The price of Coca Cola rises because of inflation and taxes
However, sales figures show no signs of slowing down
Mexico is one of the largest consumers of Coca Cola in the world
The price of our favorite products is going up and of course this is in response to the inflation that is happening worldwide, affecting both consumers and producers, but there are some products that we continue to buy despite the price increase, such as soft drinks drinks and the most popular in Mexico is the Coca Cola brand.
The favorite season to consume soft drinks is the traditional national month of September, with all the typical food that is served such as pozole, pambazos, tostadas, enchiladas, tacos and chiles en nogada, which are always accompanied by a classic Coca-Cola. Although it is not the only season, this drink is a classic in almost every restaurant.
In fact, Mexico is one of the largest consumers of Coca Cola in the world. According to the organization El Poder del Consumidor, Coca-Cola products account for more than 70% of the national consumption of bottled sugary drinkswith an average of 160 liters per person per year, according to data for 2021.
According to the National Council of Science and Technology of Mexico (Conacyt), Chiapas is the region of Mexico, America and the world that consumes the most Coca-Cola. With an average annual consumption per inhabitant of 821.25 liters at an average of 160 liters per person for the country. This means that each person there drinks 661.25 liters more than other Mexicans. The figure is also five times higher than the rest of Mexico and 32 times the world average.
Coca Coca Cola price rises in Mexico
Soft drink company Coca-Cola Femsa and its subsidiaries have announced the price hike of their products in various presentations as part of the effect global inflation has had on the company’s production.
A 1.25-liter returnable Coke will go up from 20 to 21 pesos, a 3-liter returnable will go up from 33 to 34, and the one without canned sugar from 16 to 17 pesos. For their part, the 355-milliliter, 1.35-, 2- and 3-liter flavored soft drinks will also go up by 1 peso, as will Ciel’s 2-liter and 10-liter bottled water, as well as Frutsi.
“Moving into the second half of the year, we will continue to leverage our revenue optimization opportunities by working proactively to ensure affordability to our consumers, making sure we’re offering them the right product at the right price,” said the CEO of Coca-Cola Femsa John Santa Maria.
The price increases will be in Chiapas, Mexico City, Mexico State, Guanajuato, Guerrero, Michoacan, Morelos, Oaxaca, Puebla, Queretaro, Tabasco, Tamaulipas, Tlaxcala and Veracruz.
According to the National Alliance of Small Traders (Anpec), there is already an increase in the price of the soft drink in some states, while due to the heat wave there is also a shortage due to increased demand.
Could a one peso increase in the price of Coca Cola affect the consumption of this product in Mexico?
In addition, a new tax on these soft drinks
On December 23, 2021, the Ministry of Finance and Public Credit published an agreement to update the Special Production and Services Tax (IEPS), which is levied on products that are harmful to health and the environment, such as gasoline, soft drinks and tobacco. The IEPS amounts charged on flavored beverages such as juices, soft drinks and cigarettes have been adjusted annually since 2020, according to the current IEPS Act. Therefore, by 2022, a 1 peso per liter hike begins on flavored beverages.
According to the National Institute of Public Health (INSP), the price elasticity of demand for soft drinks, based on an analysis of two nationally representative databases, shows that if the price of soft drinks increases by 10%, consumption can be reduced between 10 and 13 %. The reduction in consumption would be significantly greater if the tax were 20%: a reduction of between 20 and 26% would be achieved.
“If we assume that in Mexico the average consumption of soft drinks is 163 liters per person, given the elasticity estimates shown in the previous paragraph, this consumption can be reduced to a range of 141 to 146 liters per capita with a 10% tax and between 121 and 130 liters per person with a 20% tax”, explained the INSP.
Explaining, price elasticity of demand, in simple words, means that an increase or decrease in the price of a product has a very small change in the consumption of that good, but not only a price situation, but there are substitute products that are those that we could to buy when we can no longer or want to acquire the main product for reasons of price and even quality.
In the case of Coca Cola, the main competitor is Pepsi, but there is also Red Cola, as well as other ranges of Cola products, sweetened and flavored, and even the same brand variants, such as Zero, light and Sugar Free, that Mexicans are willing to buy in the absence of Coca Cola.
Coca Cola sales continue to grow
Did increasing IEPS on sugary drinks reduce their consumption? According to Coca Cola Femsa’s results report for the second quarter of 2022 accumulated through June, the volume of monetary units sold was 1,834.1 million, an increase of 11% compared to the end of June 2021.
It should be clarified that a single can refers to 192 ounces of finished product (24 8-ounce servings).
Finally, on average, Mexicans spend 3,200 pesos on soft drinks per year, about 61.5 pesos per week, compared to the 3,293 pesos per year Mexicans spend on beer, according to 2019 data from Statista and Kantar Worldpanel Mexico.
It seems Mexicans aren’t going to take away the taste of Coca Cola, either through direct price increases or more taxes. However, Mexico is not only the main consumer of Coca Cola in the world, but also the main country with the highest number of obese children.
The entrenchment of soft drinks in the diet of Mexicans throughout their lives is from the cradle to the grave, as difficulties continue in society, even the refusal to give up these drinks, even among people with diabetes.
Both for the pocket and for the health, abandoning sugary drinks would benefit Mexicans.