A new Trade Ministry regulation issued on Friday will allow alcoholic-beverage makers to supply their products directly to retailers without having to go through distributors, a move that the government hopes will help reduce costs for producers.
However, liquor producers and distributors have been hit hard by high government taxes. They remained skeptical about whether the move would reduce their costs and make beer, wine and spirits more affordable for consumers.
Under the previous regulation, all producers of alcoholic beverages were required to use independent distributors to supply their products to retailers.
The regulation also applied to the country’s sole licensed importer of alcoholic beverages, state-owned PT Sarinah.
The new rule gives producers the freedom to decide whether to use distributors, Subagyo, the ministry’s director general of domestic trade, said on Friday.
Distribution costs for alcohol usually add about 10 percent to retail prices, said Jimmy M Rifai Gani, the president director of Sarinah. However, he said he was unsure whether the regulation would dramatically reduce costs.
“It may reduce distribution costs, but I don’t think it will affect beverage prices that much,” Jimmy said. “The high luxury goods tax, value-added tax and import and excise duties charged on alcohol are areas the government will need to review if they want to reduce prices.”
The government currently taxes alcohol products, which are categorized as luxury goods, at between 40 percent and 150 percent. Imported beverages also face steep import and excise duties. By the time imported beverages hit the shelves, they often cost up to four times more than their wholesale price, Jimmy said.
Sarinah uses 18 distributors to move its products to restaurants, nightclubs and other licensed premises, he said.
Ipung Nimpuno, a spokesperson for the Indonesian Malt Beverages Association (GMMI), said the complexity of the distribution system meant that producers were unlikely to cancel contracts with their distributors in the near future.
“From a business perspective, it wouldn’t bring any benefits,” Ipung said.
“Can you imagine what would happen if we went head-to-head against our former distributors? Besides, we would have to establish our own distribution networks first.”
On Thursday, liquor producers urged the government to ease taxes on alcohol, arguing that the high prices were forcing people to turn to smuggled products and hazardous moonshine, which led to many deaths from alcohol poisoning.
They said illegal liquor accounted for more than 50 percent of the alcoholic beverages consumed in the country.