JKH experiences a 31% volume drop due to Sugar Tax on Carbonated Soft Drinks Range

November, 8, 2018

Sri Lanka’s one of the oldest Carbonated Soft Drinks (CSD) range including Elephant House brand that’s owned by John Keells Group had experienced a 31% drop in their sales volume of beverage business due to the implementation of a sugar tax on CSD from November 2017, the latest quarterly review of John Keells Holdings (JKH)’s Chairman Susantha Ratnayake highlights.

Ratnayake notes that the Consumer Foods industry group Profit Before Tax (PBT) of Rs.443 million in the second quarter of Financial Year 2018/19 is a decrease of 40% against the second quarter of the previous financial year of 2017/18 Q2: Rs.738 million.

“The decline in profitability is primarily on account of a volume decline of 31% in the carbonated soft drinks (CSD) range of the Beverages business and costs relating to the commissioning of the new ice cream factory as discussed below” he points out adding that that the decline in beverage volumes is due to the implementation of a sugar tax on CSD from November 2017, which resulted in substantial price increases across the industry.

“However, it is encouraging that the growth in monthly volumes within the quarter has been on an upward trend. The performance of the non-CSD product range continue to be encouraging. The Frozen Confectionery business recorded a volume growth of 8% during the quarter under review, driven by growth in the impulse segment” Ratnayake notes in his review. According to him whilst the business recorded volume growth, profits were impacted by plant commissioning and startup costs due to the gradual ramp up of production at the new manufacturing facility in Seethawaka and the depreciation and finance expense relating to the investment. The new facility will be pivotal to the longterm growth prospects of the business, given its scalability of product range and volumes and higher operational efficiencies.

- Reporting by Devendra Francis

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