Mexico May Make Coca

Coca Cola faces a new tax in Mexico. Photo by N. Parish Flannery @LatAmLENS

Coca-Cola is omnipresent in Mexico. The company's logo is seen on flashing billboards in big cities and hand painted signs in remote rural communities. A mainstay associated with taco-laden lunches, the beverage has also been targeted by health activists supported by billionaire former New York City mayor Mike Bloomberg . In response to a new tax, one bottler has considered changing its recipe.

In this piece for The Los Angeles Times, Ricardo Lopez explains 'Fans of Mexican Coke have been dismayed, saddened and angered at recent reports that their beloved soda's key ingredient - cane sugar - will be replaced with old-fashioned corn syrup.'

While Coca-Cola, a company that reported revenues of $48 billion in 2012 switched to using corn syrup for the U.S. version of its soda in the 1980s, the bubbly beverage bottled in Mexico by Arca Continental has until now stayed true to the original recipe. In the U.S. foodies averse to consuming corn syrup and a strong base of flavor-chasing cult followers have established a strong loyalty to the Mexican version of the world's top selling soda. This week Twitter and other social networks have been abuzz with complaints and concerns about the potential change.

Lopez explains 'The outcry began when news outlets such as Quartz reported that executives from Arca Continental , the Mexican bottler, suggested in an earnings call that it would move to use cheaper sweeteners after the Mexican government imposed a new tax on soda.'

Arca has since clarified that the change in the recipe will only affect the cola sold in Mexico.

According to a report from the Associated Press, 'Arca Continental, the Mexican bottler in question, stressed in a statement that it has no plans to change the sweetener for the 'Coca-Cola Nostalgia' bottles it exports to the U.S. The company's CEO said last week that the bottler could consider using more fructose, but that was only for drinks distributed in Mexico.' The bottles sold in the U.S. will still be made using only cane sugar.

So, Mexican coke fans in the U.S. won't have to start hording cases of the cane sugar infused version of the soda. South of the U.S. border, however, a change in the coke recipe could lead to a major uptick in intake of high fructose corn syrup.

On average, Mexicans drink more than 40 gallons of soda a year.

According to a recent article in The New York Times, 'Almost 70 percent of Mexicans are now overweight, and about a third are obese, according to the World Health Organization, about the same proportions as in the United States. Like much of the world, Mexicans exercise less and eat more fat and sweets than they used to.'

Mexico's government, concerned with expanding tax revenues and reducing waistlines, has passed a new tax of one peso on every liter of soda sold (about $0.08). As the debate intensified about the soda tax, Mexico's main bottling companies saw their share prices fall.

Arca, a company that reported $4 billion in sales last year, is concerned about the elasticity of demand for their sugary beverage and is considering shifting to lower cost ingredients rather than waiting to see if a small price increase will lead to drastic cuts in sales. If the demand curve is steep enough, producers should be able to pass the cost of the tax onto consumers.

It remains to be seen, however, whether a recipe change might also lead to reduced consumption. In any case, within Mexico Arca Continental faces tough competition from FEMSA Coca-Cola, a much larger rival bottler that reported revenues of $18 billion in 2012.

If consumers are averse to Arca's potential change in recipe they can always seek out FEMSA's version of the soda. For now, cola fans will have to wait and see whether or not Arca will go forward with the switch to corn syrup.

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