‘Not positive for industry’: F&N may raise prices of 90% of beverage products in response to Malaysia sugar tax
Speaking at the company’s FY2018 financial results briefing, F&N CEO Lim Yew Hoe said: “We all know [the sugar tax] is not going to be positive for industry players. For now, we need more details on the tax from the government before we are able to fully assess its impact on our business.”
Malaysia Finance Minister Lim Guan Eng announced the excise tax on sugar-sweetened beverages earlier this month during his tabling of the country’s Budget 2019.
“The duty proposed will be at RM0.40 per litre to be implemented on 1 April 2019 for non-alcoholic beverages containing added sugars of more than 5gm per 100ml drink; and for fruit or vegetable juice containing added sugars of more than 12gm per 100ml drink,” said Lim.
The majority of F&N’s beverage products fall into the taxable categories. Examples include 100Plus (6gm per 100ml), Seasons carbonated drinks (11gm per 100ml), Asian drinks like Grass jelly (8.1gm per 100ml) and its tea range (10gm – 11gm per 100ml).
Although no final numbers were released, Lim mentioned a potential price increase of between RM0.10 and RM0.60 based on existing retail prices (RM1.20 for 250ml drinks, RM3.40 for 1.5L drinks).
More time is needed
Implementing the sugar tax in several stages, instead of at one shot on April 1 2019, would be more practical for manufacturers as more time is needed to properly reformulate products, said Lim.
He added that this is because in order to ensure consumer acceptance of reformulated products, it is more complicated that the simple reduction of sugar content.
“Over the years, F&N has made significant efforts to reduce the amount of sugar in its total beverage portfolio. As a result, the sugar index has decreased 34% since 2004.”
Lim added that F&N will provide healthier variations of each beverage product by 2020.
Reformulation and mineral water for consumers
Lim added that sugar levels for some products are ‘easy to tweak’, and the company is looking at reformulating existing products to provide consumers with healthier choices.
That said, he reiterated that this reformulation process whether in terms of taste, consumer acceptance or quality stability, will take time.
F&N is also looking to increase the potential of its mineral water section in hopes of mitigating the sugar tax impact, Lim told The Edge. Mineral water’s contribution to F&N is ‘currently insignificant’.