Venezuela has reportedly enacted price regulation legislation

Venezuela has reportedly enacted price regulation legislation

A price cap implemented by the Venezuelan Government on around 15,000 food, beverage and household products is likely to hit top-line growth at soft drinks firms in the country, Bernstein Research analysts have said.

Yesterday (24 November), Venezuela's Government reportedly enacted legislation allowing it to set price caps on consumer products, including bottled water and juice. 

While the majority of products impacted fall into the household and personal care categories, industry sources have cited a likely expansion into additional food and beverage categories, Bernstein Research analysts said in a note today (25 November). The Coca-Cola Co and PepsiCo are two firms likely to be affected by the move.

"We project full administration of this new "price cap" law to potentially have noticeably negative impacts on reported top-line growth going forward ... and likely equivalent impacts on overall profit growth," the Bernstein analysts said.

Relations between president Hugo Chavez's Venezuela Government and PepsiCo and Coca-Cola have been tense for some time. Last year, the Chavez threatened to nationalise Pepsi-Cola bottler Empresas Polar as part of a war against the “bourgeoise”. A year earlier, he banned Coca-Cola Zero from sale in the country due to unspecified health concerns.

Coca-Cola FEMSA has also experienced tense relations with Chavez. In 2009, the company was given two weeks by the Government to vacate a plot of land, on which the firm had a distribution centre.