3 major beverage firms reformulating soft drink mix due to new taxes

To avoid paying heftier taxes under the first package of the tax reform program, three beverage companies are reformulating their soft drinks mix to avoid paying a heftier tax.

The Tax Reform for Acceleration and Inclusion (TRAIN) law imposed taxes on sweetened beverages. Those using sugar are slapped a lower rate of P6 per liter while those using high fructouse corn syrup (HFCS) are taxed P12 per liter. These cover energy drinks, powdered juice drinks and soft drinks.

Pepsi Cola Products Philippines Inc. earlier announced it was shifting to using 100 percent sugar in its products from the previous mix of 60 percent sugar and 40 percent HFCS.

Coca-Cola Femsa Philippines Inc. and RC Cola Philippines have followed suit, according to members of the Sugar Regulatory Administration (SRA) board.

The new tax structure also doubled the rate on imported sugar.

“Coca-Cola requested to reclassify their remaining HFCS for export, which means it is shipping out the HFCS and will no longer use it for domestic production. RC Cola did the same. It already manifested that it will no longer use HFCS,” said SRA board member Roland Beltran.

SRA administrator Hermenegildo Serafica said the sweetener consumption of the three beverage-makers last year amounted to 283,000 metric tons (MT), or equivalent to 5.060 million 50 kilogram (LKg) bags.

“We are confident that our production can cover the amount,” he said.

Despite the onset of La Niña which already affected the sector’s output for the first week of January, Serafica expressed optimism that weather would improve by February, citing better forecasts by the state weather bureau.

La Niña, which is marked by heavier-than-usual rainfall, can lead to lower recovery rate for sugarcane.

Data from the agency showed that for the week ending January 7 this year, the industry’s total raw sugar production stood at 663,013 MT (13.26 million LKg-bags), down by 2.1 percent compared to last crop year’s 677,241 MT (13.54 million LKg-bags). Week-to-week sugar production has also declined by 6.87 percent.

Without citing any figures, Beltran said that the agency would allocate a huge part of its budget to farm mechanization, which Serafica believes “is the wave of the future.”

Both officials expressed confidence that local farmers could meet the needs of the beverage companies as well as the requirement of the whole industry.

The country’s sugar crop year starts September and ends in May, while harvest period begins in October to December and ends in May.