NEW YORK — No wonder Coke and Pepsi are spending millions of dollars to fight proposed taxes on sugary drinks in California.
PepsiCo reported a higher quarterly profit Thursday as global sales rose, but one weak spot was Mexico. The company said snacks sales volume declined by 3 percent, hurt by a new tax on junk foods.
Recent declines suffered by Pepsi and Coke in Mexico underscore why the beverage industry is fighting tax proposals on sugary drinks in San Francisco and nearby Berkeley.
PepsiCo — which makes Frito-Lay chips, Gatorade and Tropicana — reported similar declines in its snacks business for the first half of the year, starting when the tax went into effect.
Coca-Cola, which reports its third-quarter results Oct. 21, has also reported beverage volume declines in Mexico for the first half of the year, citing a similar tax on drinks. Mexico has the world’s highest per capita consumption of Coca-Cola drinks.
Hugh Johnston, chief financial officer for PepsiCo, said in a phone interview that declines in Mexico were in line with what the company expected. To mitigate the impact of the tax, he said PepsiCo plans to target different package sizes for different outlets.
The taxes in Mexico add one peso, about 7 cents, to the cost of a liter of sugary drinks, and 5 percent of the price to foods with 275 calories or more per 100 grams.
It’s not yet clear whether the taxes’ impact on consumption will last or how significant it will be over time. And while PepsiCo monitors such tax initiatives around the world, Johnston said he doesn’t expect them to become more common.
