The Iberian division of Coca-Cola European has suspended a planned €40 million investment in its Setúbal plant unless the government scraps the proposed ‘sugar tax’ on soft drinks.
Andrés Curbelo, the head of Coca-Cola in Portugal is confident the tax that is included in the draft 2017 State Budget will be amended and talks of the ‘social impact’ if it is not.
The so-called "fat tax" on sugary drinks is set to penalise products considered harmful to health, such as cans of Coca-Cola each of which contains 35g of sugar in a 330ml can – the equivalent of 7 teaspoons of sugar.
The Pedro Passos Coelho administration was going to impose the tax in 2014 but eventually scrapped the plan.
The new tax will add between 8 cents and 16 cents per litre, has so annoyed the company that is has threatened to suspend its plans to expand the Refrige factory in Azeitão, Setúbal where the current 265,000m2 plant was going to be expanded by another 28,000 m2 in a €40 million investment over four years.
This production unit employs 450 people and the company claims the site also supports a further 4,500 indirect jobs.
Andrés Curbelo said the company has a 30% share in the Portuguese market for soft drinks and that it would be the company most affected by the tax, as inevitably the price of Coca-Cola to the consumer would have to rise.
At current production levels, the Treasury would benefit by around €80 million a year but nobody is able to predict the elasticity of demand and whether the market will bear the price rise without affecting production levels.
Curbelo agreed that it is "premature" to guess what impact the sugar tax will have on sales of Coca-Cola, but noted that the price of soft drinks in Portugal is very high compared with consumer purchasing power and concluded that the Portuguese consumer is very price sensitive.
This sort of corporate bullying is par for the course and in Coca-Cola's case, it in increasingly hard to justify selling drinks with such a high sugar content into a amrket woth increasing childhood obesity and type 2 diabetes.
