KUALA LUMPUR: A key measure in Budget 2025 that could impact the consumer sector is the planned phased increase in excise duty on sugar-sweetened beverages (SSB), raising it by up to 40 sen per litre, starting from Jan 1, 2025.
CIMB Securities Sdn Bhd said for food and beverage (F&B) companies that offer ready-to-drink beverages with high sugar content, the increase in excise duty on SSB tax of 40 sen per litre is negative, as it may lead to lower demand for these products.
"However, we believe the negative impact will be minimal, as F&B companies are likely to accelerate efforts to reformulate their products to keep sugar content below the SSB tax threshold.
"This was a step taken by affected F&B companies as seen during previous sugar tax implementations from 2019 to 2024.
"On a positive note, the government did not expand the range of products subject to the sugar tax, such as condensed milk," it said.
The firm maintained a 'Neutral' outlook on the consumer sector, withholding additional details on the Budget 2025 measures, particularly regarding the range of products that will be impacted by the proposed extension of sales tax on non-essential goods.
CIMB Securities added that the main surprise for the consumer sector is the government's plan to increase the sales tax on non-essential goods and premium food items, such as imported salmon and avocados.
"However, no clear details have been provided on which products will be classified as daily necessities or basic food items.
"We gather that the government will conduct engagement sessions with industry stakeholders to finalise the scope and rates of the tax," said the firm.
CIMB Securities noted that the government's announcement of raising the minimum wage to RM1,700 will have a short-term effect on labour expenses, which are estimated to account for an average of 15 per cent of operating costs for consumer stocks.
"We expect consumer companies to raise selling prices to pass on the additional costs," it said.
Additionally, CIMB Securities said it keeps a neutral view on the government's plans to implement targeted subsidies for RON95 petrol from mid-2025.
"While this should lead to an increase in operational costs for companies, we expect this impact on consumers' spending power to be minimal.
"This is premised on the government's statement that it will continue to maintain subsidies for 85 per cent of the population while removing them for foreigners and the top 15 per cent of income earners," it added.