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Thailand: Functional drinks ready for windfall from lower excise tax
The functional drink market expects a big boost after the cabinet last Tuesday approved lowering the excise tax on functional products, effective from Oct 1.
Anak Lapsuksatit, chief financial officer of Sappe, the marketer of Sappe Beauti functional drinks, said the lower excise tax rate on functional drink products — from 14% to 10% — will help the segment grow.
“The number of functional drink consumers will definitely increase because producers will reduce product prices and spend more money on promoting products,” Mr Anak said.
The cabinet also approved a lower excise tax on fruit and vegetable juices with health benefits, from 10% to 3%, effective from Oct 1.
“The excise tax cuts provide an opportunity for Thai manufacturers to develop various innovative products for customers who have more sophisticated tastes,” said Supachai Junkeiat, director of TCP Group’s global marketing division.
With attractive tax incentives, Thailand could become a production hub for functional drinks in Asean, Mr Supachai said.
“Consumers and the country will benefit from the lower tax,” he said.
The functional drink market got off to a running start 12 years ago, fuelled by the launch of Sappe Beauti, with 10 brands entering the market subsequently. The Thai market was worth 4 billion baht in 2007.
The market has stayed flat over the past five years because no new innovative products were launched to attract consumers, Mr Supachai said. The market was estimated to be worth 6 billion baht last year.
With the entry of new drinks like Blue — a joint development of Danone, a company from France, and Sappe — as well as drinks from Nestle, demand for functional drinks is expected to grow by 7-8% this year.
“Competition in the functional drink market will be fiercer, with a lower excise tax rate drawing more players to enter the beverage segment this year,” said an executive at the Thailand Beverage Industry Association who requested anonymity.
Mr Anak said his company will focus on developing new ingredients for novel products for launch in the final quarter this year and throughout next year.
The company expects to launch 20 new functional drinks to the market this year, projecting sales to grow by 20-25% in 2019, compared with industry growth of 4-5%.
Source: https://www.bangkokpost.com/business/1761304/functional-drinks-ready-for-windfall-from-lower-excise-tax