Coca-Cola European Partners CEO Damian Gammell says the company is ready for sugar taxes

Coca-Cola European Partners CEO Damian Gammell says the company is ready for sugar taxes

Top executives at Coca-Cola European Partners have said the company is poised to face challenges in 2018, including sugar taxes in several markets. 

Speaking after the newly-combined company's first set of full-year results, CEO Damian Gammell said he expects "near-term headwinds, mainly from the introduction of new soft drinks industry taxes". Norway introduced a sugar tax in January while the UK's will begin in April. Meanwhile, France is expected to increase its levy later in the year.

"While the introduction of these taxes will clearly be a headwind in 2018, we have continued working with the Coca-Cola Co on formulation," said CFO Manik Jhangiani. "Our results continue to highlight the strong growth we are seeing from the sugar-free segment as demonstrated by a 15% increase in volume of Coca-Cola Zero Sugar during the fourth quarter and the full-year."

CCEP expects that when the UK sugar levy hits, 60% of its portfolio will fall below the threshold. "Coke Classic and Monster Green remain the two notable brands that will be subject to the tax," added Jhangiani. 

In a note following the conference call, Stifel analyst Mark Swartzberg said reformulations and channel exposure "imply soft drinks taxes may not impact the company as much as its forecasted 2-3% revenue increase and corresponding 4% COGS increase absorbing the taxes".

"For instance, fixed price increases will have less of a percentage impact on consumers in the higher priced away-from-home channels, where CCE is investing resources," he added.

Coca-Cola European Partners 2017 - results data