to do so for good. For the companies’ hometown of San Francisco, the moves are early signs of a dire blow. In a city with a long history of booms, busts and natural calamities, the COVID-19 pandemic has suddenly upended nearly a decade of prosperity. While municipalities across the US are grappling with economic fallout from the virus, San Francisco stands to take a deeper hit given its high
BULK PURCHASE: The French chain and Hong Kong-based Dairy Farm International reached a deal covering 224 stores, which is expected to be finalized by year’s end Carrefour SA yesterday announced it would acquire Wellcome Taiwan Co (惠康百貨) for 97 million euros (US$108.33 million), and bring all the Wellcome supermarkets (頂好超市) and Jasons Market Place stores nationwide under its banner within 12 months of the deal closing. The France-based hypermarket chain reached an agreement with Hong Kong-based Dairy Farm International Holdings (牛奶國際控股), the pan-Asian retailer that launched Wellcome Taiwan in 1987. The transaction involves 199 Wellcome supermarkets, which have average sales areas of 420m2 and 25 high-end Jasons Market Place stores, which have an average sales area of 820m2, as well as a warehouse in Taoyuan, Carrefour Taiwan (家樂福)
‘ONE-STOP SHOP’: A Miaoli official said that the factory in the Jhunan section of the Hsinchu Science Park would create more than 1,000 jobs and boost prosperity A new high-end IC packaging and testing plant planned by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in Miaoli County is expected to start operations in the middle of next year, Miaoli County Commissioner Hsu Yao-chang (徐耀昌) said. Hsu wrote on Facebook that TSMC, the world’s largest pure wafer foundry operator, would invest NT$303.2 billion (US$10.1 billion) to build the plant, the largest-ever single investment in Taiwan. However, TSMC declined to disclose the financial terms of the deal, while a company board meeting on May 12 approved a spending plan worth NT$168.2 billion as part of its investment plans. Construction of the