F&N says ready to implement sugar tax

PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) is ready to implement the sugar tax to be introduced on July 1, says chief executive officer Lim Yee How.

He said although it is a big challenge for the company given that 90 per cent of its product portfolios will be impacted by the tax, it is confident of being able to mitigate the impact on most of the affected categories and minimise the impact on the group.

“Out of the 90 per cent of the products, 70 per cent can be reformulated. But having to do reformulation will also incur additional costs.

“There are still some variants that we are trying out. We will see how much of the cost that we can absorb. Price increases will only be a last resort,” he said in a media briefing on the company’s first-half results yesterday.

Lim noted that three general directions will be taken by the company to mitigate the impact of the sugar tax, namely having original recipes in smaller pack sizes, reduced sugar recipes, and portfolio transformation by innovation into health product categories.

He said the company has invested RM30 million in capital expenditure in its Shah Alam plant to enable multiple new products to be produced from October this year.

The government postponed the introduction of excise duty of 40 sen per litre on sugary sweetened beverages (SSB) from April 1, 2019 previously to July 1, 2019.

Meanwhile, on the outlook for Malaysia, Lim said the company will continue to drive the isotonic and carbonated soft drinks including 100 Plus and the new F&N Lychee Pear, while providing healthier options for its customers.

Regionally, he said prospects for the Thailand market are expected to be better following improvements in the sweetened and unsweetened condensed milk segment.

F&N is also in the midst of expanding its export markets in Nepal and France, he said.

“Next month, we hope to conclude an agreement to enable distribution of our products in Nepal, while for France, it is not going to be that soon as we are still building our market mode there,” Lim added.