Sugar Tax Reduction may increase sales volumes of Carbonated Soft Drinks

December, 3, 2018

Sri Lanka's newly formed government of Maithripala Sirisena as President and Mahinda Rajapaksa as Prime Minister had reduced the sugar tax on sweetened beverages imposed by the previous ‘Yahapalana’ government which was said to be a measure to control the prevalence of diabetes that time. However it is forecasted by analysts that the Sugar Tax Reduction may fuel the sales volume growth of Carbonated Soft Drinks which has experienced over a 30% sales volume drop during last few months according to reports.

Accordingly reports said that the Finance Ministry on Saturday has been instructed to cut the sugar tax by almost 40%. The decision was taken by Finance Minister Mahinda Rajapaksa after a meeting with business leaders in the industry. Analysts further notes that the new measure could reduce soft drinks prices by 30%.

Meanwhile speaking to media recently at the Office of the Prime Minister, Minister of International Trade and Investment Promotion Bandula Gunawardena said the reduction in taxes is expected to boost production efficiency of the fruit juice manufacturing industry. He further that the Finance Ministry had been asked to exempt only soft drinks that contain less than 6g of sugar and sweetened fruit drinks by up to 09 grams from the tax. The Ministry has been instructed to cut the tax to 30 cents from 50 cents per gram of sugar. The MP said those engaged in the soft drink and local fresh juice manufacturing industry expressed their gratitude over the reduction in taxes and vouched to increase productions.

However reports also said that health campaigners and a former Health Minister Dr. Rajitha Senaratne however, condemned the move as damaging the fight against obesity and diabetes among young people. In another development Sri Lankan President Maithripala Sirisena, last year attacked the sweetened beverages manufacture Nestlé for increasing the sugar content in popular beverage Milo and asked the Finance Minister to extend the tax on soft drinks to all forms of sweetened beverages

In November releasing quarterly results Sri Lanka’s one of the oldest Carbonated Soft Drinks (CSD) range including Elephant House brand that’s owned by John Keells Group said that it 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,

However JKH group in August 2018 said that as a part of their continuing strategy to reduce and replace calorific sugar content in the carbonated soft drinks (CSD), the “GO Sugar Free” and that the sugar free CSD variants accounted for approximately 23% of total beverage volumes as of the first Half of 2018.

- Reporting By Devendra Francis