THE effect of the ‘sin’ tax law has been more evident in alcoholic-beverage consumption as volumes dropped in the industry since 2013, the first year higher taxes were first implemented.
Unlike in the tobacco sector, where players continue to claim the increase in tax rates result to illicit trade, alcoholic-beverage manufacturers admitt the hike in taxes affected them on the first year that Republic Act (RA) 9334 took effect.
Based on their financials, most firms manufacturing alcohol products and listed in
SAN Miguel claims to corner a commanding 90 percent of the beer market, with no other company coming close except for
Ironically, Filipino consumers who have long-supported San Miguel have become the company’s stiff competitor. The changing drinking habits of these consumers eroded the already shrinking beer market to other products, such as the alcohol-laced pop drinks, the so-called ‘alcopop’, of
However, the industry-wide slump at the end of 2013 did not spare
‘The beer and alcopop segments of the company’s portfolio experienced significant drops in volumes and revenues as the industry and market reacted to the severe increases in specific taxes imposed during the year,’ the company said in its report on its 2013 performance.
While the company supplies the beer and alcopop segment of Tan’s business, it also sells other non-alcoholic products, such as water and energy drink.
FERMENTED liquor, such as beer, has a two-tier tax structure-one for the lower-priced and another for the higher-priced segment.
Like in cigarette products, both tiers will be taxed at the same rate starting in 2017 in order to prevent possible downshifting to cheaper products.
Alcohol products priced P50.60 per liter and below were slapped P15 beginning 2013. Every year, the tax imposed on these products increased by P2. By next year, taxes on these products P2017 will only increase by P1.50 to reach P23.50.
For those priced above P50.60 per liter, the tax started at P20 per liter in 2013 and an additional P1 per year. By 2017 products at this price will be slapped with an additional P1.50 to reach P23.50, the same tax structure of the lower-tiered products.
THE 2004 revision of an alcohol and tobacco tax law followed a three-tier tax structure. The amount of tax started at P8.27 per liter to P16.33 per liter of alcohol products, like beer.
It is, however, another story for the distilled spirits sector, which also experienced industry-wide decline.
Unlike in fermented liquor, distilled spirits, such as ‘hard’ liquor, like gin, whiskey, brandy and rum, are taxed on a per-proof basis, or the amount of alcohol a beverage contains.
Many brands catering to the mid-market were able to launch products with lower alcohol content than regular products and then increased their prices, further widening margins. These products are those that have added the ‘light’ tag beside the product name, such as Emperador Light and
Despite the decline experienced by players in the distilled-spirits sector,
UNDER the new tax scheme, distilled spirits will be slapped a P20 per specific proof per liter, plus a 15-percent ad-valorem tax for 2013 through 2015. The rates were subsequently increased this year but will have a slight decrease by next year.
As a result, its revenues rose 26 percent to P 29.86 billion for 2013, from
The increase, however, came at the expense of its competitor, mainly of
The distiller said that, for 2013, its market share in terms of volume dropped to an average of 25 percent from 29 percent in 2012 ‘largely due to the penetration of brandy in the Visayas and Mindanao or VisMin region,’ the company’s stronghold. This was exacerbated by Super-typhoon Yolanda (international code name Haiyan) and a 7.2-magnitude earthquake that devastated parts of the Visayas.
The volume of Ginebra’s gin sales fell by 12 percent in 2013 to just 21 million cases from the 24 million cases the company sold the previous year. Still net sales actually grew 3 percent to
Ginebra’s market have already shrunk over the years as its ‘white’ liquor is seen as being ignored for the ‘red’ liquor-rum and brandy-of the two Tans.
The company has been struggling to make a profit, as it has been reporting net losses since 2011.
MOST of the firms that experienced a decline in consumption have since recovered from the initial fall in consumption, starting as early as 2014. These companies have implemented measures to increase profitability.
‘To mitigate the effects of higher taxes arising from the ad valorem portion of the excise tax, we sought to further improve efficiencies in our operation,’ Ginebra said in a report. ‘We worked to extract higher yield from distillery, driving alcohol costs down 3 percent from the previous year.’
Ginebra added that ‘vigilance in monitoring sources of used bottles was also key, allowing us to maintain container cost efficiencies.’ The company said it saw a slight increase in volume at 22.1 million cases in 2014.
The firm, which now claims to be the world’s largest brandy firm by volume, said it would bring all those premium brands at home as the ‘taste’ of Filipino consumers improves.
‘The mass market right now is 90 percent of the total volume of liquor in
According to him, the premium segment is ‘still very small at the moment.’
GINEBRA is seen as taking the same path of
‘There are brokers handling the acquisition deals for hard liquor,’ Ang said, adding that San Miguel is interested in pursuing every opportunity to expand its businesses.
Ang said, there is an element of luck in foreign acquisitions.
‘If you notice we have a lot of acquisitions for the last eight years. We have a success rate of 80 percent,’ Ang said. ‘I hope we will be lucky again with these planned acquisitions.’
Ginebra said both its flagship brand Ginebra gin and its other heritage brand, Vino Kulafu, already reclaimed its lost market share, which now stood at almost 30 percent last year, according to
(c) 2016 Business Mirror Provided by SyndiGate Media Inc. (Syndigate.info)., source