KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N), which estimates that prices of its beverages could increase by 10 sen to 60 sen if the sugar tax is passed on to consumers, is appealing that the tax be phased in, rather than take effect on April 1, 2019, as reformulation of existing products takes time.
F&N CEO Lim Yew Hoe said about 90% of its beverage portfolio are products containing sugar exceeding 5 grams per 100ml, which will be subjected to excise duty of 40 sen per litre starting April 1, 2019. F&N’s products include F&N 100 Plus, F&N Fun Flavours, F&N Seasons, Oyoshi, F&N Condensed and Evaporated Milk, F&N Magnolia, Farmhouse, Carnation and F&N Fruit Tree.
“It (sugar tax) is not going to be positive for sure (for the industry). April 1, 2019 is too early. It’d be better if we’re able to do this in a phased-in manner,” Lim said at a media and analyst briefing here Monday.
He said the reformulation process that F&N has to go through for its products includes working with new suppliers, using new ingredients, as well as undergoing lab trials and commercial trials. This is followed by consumer surveys and tweaking, halal certification application, production and putting the products on the market.
“We prefer for this process to be phased in so that we can do it more systemically. It’s important that producers introduce a good reformulated product. Rushing is never good. Reformulation takes time and looking at our products, we need to reformulate quite a lot of things and five months (to April 1) is very quick,” explained Lim.
He said reducing the sugar content of its beverages from 6% to 5% is not difficult but it is a matter of how much is the cost increase, and how much should be passed on to consumers.
Lim added that sugar is not easy to replace with the same costs and taste, explaining that sugar provides the “texture and body” and is stable in keeping the quality of beverages.
“It’s difficult to replicate recipes by having less sugar. (100 Plus) Reduced Sugar actually costs a lot more to produce than the normal 100 Plus because the recipe to go to 4% sugar and yet be accepted by consumers is not easy,” he explained.
Lim said F&N is targeting to have an alternative healthier product for every product category by 2020.
He said the management is waiting for more details and clarification on the sugar sweetened beverages excise tax before they are able to fully assess the impact, but will closely monitor the situation.
Over the years, F&N has reduced the amount of sugar in its total beverage portfolio, decreasing the sugar index (sugar amount in gram per ml of beverage) by 34% since 2004.
With the evaporated milk line at its dairy manufacturing plant in Pulau Indah running at full capacity, the group is investing in a new RM15 million production line to further expand its capacity. This would lead to greater export capability for F&N, in line with its aim to surpass the group’s RM800 million export sales target by 2020.