ECONOMYNEXT - An urban elitist tax imposed suddenly has hit carbonated soft drink sales of a domestic producer, who lost market share to foreign manufacturers which were already in Western nations where the regressive fad originated.
Ceylon Cold Stores said the tax pushed up prices of carbonated soft drinks by 33 percent, leading to a collapse in demand, on top of a currency collapse which led to an economic downturn.
"The Beverage sector witnessed a 16 per cent decline in volume stemming from the overall tapering of demand on discretionary food items, exacerbated by the significant price increases taken to mitigate the introduction of an excise duty imposed on the sugar content of carbonated soft drinks in November 2017," Ceylon Cold Stores told shareholders in the annual report.
"In response to the regulatory developments CCS developed a sugar free CSD variant “GO Sugar Free”, a beverage portfolio with no calorific sugar content, which was introduced to the market in April 2018.
Ceylon Cold Stores produces Elephant House branded fizzy drinks such as, Orange Barley, Necto and Lemonade, almost a cultural food many Sri Lankans have grown up with, even in rural areas.
Sri Lanka slammed a tax of 50 cents per gram of sugar on drinks, without giving enough time for producers to adjust, following the path of some European interventionists.
"Accordingly, CCS lost market share to its international competitors, several of whom already had sugar- free variants available in their international portfolio," the company said.
The UK imposed a tax on sugar in excess of 5 grams per 100 millilitres after announcing it in March 2016 and imposing it only from April 2018, two years later
Critics in several countries have slammed the use of the coercive power of the state to drive kids away from natural sugar into artificial sweeteners such as aspartame. Studies have so far not shown significant long term negative effect from aspartame use.
Elephant House is using Stevia, a plant, to replace sugar.
Ironically the paternalistic urban elitist sugar tax comes in a country with malnutrition and low calorie intake, though obesity is a problem in affluent households with bad eating habits.
Doubts have been cast whether sugar taxes would have the effects claimed, as people will eat other foods with sugar if they do not have an overall healthy diet.
Critics have also warned that such taxes give undue power for rulers to control citizens and make their dinner table a 'fiscal playground' (Colombo/June11/2018)