Page 59 - FoodFocusThailand No.172 July 2020

BEV TREND & TECH SUPPLEMENT Edition

also serve immediate, local markets, and (i) Tax has been imposed on soft drinks according to their sweetness, as well as on
there are more than 100 of these upcountry the sugar content of powdered and concentrated drinks, in order to increase public
selling to restaurants and street food stalls. awareness of the impact of the consumption of sugar-laden drinks on health. Initially, the
• Carbonated drinks: This market tax rates have been set at a relatively low level but these will be ratcheted up every two
has the features of an oligopoly because years until 2023.
new players have to invest significant (ii) Tea and coffee have been removed from the list of drinks that are tax-exempt
capital reserves in the purchase of (because they promoted the use of agricultural products and are beneficial to health) and
machinery, a fixed cost, that they will then so taxes on these goods have also risen.
hope to recuperate by producing in large 3. Duties on alcoholic drinks retain their mixed nature so these are still based on
enough quantities to generate economies both price (to reflect the extent to which a product is a luxury) and alcohol content (to reflect
of scale, and because they usually have its potential to damage health) but the balance between the two has shifted. Thus, the
to import ingredients from a parent value component has fallen from 80% to 40% and the alcohol-content component has
increased from 20% to 60%, a mix that better reflects international norms.
company. Important operators in this
market include Coca Cola Thailand (selling
Coke, Fanta, Sprite, Schweppes, and A&W
Root Beer), Pepsi Cola Thailand (selling
Pepsi, Mirinda and 7 Up), Sermsuk (EST
Cola), RJ Group (Big Cola) and Sakol
Beverage Company (RC Cola).
• Energy drinks: This market is also
somewhat oligopolistic in nature because,
as with bottled water, producers need to
generate economies of scale by outputting
in bulk. In the case of energy drinks, this
is to enable them to price their goods
cheaply and so successfully reach the
domestic market, which in Thailand is
overwhelmingly blue collar in composition;
this in contrast to the market for energy
drinks in areas such as the United States,
Europe, Japan and South Korea, where
the market also extends to white collar
workers and students, in addition to
manual laborers. Marketing strategies that
emphasize developing many brands as a
way of preserving market share also work
as barriers to entry against new players
and so at present, there are three market
leaders: Osotspa (operating under the
brands M-150, Lipo and Shark),TC
Pharmaceuticals (Red Bull and Ready)
and Carabao Group (Carabao Dang).

Changes to Taxation in the
Drinks Industry, 2017
Adjustments to excise duties following the
2017 Excise Tax Act were enforced from
September 16, 2017 and had important
consequences for the collection of taxes
in the beverages sector.
1. The review of the basis for
calculating duties from factory-gate
prices (for domestically-produced drinks)
or CIF prices (for imported drinks) to one
based on the recommended retail price,
less any sales taxes, had more significant
consequences for Thai-made alcoholic
drinks than for imported ones and this has
then led to the former carrying a heavier
tax burden.
2. The collection of taxes on drinks
according to their sugar content has
brought about changes to the sector in two
ways.

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