The age-old battle in sales between two soft drink giants is resurfacing in a bit of an unexpected place. The Trump tariff plan is affecting both PepsiCo and Coca-Cola Co., but seemingly one more than the other.
How would the companies be impacted by tariffs?
The Wall Street Journal reports that the specific taste of Coke or Pepsi all comes down to the concentrate, in other words, the secret ingredients that each uses to make its signature soda. That concentrate is then sent to bottling plants, which add the water, the fizz and the sweetener to make the finished product.
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In Pepsi’s case, low corporate taxes led it to manufacture the concentrate in Ireland more than 50 years ago, and the company recently invested nearly $190 million in manufacturing facilities there.
But the Journal reports that the concentrate, including for both Pepsi and Mountain Dew, is now subject to a 10% tariff when it comes into the United States.
Coca-Cola, meanwhile, makes most of its concentrate in Atlanta and Puerto Rico. As a result, its Coke products, including Sprite, will avoid the tariffs.
Analysts, such as HSBC’s Carlos Laboy say Pepsi is clearly at a disadvantage that it could not have seen coming.
Then there are aluminum cans. Coca-Cola imports some aluminum from Canada, which is facing a 25% tariff. The company has warned that cans of pop could rise in price and that packaging might shift more toward plastic bottles.
Are any other soda products worth keeping an eye on?
Pepsi recently dropped to America’s number three soda, unseated in the two slot by Dr Pepper, which is owned by Keurig Dr Pepper Inc.
For now, PepsiCo has refused to comment on what steps it might take to deal with the tariffs and the effect it will have on consumers. However, independent bottlers think tariffs on concentrate could increase their costs and make them part of the trade war.
