KUALA LUMPUR: The potential introduction of sugar-sweetened beverage (SSB) tax may hit consumers' pocket but the impact on ready-to-drink (RTD) and pre-mixed drinks companies particularly is expected to be mild.
These companies may find ways to mitigate the impact on their finances, a research house said.
The Health Ministry yesterday reiterated plans to further hike the sugar tax in the upcoming 2025 Budget.
Its minister Datuk Seri Dr Dzulkefly Ahmad said this followed the success in reducing sugar consumption by 9.25 per cent nationwide after a 10 sen increase in the sugar tax under 2024 Budget.
In July, Dzulkefly in a written Dewan Negara reply had said that his ministry was pushing to further raise sugar tax to 20 per cent of the retail price as part of its "war on sugar" campaign.
In 2019, the government introduced tax on sugary drinks, imposing a 40 sen tax per litre before raising it further to the current 50 sen.
CIMB Securities said based on the implementation of sugar tax from 2019 until now, food and beverage (F&B) producers had shown a track record of tailoring their product formulation to comply below the allowable sugar content thresholds.
F&B manufacturers could minimise the impact by raising the selling prices of affected products to fully pass on the additional sugar tax, or lowering the sugar content in their products to below the threshold for SSB tax, it added.
The firm named Nestle (M) Bhd, Fraser & Neave Holdings Bhd (F&N), Berjaya Food Bhd and Farm Fresh Bhd as those that may be affected from the measure, albeit midlly.
For Nestle Malaysia, CIMB Securities said the company has exposure to both RTD and pre-mixed drink products under brands such as Milo, Nescafe, and Nestum.
"Our in-house estimate suggests that 25-30 per cent of Nestle's sales are derived from beverage segment."
For F&N, its product mix includes sweetened RTD beverages as well as sweetened dairy products.
"We estimate that domestic sales of these products make up less than 35-45 per cent of F&N's total nine month financial year 2024 revenue," it said.
Berjaya Food retails, meanwhile, certain RTD beverage products but revenue contribution from this segment is minimal, CIMB Securities said.
For Farm Fresh, none of its products are currently affected by the on-going sugar tax.
Currently products used for preparation of fresh beverages such as sweetened condensed milk are not affected by sugar tax.
If the government widens the product scope affected by sugar tax to include products used in making fresh beverages, CIMB Securities said this poses a risk specifically to F&N as domestic sales of this product range alone is estimated to make up 10-15 per cent of its total revenue.
CIMB Securities is neutral on the announcement, pending further details.
Business Times have reached out to Nestle Malaysia, BFood, Farm Fresh and F&N.
At press time, only F&N responded but it declined to comment.
Business Times' quick checks show that in Asean, Brunei had imposed a tax of US$3 per 10 litres of high-sugar drinks and a 3.0 per cent excise tax on sugar, confectionary and cocoa products.
Last year, the country updated its customs import and excise duties which imposed an excise tax of four Brunei dollars per decilitre on beverages with low sugar content.
The Philippines government slapped a six peso per litre tax on sugary drinks made with caloric or non-caloric sweeteners. This was part of the country's efforts to curb obesity.
In Vietnam, its latest draft of the law on special consumption tax noted that the Ministry of Finance added a 10 per cent tax on sugary drinks based on Vietnamese standards with sugar content above five grams per 100 millilitres.