Sugar levy, muted sales may see job cuts at Coca-Cola SA

The company has cut the sugar content in its beverages by 20% across all brands

The jobs of more than 1,000 people may be on the line as Coca-Cola Beverages SA embarks on restructuring.

The company said this week it was reeling from the effects of the sugar tax imposed on sugary drinks from April 2018.

In a section 189 notice to the Food and Allied Workers Union, Coca-Cola Beverages SA said prior to the implementation of the sugar tax, volume growth expectations were at 4% a year. The tax, as well as “economic headwinds” had resulted in lower volumes, which the company said were only expected to recover in 2021.

The “health promotion levy” was introduced to curb the consumption of sugary beverages and generate tax revenue.

The levy, fixed at 2.1c/g of sugar content exceeding 4g/100ml, affects sugary beverages manufactured in or imported into SA.

The tax raised R2.3bn by the end of December 2018, Treasury said. Coca-Cola said it increased prices in response to the tax, but competitors maintained pre-levy prices, which cost Coca-Cola Beverages SA market share. In addition, weak consumer spending resulted in muted volume growth.

The company has cut the sugar content in its beverages by 20% across all brands.

Coca-Cola Beverages SA employs 7,100 employees and retrenched 76 people in 2018.

“We anticipate that just over 1,000 jobs may be impacted,” Coca-Cola Beverages SA public affairs and communication director Tshidi Ramogase said.

This may include 117 warehouse operators, clerks, shunter drivers, janitors, cleaners and scrub operators. About 650 merchandisers may also be at risk. The company also intends cutting pay for certain jobs.

Ramogase said: “We are doing all we can to ensure that the impact on employees is minimised through alternatives such as redeployments, early retirements, voluntary packages, in-sourcing and, as a last resort, retrenchments.”

Katishi Masemola, the general secretary of the Food and Allied Workers Union, said it opposed the retrenchments on the grounds that the company would be in breach of a 2017 order handed down by the Competition Tribunal when the Coca-Cola Company merged with Coca-Cola Beverages.

The tribunal, in its ruling, said the merging entities should maintain employment levels for a period of three years from the date of approval.

It also prohibited the merging entities from involuntary retrenchments of employees in the bargaining unit.

But the company said the proposed retrenchments were not specific to the merger and were not in breach of its conditions.

Masemola said the union would take legal action should Coca-Cola “proceed with the intention to retrench” or take strike action.