Coca-Cola Escapes New Tariff Costs With US-Based Production, While PepsiCo's Irish Supply Faces 10% Levy
New U.S. tariffs are impacting the cold drink companies, with the Coca-Cola Co. (NYSE:KO) ending up with a cost advantage over PepsiCo Inc. (NASDAQ:PEP).
The key factor behind the change is where each company manufactures the concentrate that forms the base of their sodas.
What Happened: PepsiCo manufactures almost all of its concentrate for U.S. sodas in Ireland, which is now subject to a 10% tariff.
Coca-Cola, by producing its concentrate largely in Atlanta and Puerto Rico, has managed to avoid this import duty. The Wall Street Journal reports that both companies also have to deal with a 25% tariff on imported aluminum, which has raised concerns about packaging costs.
See Also: Gary Black Shares Polymarket Data, Says Trump Tariffs Have Pushed Odds Of 2025 Recession To 57%
Why It Matters: Pepsi's decision to base concentrate production in Ireland for tax benefits has landed it with an unexpected disadvantage.
Dr Pepper recently raced ahead of it in U.S. market share—Pepsi must now absorb increased costs or pass them on to consumers. Keurig Dr Pepper Inc. (NASDAQ:KDP) exceeded analyst expectations in the fourth quarter.
As the trade war continues, production geography is becoming a central factor in business strategy. With its domestic operations, Coca-Cola is better positioned to tackle the impact, while PepsiCo faces new challenges in an already competitive market.
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