Besides raising money, what would be the justification behind such a governmental strategy? Well, excess sugar consumption can be dangerous. It can lead to all kinds of complications. You know the drill: obesity, diabetes, etc. When health issues like those rise, the cost of health care increases as well.
I'm not going to deny that drinking too many sugary beverages is unhealthy. But I do worry about the implications for shareholder value as it relates to this business. Taxing Coke and Pepsi because of concerns over health effects will hurt brand equity, as well as have a direct impact on growth in case volume. The North American market, which has been weak for carbonated sodas, certainly doesn't want another thing to worry about.
Without a doubt, those who own stock in such companies need to keep an eye on this. Hopefully, the government will look to taxing cigarettes and alcohol more heavily. Who could argue with that? Actually, a lot of people would take issue with that suggestion, but when it comes to dangerous products, those two categories should be at the top of the list. I don't think a can of sugar water can compete.
Look, I get that drinking too much Coke is inadvisable. Actually, so do the managements of Coca-Cola and PepsiCo. That's why they've been trying to expand volumes in waters and juices as a way of offsetting lagging growth in their flagship products. The market has already spoken, to some degree, on unhealthy beverages.
What this discussion should tell these companies is that, whether a new tax comes along or not, they need to redouble efforts at marketing the healthier side of their drink portfolios. They shouldn't, however, forget their flagship products, either. At the end of the day, Coca-Cola wants Coke and PepsiCo wants Pepsi to be strong contributors to the bottom line. Those trademarks are important, after all, and can be utilized as drivers for the long term.
I don't believe shareholders should panic. We're hopefully not close to getting a sin tax on cans of sugar. If we do, then projections would have to be adjusted for the businesses involved. We'll just have to see what develops.
Disclosure: I own Coke; positions can change without notice.