Why The Coca-Cola Company (NYSE:KO) & PepsiCo, Inc. (NYSE:PEP) Joined Hands?
The grand old aerated drinks giants The Coca-Cola Company (NYSE:KO) ($172 billion market cap) and PepsiCo, Inc.(NYSE:PEP) $128 billion market cap) have for long been seen as fierce competitors who have faced off against each other in pitched battles for market share in countries across the globe. In an ironic twist to this decades old competitiveness, a new tax to be imposed by the Mexican government on food and beverages has managed to bring the two beverage behemoths on to the same side of the isle in protesting against the impending tax measure.
The new tax which has gained notoriety as “Soda Tax” has passed muster with the lower house of Mexico’s legislature. This will allow the government to levy additional tax on “soda and other sugary drinks”. The legislators had drummed up support for this bill by positioning it as a Government effort to fight “obesity and diabetes”. The tax also covers snacks and fast food items in addition to beverages. The bill is expected to come up for debate and vote during next week.
In the run up to the vote, the beverage giants Pepsi and Coco-cola had led the lobbying efforts by creating a common forum where sugar product producers, small store owners and beverage industry had jointly opposed the move. Health experts have welcomed the resolve shown by President Enrique Peña Nieto in bringing in these measures in order to rein in the consumption of obesity and diabetes inducing “chips, candy and carbonated drinks”.
At close of business on October 18, the shares of The Coca-Cola Company (NYSE:KO) was trading at $38.78 per share and PepsiCo, Inc. (NYSE:PEP) shares were trading at $83 per share. Coco Cola shares had posted a 2.67% increase during trading last week where as Pepsi shares had also appreciated by a similar 2.7% in the same period.