Sugar tax may affect Coca Cola investments in Philippines

MANILA, Philippines - The passage of the proposed higher taxes on sugar sweetened beverages (SSB) in its current form may put in peril investments lined up in the country by global beverage giant Coca Cola.

Coca Cola FEMSA last year committed to invest $1 billion over the next five years to grow its business in the Philippines.

The company, however, may likely revisit these investment plans should the proposed higher SSB tax rate be imposed in the country, Coca Cola FEMSA director for legal and corporate affairs Juan Lorenzo Tañada said yesterday.

“As Coca Cola FEMSA, we have already made commitments to invest up to an additional $1 billion over what we have invested previously until 2022. On average until 2022, we project to spend about $180 million a year so it’s quite substantial. It was around October or November 2016 we signed of an agreement with the Department of Trade and Industry (DTI) on this,” Tañada said.

Tañada said the investment would go to several components such as expansion of lines, training and hiring of employees, building of new facilities, and purchasing of equipment, among others.

“We really like for this to happen and we really like for this to continue and that is why we have been in constant touch with the DTI about our concerns regarding possible revenue measures that may be imposed,” he said.

“Right now we’re very concerned about the bill and we’re watching it very closely. We’re a business so we have to evaluate all possible sources of risk. If there is a decrease in consumption then we’ll have to revisit business plans like any other business. What we do know for a certain is the tax that was originally proposed, the P10 per liter increase, we feel will not be viable for the country. It will have an impact on our business in its present form. If there will be that impact then we’ll have to revisit and we’ll see how (it goes),” Tañada added.

Coca-Cola had already invested $1.5 billion in the Philippines from 2010 to 2014.

The investment enhanced the company’s distribution network and created over 2,000 new jobs for Filipinos.

The investment has also led to the expansion of the Coca-Cola Canlubang plant, increase in production of its Misamis Oriental plant, the rehabilitation of its plant in Tacloban, and the purchase of a manufacturing plant in Davao del Sur from San Miguel Corp.

Coca-Cola has 19 plants in the Philippines and competes in seven different beverage categories locally.

“We continue to believe in the Philippines. That is why we are here and we are here for the long term. We continue to work with the government that at least as an investor in this country, as a foreign investor, our contributions to the economy will also be taken into consideration,” Tañada said.

“We believe in the Philippine growth numbers that have been established in the last few years and we think if we continue the right course, it will continue to remain a viable investment, the ones we have here in the Philippines,” he added.