The pharmaceutical dilemma: absorb or transfer?
It seems that life gives us whey and, sometimes, we have to pay more for it. In a twist that no one saw coming (or perhaps everyone), Genomma Lab, that company that is dedicated to our personal care, is very seriously considering increasing the price of its star drink, Suerox. The reason? A new tax that has fallen like a bomb on sweetened drinks. Because, clearly, in these times of inflation, what we need is for hydration to cost more.
The revelation, courtesy of the Bloomberg agency, introduces us to Marco Sparvieri, the company’s CEO, explaining the complex corporate strategy with the finesse of a poker game. Basically, his master plan is…wait and see what everyone else does. Yes, you read that right. The decision to make the product more expensive for the final consumer will depend exclusively on whether the competition dares first. In his own words, if the others raise prices and do not assume the IEPS, Genomma Lab will follow them with enthusiasm. But, surprise surprise, if the competition behaves well and absorbs the cost, then “we’ll have to absorb it.” A brave stance, without a doubt.
The competitive advantage of not having sugar (and the disadvantage of having to explain it)
In a show of optimism, Sparvieri pointed out that this tax measure will affect the entire isotonic drinks and electrolyte sector. But fear not, Suerox lovers, because it has an advantage: its product is not sweetened with sugar. According to its impeccable logic, this means that the IEPS that will apply to Suerox will be half of what its rivals will pay. It’s like arriving at a party and realizing that by not wearing the same suit as everyone, you only have to pay half the bill. A wonderful comfort when the total bill is higher.
While companies are making these existential calculations, the Mexican Congress, in an outburst of tax collection zeal, approved a reform to the IEPS Law that does not mince words. Now, sugary drinks will see the tax rise to 3.80 pesos per liter, a jump from the current 1.6451 pesos. So you understand: it is an increase of just over 2 pesos for every liter you drink. Those who use sweeteners will pay 1.50 pesos. But the tax holiday doesn’t end there.
Cigars, those bad habits that the government loves to tax, will see their ad valorem rate go from an already juicy 160% to an exquisite 200%. Translation: a pack that today costs between 80 and 90 pesos could reach a hundred. Do you play violent video games to blow off steam after paying taxes? Well, prepare for an IEPS of 8%. And if strong emotions are your thing, online betting houses will see their tax rise from 30% to 50%. It seems that the government has decided that everything we like should cost us a little more suffering, I mean, money.
So now you know: the next time you buy your Suerox to recover from a hangover or heat stroke, remember that its price is the result of a delicate dance between executives, competitors and legislators. A dance that, of course, ends up playing in your wallet.
Are you surprised by this pricing strategy? Share this note on your social networks and discover more analysis on how tax decisions impact your daily life.
