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Carbonated drink makers face sales drop on new excise duty

Nigeria’s $1.4bn soft drink market to slow on Excise Tax

The Federal Government’s excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages may have negative implications for the industry.

According to experts, carbonated beverages popularly known as soft drinks like Coca-Cola, Pepsi, Sprite, Bigi, Fanta etc. may risk a dip in sales and volumes as beer makers who are also complaining of high excise duty,

“The excise duty of N10 might make them increase it to N160-N180 from N150. I don’t support it because the money is not coming to the beverage companies but the government making their sales lower,” Ibrahim Ahmed, an inventory manager at Coca-Cola Nigeria said

Ahmed further said that lower sales will make the companies less profitable thereby making them lay off staff.

Similarly, Ayorinde Akinloye, a consumer analyst at United Capital Plc said the same thing that happens to the alcohol industry will also happen to soft drink markers because the sales in the increase in price will not be coming to them but the government.

“Consumption of soft drinks will reduce, making them opt for cheaper alternatives. So the producers are losing in two ways, the volumes and the extra price that they are charging,” Akinloye further said.

Excise duty is a form of tax imposed on the production, licensing, and sale of goods. Before the announcement of a new excise duty, there have been rumours that the government would introduce it since 2019.

Read also: Coca-Cola’s marks 70 years of robust business in Nigeria

During the public presentation of the 2022 budget in Abuja on Wednesday, Zainab Ahmed, the Minister of Finance, Budget and National Planning said the new policy is in the Finance Act signed into law by President Muhammadu Buhari on December 31, 2021.

She said, “There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages. And this is to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.”

She also added that it will help raise excise duties and revenues for health-related and other critical expenditures.

Over the past five years, soft drink makers have been competing for sales by increasing the quantity of products without increasing their prices due to weak purchasing power of consumers.

But last year, soft drink markers increased their prices twice due to a surge in international sugar prices, a major ingredient in the production of carbonated drinks.

The carbonated soft drink market commands a unique hold on the food and beverage sector in the Nigerian economy.

Despite the huge popularity of the juice and drinks market, the unique tasting appeal of carbonated soft drinks and its many array of flavours have always been a strength other drinks cannot match.

Nigeria’s fast-growing population brings with it a continuing demand for soft drinks, especially as the climate is quite hot.

According to Euromonitor International, a global market intelligence publisher, the country ranked fourth globally in the volume of soft drink sales recorded in 2016.

In 2019, Nigerians households spent N551.2 billion on non-alcoholic drinks, N205.5 billion on sugar, sweets and confectionery, and N150.3 billion on alcoholic drinks, a National Bureau of Statistics report shows.