THE Filipinos’ love for celebration will fuel the growth of hard drinks, amid the government’s plan to slap higher excise taxes on this type of beverage.
While he described the move as unfavorable for the business, Yogi Ringler, Future Trade International’s (FTI) chief marketing officer, remains optimistic that consumption of wine and other alcoholic drinks will remain robust on the back of the country’s high spending power.
But as the government hikes excise taxes on alcoholic beverages, Ringer warned that consumers will face a round of price increases by five to 10 percent.
He, however, downplayed the impact of high taxes affecting their sales, saying “Filipinos love to drink in good and bad times.” He also cited the strong inflows of remittances abroad that would spur growth on spending, as well as the high consumption of people who work in high-paying industries like business process management (BPM).
FTI is a distributor of wines and spirits. It carries several brands, from ready-to-drink, spirits, wines and beer and cider segments. The firm carries 70 brands and 400 different products.
Ringler was recently in Cebu to promote Nederburg wines together with the brand’s winemaker, Samuel Viljoen. Nederburg is a South African wine established in 1791.
Viljoen has high prospects for Cebu, saying its growing affluent market is driving the brand’s sales growth.
He said the wine’s high quality, despite it still being less popular in the country compared to French wines, was able to capture a good share of the market.
“Filipinos have a fun and loving culture. They love celebrations, the reason the beverage market is maturing. For wines, we now see the market getting conscious about health, so they try to experiment. From a certain age of loving beers, when you hit in your 30s, you explore wines, which is a bit higher in terms of price points. But it is a trend that most Filipinos follow,” explained Ringer. “The beer drinkers eventually graduate and become wine drinkers,” he said.
Social media is also helping the wine industry capture the younger market. The presence of Facebook, Instagram and other digital platforms has helped raised awareness about wine, its benefits, culture and knowledge that it isn’t always expensive.
“There are wines that are friendlier on the pockets of the younger market,” said Ringler.
FTI’s import volume for wines has been growing by 10 to 12 percent every year. This translates to two million cases imported every year. One case carries 24 wine bottles.
Meanwhile, Finance Assistant Secretary Antonio Joselito Lambino II said the government expects around P161.3 billion in additional revenues once taxes from cigarettes and alcohol are raised beginning 2020, and another P177.6 billion the following year.
The Department of Finance (DOF) wants higher excise taxes on distilled spirits, or the hard drinks, wines, and fermented liquors including beers, and aims to get the bill be passed into law within 2019.
Under the proposal, the present value-added tax of 20 percent on distilled spirits will increase to 25 percent beginning in 2020, while its specific tax per proof liter will rise to P140.
An annual increase of P15 per proof liter of distilled products is also being proposed by the DOF between 2021 and 2023.
For wines, the government agency wants the excise tax to be imposed by the liter covering sparkling wines, or Champagnes, as well as still and carbonated wines.
For sparkling wine products with retail prices of not more than P1,500 per liter, the excise tax will be at P1,334.59, while those priced above P1,500 per liter will be taxed P1,936.82.
A yearly increase of 10 percent beginning 2021 onward is also being proposed for all varieties of sparkling wines being sold in the Philippines, whether locally produced or imported.
For still and carbonated wines, the DOF wants the excise tax rate be pegged on the alcohol content.
For bottles containing 14 percent alcohol or less, the excise tax will be P140.15 by 2020, while those with 25 percent or less are levied at P180.31.
Meanwhile, still and carbonated wines with more than 25 percent alcohol content will be taxed as distilled spirits.
Like sparkling wines, the excise tax rate on still and carbonated wines will increase by 10 percent annually beginning 2021 onward once the proposal is adopted.
For fermented liquors or beer products, the agency wants to raise their excise tax per liter to P140 by 2020, and a yearly increase of P15 from 2021 to 2023.