Coca-Cola stresses autonomy in Brazil despite tariffs

According to a study by consulting firm Steward Redqueen, the company contributed R$87.5 billion to the Brazilian economy in 2023, equivalent to 0.7% of the country’s GDP. The study underpins the launch of the new Coca-Cola System campaign in Brazil, titled “Feita com todo o Brasil” (“Made with all of Brazil”).

The campaign is no gamble. The tariff issue has escalated, particularly with measures taken by U.S. President Donald Trump. Analysts’ main concern in this context has been to gauge the impact of the dispute on business.

Global executives of groups such as Coca-Cola, Heineken, and Ambev have long highlighted the strong local presence of beverage giants as an advantage in times of volatility.

“The global context is relevant [for the new campaign],” Ms. Batista told Valor. According to her, localizing production is inherent to the business, given the high cost of transportation. This extensive operational presence, she said, is the main competitive edge of the industry compared with others.

“It is key to reinforce the autonomy we have in the Brazilian market, in continuing with our operations, our portfolio, and growth trajectory,” she said, stressing that most of the company’s inputs are sourced locally.

Some inputs, such as aluminum, have seen sharp volatility in recent months. The industry, Ms. Batista said, has already provided answers to such challenges. “We have a supply-chain resilience concept, with alternatives in times of shortage. After the pandemic, there was an aluminum shortage, so we shifted to returnable PET or glass,” she explained.

The turbulence goes beyond tariffs. Coca-Cola made headlines recently after Mr. Trump said he had persuaded the company to replace corn syrup with U.S. cane sugar in the production of its soft drinks in that country. The multinational said it plans to launch, in the second half of this year, a version that meets Mr. Trump’s request.

Sugarcane is already used in the formula in several countries, including Brazil, where it has been part of the original recipe since its launch in 1886. However, in the 1970s, soaring sugar prices led the American industry to adopt corn syrup as a cheaper alternative, supported by U.S. agricultural policy.

The Coca-Cola System in Brazil—comprising seven bottling groups (Andina, Bandeirantes, Brasal, Femsa, Solar Coca-Cola, Sorocaba, and Uberlândia) plus Leão—operates 33 factories nationwide.

Beyond its GDP impact, the study shows the company is responsible for generating more than 574,000 jobs throughout its production chain.

This is not the first time Coca-Cola has commissioned such a study in Brazil, but a change in methodology prevents comparison with previous editions. The advantage of the new approach, Ms. Batista said, is that it now allows comparisons across countries in the region. “This work made us realize that we are also a major exporter of fruit in the region for other Coca-Cola businesses,” she said. In Argentina, for example, the Coca-Cola System also accounts for 0.7% of GDP, while in Chile the figure reaches 1.2%.

The executive also pointed out that Brazil is seen as a central market for the multinational—currently, the country is Coca-Cola’s fourth-largest market by sales volume.

“We are in a long cycle. The company has been in Brazil for 83 years. This is not just a story of the past. It is a story of the future. We have a lot of room to grow,” she said.

Altogether, the Coca-Cola System plans to invest R$7 billion in Brazil this year. Among recent moves are R$380 million, alongside Femsa, to build its own Crystal mineral water factory in Rio Grande do Sul.

Also this year, the group concluded an R$886 million investment in Porto Alegre to rebuild and modernize Femsa’s plant, which had been damaged by floods in May 2024.

Ms. Batista was asked about the ongoing tax reform debate. Soft drinks have been included in the excise, known as the “sin tax,” applied to products considered harmful to health or the environment. “We do believe in the reform as something positive. But we also believe it is important to ensure equal treatment,” she said.

Asked by Valor, Alexandre Horta, president of the Brazilian Association of Soft Drink and Non-Alcoholic Beverage Industries (ABIR), said the country’s non-alcoholic beverage sector continues to stress the “inconsistency” of applying excise to sugary drinks. “Rather than demonizing a product, we continue to believe in dialogue to ensure legal certainty and predictability for companies,” he said.

*By Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/