By Amy Guthrie
MEXICO CITY--Mexico's new tax on sugary drinks, which took
effect in January as part of a government effort to trim
waistlines, has reduced the sales volume in the country by more
than 5% for Latin America's largest soft-drink bottler, a company
official said Wednesday.
Coca-Cola Femsa SAB Chief Financial Officer Hector Treviño told
analysts during a conference call that the entire beverage industry
is experiencing reduced sales volumes of 5% to 7% this year for
sweet drinks after a tax was imposed on consumers of one Mexican
peso (eight U.S. cents) per liter.
As prices rise, though, Coca-Cola's branded and flavored sodas
are actually gaining market share for sparkling beverages, Mr.
Treviño said. That suggests price-sensitive consumers might be
forgoing other soda brands at a higher rate than Coke brands.
Coca-Cola is the runaway market leader for soda in Mexico, the
biggest per-capita consumer of Atlanta-based Coca-Cola Co.'s
products.
According to Bernstein Research, Mexico represents about 5% of
Coca-Cola's global annual sales.
Coca-Cola Femsa began raising prices on its sugary beverages in
late November, Mr. Treviño said, aiming for a 16% increase overall.
Competitors have also raised prices, he said. To shore up sales,
Coca-Cola Femsa has been pushing more beverages in returnable
bottles, which costs consumers less than disposable ones.
Sales of zero-calorie beverages such as bottled water and diet
soda have been rising around 5%, but that has done little to offset
the decline in the more popular sugary drinks.
The company is looking to lay off workers, and may even close
some facilities in Mexico in response to the lower sales volumes,
Mr. Treviño said. Coca-Cola Femsa sold 458 million unit cases of
beverages in Mexico during the fourth quarter.
Coca-Cola Femsa, which operates in 10 countries, reported
Wednesday a 29% fall in fourth-quarter net profit to 3.07 billion
pesos ($235 million) on the back of higher interest expenses on
debt and foreign-exchange losses.
Acquisitions in Brazil, Mexico and the Philippines raised the
company's total debt last year by $2.3 billion. Total revenue rose
8.5% to 43.24 billion pesos in the fourth quarter.
Coca-Cola Femsa's American depositary shares were recently down
3.8% on the New York Stock Exchange.
The bottler could see the ripple effects if more Latin American
governments are inspired to copy Mexico's soft-drink tax
The Mexican government views its country's weight problems as a
health emergency. Seven of 10 adults in Mexico and one-third of
children are overweight or obese. Mexico has now surpassed the U.S.
as fattest country in the Organization for Economic Cooperation and
Development, according to the OECD.
That excess weight has contributed to an alarming rise in
chronic illnesses such as Type 2 diabetes, which afflicts an
estimated 15% of Mexicans over the age of 20, the highest rate for
any country with more than 100 million inhabitants.
Write to Amy Guthrie at amy.guthrie@wsj.com
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