Sales of sugar-sweetened drinks slump in Feb. amid higher taxes
ALREADY REELING from a shift in consumer preference to healthier options, sales of sugarsweetened beverages weakened in February following the implementation of higher excise taxes, according to performance management company Nielsen.
The Nielsen Retail Index data showed a more notable sales drop in sari- sari stores, with sales of all five sugar- taxed beverage categories falling by an average of 8.7% in February compared to 4.4% in the same period last year.
Sales of powdered juice decreased by 15.4% in February from 1.7% a year ago, and powdered tea slumped 18.1% from 3.4%. Carbonated soft drinks sales dipped 7% from 4.1% last year.
Nielsen Retail Index tracks product sales in defined retail outlets, serving as the industry currency in measuring a brand’s market share.
“This reaction from consumers is a normal and expected behavior immediately following a price increase. Over time, some consumers may go back to old buying habits while some will adopt their new buying patterns,” John Patrick Cua, managing director of Nielsen in the Philippines, was quoted in the statement as saying.
Sugary drinks succumbed to the impact of higher taxes as a result of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which aims to raise funds for the government’s P8-trillion infrastructure spending plan.
The decline in sales in supermarkets is less substantial compared to sari-sari stores, slowing down by 9.4% in February from 14.7% in the prior year. Among the seven categories, energy drinks and ready-to-drink juice displayed significant declines of 10.7% and 8.8%, respectively.
“Impact is lesser and not as immediate in supermarkets because shopping trips and baskets are typically planned. In our (focus group discussions), (middle) and upper class shoppers claimed that their shopping behaviors will not change as much, despite the higher prices,” Mr. Cua said.
“In comparison, declines in sales in sarisari stores are more apparent since most impulse purchases happen in these neighborhood stores that also mostly cater to the low income segment,” he added.
As of February this year, prices across five categories carried by sari-sari stores climbed 20.6% from year- ago levels, while prices across the seven sugar- taxed categories in supermarkets jumped 16.6% on average.
A chat with some listed beverage companies showed that sales in January were “a
little bit strong” because of front loading but sales have started to soften in February because of higher prices, COL Financial Group, Inc. Vice- President and Head of Research April Lynn L. Tan said in a phone interview.
“If you look at the restaurants, prices have increased by only 1- 2% so this is acceptable for consumers. But for the sugary drinks, an increase of six pesos is too much and in fact if you go to convenience stores you’ll see even higher prices. This may impact volumes,” Ms. Tan said.
While higher excise taxes may affect revenues, beverage companies also have to contend with consumers ditching sugary drinks for other healthier alternatives.