A few months back we wrote about the economic turmoil in Venezuela and how Mondelez International, the manufacturer of Oreo cookies, would no longer be tracking sales of the snack in Venezuela.
The country’s economic landscape has yet to improve and several news sources have reported that Coca-Cola FEMSA, along with Kraft Heinz Co. and Clorox, have “temporarily shutdown production,” due to a sugar supply shortage.
It has been widely reported, over the last few years, that Venezuela’s economy is virtually on the edge of collapse, with political and economic friction resulting in food shortages and rationing practices. Venezuela’s President, Nicolas Maduro, recently declared a state of emergency, due to the dire conditions.
In the annual report released by the USDA Foreign Agricultural Service in April, the department anticipated sugar production to decline while sugar consumption was expected to rise. The report, approved by the Venezuela Office of Agricultural Affairs, highlighted El Nino drought conditions, price controls and restrictive foreign exchange policies as contributing factors to the decline. The report also pointed out that if conditions worsened, a shutdown would be necessary.
“Price controls, land/farm expropriations, lack of foreign exchange, security concerns, lack of spare parts for agricultural inputs, machinery, and packaging materials, and even labor problems, are all major issues negatively impacting the market for sugar production and consumption. It is evident to the private sector that the GBRV (Government of the Bolivarian Republic of Venezuela) may rather import sugar than invest in areas to increase local production. Unfortunately, the GBRV finds itself with further dwindling foreign exchange available to purchase imported sugar. The economic situation is expected to worsen in 2016 and some government sugar mills may have to shut down operations.“
It is currently unknown how long the halt in Coca-Cola’s production will last. A Coca-Cola company spokesperson spoke to CNNMoney and explained that Coca-Cola was working with sugar producers and the Venezuelan government to find an efficient solution.
“While this situation will impact the production of sugar-sweetened beverages in the coming days,” a Coca-Cola spokeswoman told CNNMoney, “the production lines for zero-sugar beverages such as bottled water and Coca-Cola Light … continue operating normally.”