The Coca-Cola Company (KO) and PepsiCo (PEP) are always seeking new avenues for growth, and one of the places with the greatest potential for geographic expansion is India.

China might get all the headlines with its 1.357 billion people, but India isn’t far behind with a population of 1.252 billion. Any missteps or unfortunate turns of events in India could have a considerable impact on these two soft drink giants. Unfortunately, there may be a regulatory roadblock about to surface.

Currently in India, a great deal of pressure is being put on the government to impose a heavy tax on beverages with high sugar content. Budget meetings will take place in January 2017, and the GST panel (Goods and Services Tax Bill panel) led by chief economic adviser Arvind Subramanian previously wanted a 40% sin tax on carbonated beverages, tobacco, and luxury cars. The current GST sin tax is 17% – 18%.

This recommendation by the GST panel might seem outlandish, but first consider some facts:

  • According to Action on Sugar (AOS), Fanta (the second-most popular Coca-Cola brand outside of the United States) has almost 12 teaspoons of sugar in India versus six teaspoons of sugar in Ireland, Argentina, and the United Kingdom.
  • According to the World Health Organization (WHO), sugar consumption in India is likely to rise to more than 15% of global consumption by 2019 – 2020. This would make India the largest sugar-consuming nation in the world.
  • Processed food and drinks containing sugar has led to a significant problem with obesity and poor health in India.

A Coca-Cola spokesperson said, “We made it clear that we are not to be blamed for the sugar intake that is on the rise in India.”

According to Coca-Cola, carbonated beverages contribute just 2.4% of total sugar intake in India, which is a small percentage compared to confectioneries at 12% of total sugar intake and sweets at 15% of total sugar intake.