May 092013

MANILA, Philippines – Higher taxes are taking their toll on liquor and beer producers, as drinkers seemingly get dissuaded from increasing their consumption.

Conglomerate San Miguel Corp. (SMC), which owns Ginebra San Miguel Inc. and San Miguel Brewery Inc. (SMB), recorded substantially lower sales volume in the first quarter, its top executive said.

“I think our beer and hard liquor businesses were greatly affected by the tax increase,” SMC president and chief operating officer Ramon S. Ang told reporters.

“Our volume went down as much as 30 percent,” he added.

Republic Act 10351 or the sin tax law took effect on Jan. 1, imposing higher excise taxes on tobacco and alcohol products in a bid to increase government’s revenues while discouraging heavy consumption of cigarettes, beer, liquor, wine, and other tobacco and alcohol products.

Specifically, taxes for fermented liquor (beer) was pegged at P15 per liter if the net retail price is P50.60 and below per liter, and P20 per liter for those with a higher price.

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The rates will rise to P17 and P21 in 2014, P19 and P22 in 2015, and P21 and P23 in 2016, respectively.

For distilled spirits, the tax is 15 percent of net retail price plus P20 per proof liter, rising to 20 percent plus P20 in 2015.

The ongoing election season is not enough to buoy sales of Ginebra and SMB.

“Usually, before elections, the volume should be very strong but volume is not strong now because of the recent tax increase,” Ang said.

“We are only seeing a slow recovery because of the elections but we don’t know what will happen after the elections,” he said.

Still, SMC said the performance of SMB and Ginebra will be better this year.

“This year, we are very active in promotion and advertising to associate the other brands with Ginebra,” said SMC chief finance officer Ferdinand K. Constantino

Constantino said the company’s bottling capacity is enough to meet continuous local demand growth in the long term.

SMB is the company behind beer brands like San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle while Ginebra markets the flagships Ginebra Gin, GSM Blue, GSM Light, Gran Matador Brandy and Antonov Vodka.

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