“Milk-based drinks with sugar content of less than 7g/100ml will no longer be affected by sugar tax (vs. 5g/100ml previously),” it said.

The three-month delay is to provide manufacturers ample time to gear up for the implementation of sugar tax. The extended timeframe will also allow the Customs Department to hold nationwide roadshows on this matter, while allowing drink manufacturers to apply for a compulsory licence under “Excise Act 1976”.

Sugar excise duty remains at 40 sen per litre for i) drinks with sugar content of more than 5g per 100ml, and ii) fruit and vegetable juices with sugar content of more than 12g per 100ml.

However, there are some changes for milk-based drinks (containing lactose), including flavoured milk. Based on this announcement, sugar levy will only be imposed on milk-based drinks with sugar content more than 7g per 100ml (vs. 5g per 100ml previously).

“At this juncture, it remains unclear whether other sugary beverages which contain lactose such as milk-coffee drinks and chocolate malt drinks (i.e. Milo) will fall under the category of milk-based drinks.

“Companies under our coverage that will be affected by the implementation of sugar tax on beverages are Nestle, F&N Malaysia, Power Root, and BJ Food. 

“Based on our sensitivity analysis, the effective selling prices of their products will increase 12-20 sen (based on 240-500ml drinks priced in the range of RM1.50-RM2.50), assuming the excise duty is fully passed on.

“We reiterate our view that the financial impact from the new excise duty is likely to be minimal, as manufacturers can: i) introduce alternate drinks with lower sugar content, ii) lower the sugar content of existing products, and iii) reduce the sizes of existing products to keep prices unchanged,” CIMB Research said.