In Mexico soda giants are facing an increasingly challenging environment. In late 2013 Mexican legislators passed a law to place a tax on sugary beverages in an effort to combat the country’s growing obesity problem. According to a report from the Mexican National Institute of Public Health and the Carolina Population Center at the University of North Carolina, Chapel Hill, Mexico’s new soda tax may be working.

In a recent article NPR food writer Eliza Barclay explained, “according to the researchers, who analyzed data on household consumption in 53 Mexican cities, purchases of sugary beverages dropped 6% on average in 2014 compared with pretax trends. And by December 2014, they’d gone down by 12%, compared with previous years. The study adjusted for other factors, like the overall downward trend in soda consumption, wages and unemployment.” Juan Rivera, a researcher at Mexico’s National Institute of Public Health, said, “the soda tax in Mexico has been successful.”

The researchers found that in the months after the tax was implemented soda consumption fell and water consumption, rather than consumption of alternative sugary drinks such as horchata or agua de jamaica, increased. Mexico’s lowest income group saw the biggest drop in consumption.

Harold Goldstein, executive director of the California Center for Public Health Advocacy, explained, that in the fight against obesity, “a soda tax is a critical step. Mexico has done it for their residents. So can we.”

Mexico’s government collected $1.3 billion USD in tax revenue while Coca-Cola FEMSA saw its sales in Mexico fall. According to the company’s annual report for 2014, “a 4.6% volume contraction in Mexico was partially compensated by a 5.1% volume increase in Central America.” Pepsi saw its operating profit fall by 11% in 2014. The company’s annual report explains, “Volume declined 2%, reflecting a mid-single-digit decline in Mexico due to a tax on certain packaged foods, which became effective during the first quarter of 2014.” Coca-Cola FEMSA may be looking to shift its attention away from Mexico. During 2014 Coca-Cola FEMSA reduced its investment in Mexico by nearly a third, while it increased investment in South America (excluding Venezuela) by 39%. The supporters of Mexico’s soda tax are confident about the measure’s impact on consumption and the ancillary health benefits a decline in sugar intake may yield.