Sri Lankans, once believed to have taken a less sugary and health-conscious path, appear to have made an about-turn as they have continued to favour the sugary variants in their selection of carbonated soft drinks prompting the market leader to withdraw the whole sugar-free range in less than a year since its launch.
John Keells group company, Ceylon Cold Stores PLC, the leader in carbonated soft drinks space and frozen confectionary market in Sri Lanka said sugar-free variants received only tepid interest in the market, hence was the pull out.
“The traction on the carbonated soft drinks (CSD) ‘Go Sugar Free’ variant introduced in 2018 was disappointing, and as a result of the lack of consumer demand for sugar-free CSD beverages in the Sri Lankan market, the company withdrew the range,” Ceylon Cold Stores Chairman Krishan Balendra said.
For the year ended in March 31, 2019, the manufacturer and marketer of food and beverage under its Elephant House brand reported earnings of Rs.13.79 a share, down 49 percent from a year ago amid poor consumer sentiments and tight policies.
The sales for the year stood at Rs.59.1 billion, up 16 percent from a year ago.
The group’s manufacturing business which houses carbonated and non-carbonated drinks and frozen confectionaries reported Rs.1.8 billion in earnings compared to Rs.2.3 billion while the revenues remained flat at Rs.13.9 billion.
The beverage volumes have declined by as much as 25 percent amid continued tapering of carbonated drinks demand due to price increases announced to mitigate increased excise duty.
The government imposed a tax of 50 cents for each gram of sugar contained in fizzy drinks from November 2017, which was later extended to fruit drinks, sending the prices of such products higher and sales lower.
The ultra-liberal factions in the country called the tax illiberal and interventionist, and interpreted the move as a slap on the poor and the less affluent to afford a drink of their choice.
The proponents of the tax cited it was a measure to stem the rise of non-communicable diseases such as diabetes in the country.
After constant lobbying by the beverage makers, large and small, carbonated and non-carbonated, the government rationalized the sugar tax in the budget presented in March 2019, which the Ceylon Cold Stores said enabled to reduce the prices of carbonated beverages towards the end of its financial year, resulting in an uptick in volumes.
“Following the downward revision in sugar tax during the year, we passed on the cost benefit to the customers,” Balendra said.
In any case, it appears that carbonated drink makers have misread the Sri Lankan consumer who thought to have been shifting to less sugary and healthier alternatives, at least for now.
In view of the denting demand for its fizzy range, Ceylon Cold Stores diversified into non-carbonated drinks from fruit juices to dairy and to bottled water.
“The initial uptake of these products in the market has been encouraging and the business will focus on growing the volumes in the non-carbonated categories in the future,” Balendra added.