The Wall Street Journal (WSJ) reported on the 20th local time that PepsiCo, which manufactures most of its cola concentrate in Ireland, was subject to a 10% tariff, putting it at a disadvantage compared to Coca-Cola.
Cola is manufactured by mixing concentrates made in special facilities with water, carbonic acid, and sweeteners, because the concentrate production site varies from company to company.
PepsiCo, a manufacturer of PepsiCo and Mountain Dew, has been producing concentrates in Ireland for more than 50 years.
I chose Ireland because of the low corporate tax rate, but now I’m subject to a 10% tariff if I bring concentrates into the United States.
On the other hand, Coca-Cola’s concentrate production sites are diverse, and although they are also produced in Ireland, this volume goes into products exported worldwide.
Most of the Coca-Cola concentrate that enters the U.S. market is produced in Atlanta, U.S., and Puerto Rico, U.S. territory.
It is evaluated that Sprite, the product of the same company, has also become more advantageous in tariff issues.
“Ireland has enjoyed tax benefits for a long time before the tariffs were imposed,” an HSBC analyst said. “No one expected this tariff war and it’s unclear how long these tariffs will last, but it’s clear that PepsiCo is at a disadvantage now.”
The 25% tariff on aluminum cans could also affect both Coca-Cola and PepsiCo.
Coca-Cola imports some aluminum from Canada, and the tariffs imposed on it could drive up cola prices, Coca-Cola CEO James Quincy said in February.
As a result, Coca-Cola plans to increase plastic bottle packaging or procure aluminum cans from the United States to mitigate the impact.
PepsiCo’s U.S. market share has been falling over the past 20 years, falling to third place last year behind Dr. Pepper.
The Wall Street Journal predicted that other products such as jeans and toothpaste will also have mixed feelings depending on the origin of the product in this tariff war.
EJ SONG
US ASIA JOURNAL
