Aboitiz Equity Ventures remains positive about the prospects of soft drink maker Coco-Cola Beverages Philippines Inc. which it plans to invest in despite the government’s proposal to increase taxes on sugary drinks, an executive said.
AEV senior vice president and chief finance officer Jose Emmanuel Hilado said during the company’s third-quarter investors briefing the higher taxes would affect sales only on the short term as consumers would eventually adjust to higher prices. Eventual sales are expected to go back, he said.
This was the experience of Coca-Cola Europacific Partners and other bottlers, according to Hilado.
“The experience of CCEP shows that you will get hit initially. There could be a drop in sales of 10 to 15 percent, but amazingly, this kind of market adjusts eventually. In matter of 6 to 12 months your sales go back. It gets affected, but goes back where it is,” Hilado said.
AEV announced last week that it teamed up with CCEP to acquire 100-percent stake in CCBI. CCEP will have 60 percent stake, while AEV will own 40 percent.
Hilado said AEV planned to raise debt to partially fund the acquisition.
“The business [is] resilient, so if you are a mid-term to long-term investor in this kind of business, [it] should not deter you from doing this business,” he said.
The Department of Finance disclosed plans to increase the sweetened beverage tax rate to P12 per liter, regardless of the type of sweetener used.
It proposed that the excise tax rate on sugary beverages be indexed annually by 4 percent, with exemptions eliminated to broaden the tax base. These measures aim to strengthen the effectiveness of the sweetened beverage tax by further discouraging the consumption of such beverages.
The higher taxes on junk food and sweetened beverages are expected to generate an additional P76 billion in the first year, the DOF said, and result in a 21-percent reduction in the consumption of junk food.
The government expects to generate P40 billion to P50 billion revenues from sugary beverages in the first year of implementation.
“This is not first time that taxes are implemented for this kind of business. This is great product with good cashflow and creates a lot of opportunities for cross selling,” Hilado said.