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Soft drinks price rises beckon in Brazil as tax incentives dry up

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Soft drinks companies in Brazil have been left reeling after a recent drivers' strike in the country has resulted in a reduction in tax subsidies in their main concentrate production area.

Last week, a ten-day, nation-wide strike by truckers came to an end. The Brazilian Government has agreed to introduce a subsidy for the price of diesel, acquiescing to a demand by the strikers.

The subsidy, however, will be partly-funded by a reduction in tax incentives for the northern city of Manaus, the home of most - if not all - soft drinks concentrate production for Brazil by large players such as Coca-Cola, AmBev and Heineken.

The additional burden on the soft drinks producers could reach as much as BRL750m (US$199mm) for the remainder of this year alone. A mid-single-digit price increase would be necessary to offset the increase, compounding the pressure on weakened soft drinks volumes in the country.

Negotiations in Brasilia are ongoing.

Brazil on its way back, but not in a hurry - Click here for a recent just-drinks analysis


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