New food-labeling rules intended to fight obesity in Chile threaten to derail profits at the country’s biggest bottlers, according to Banco Santander SA.
As much as 45 percent of products made by Embotelladora Andina SA, the country’s largest Coca-Cola bottler, will have to include labels warning of high sugar, fat or sodium content, Santander said in a note to clients. Cia Cervecerias Unidas SA, Chile’s largest beer brewer and a soft-drink producer, will need warnings on about a third of its offerings.
The policy would require as much as 20 percent of a soda bottle’s label be covered with black octagons cautioning consumers about the risks of imbibing. The rules, which also forbid advertising unhealthy foods to children younger than 14, were approved by regulators this week and take effect July 2016. Chile ranks among the top 10 countries globally for obesity in young people, according to a study from the University of Washington’s Institute for Health Metrics and Evaluation.
“Volumes will be negatively affected,” analysts Matias Duarte and Luis Miranda said in the note. “Further pressure will result from the marketing restrictions.”
A change in consumption to diet sodas or bottled water products may partially offset the negative impact for CCU as it controls about half of those markets in Chile, Santander said.