The consumption tax rate will rise to 8% in Japan next year

The consumption tax rate will rise to 8% in Japan next year

A VAT increase in Japan next year could be an opportunity rather than a threat to soft drinks producers, according to an analyst. 

From April, Japan's national sales tax rate will rise from 5% to 8% and is likely to increase again in 2015 to 10%. But, analysts CLSA said this is an opportunity for CSD companies as it will allow them all to raise prices. 

“A JYN10 hike would add more than needed to offset the tax increase and we expect a jostling for market share, with companies raising prices on some but not all products in vending and other channels, with regional variations, too,” CLSA said in a note today (12 December). 

CLSA flagged that Coca-Cola has already announced its intention to pass on the tax. But it added: “The mechanics of doing so are complicated in part by the minimum JYN10 coin increment in vending machines. As an industry leader, Coca-Cola and Suntory should be better able to manage this disruption than their smaller peers.” 

Meanwhile, CLSA said that it expects Suntory to become a bigger player in PepsiCo's bottling system in the US, as the US firm looks to reorganise. On M&A, the analysts do not expect the Japanese firm to make another acquisition until 2015, following its move for Lucozade and Ribena, but has capacity for a US$4bn deal.