FOR FOCUS - SUNDAY AUGUST 25<\/p>\n
Done<\/p>\n
;JP;HEN;
\nANPAc..r..
\nBeverages-business-outlook<\/p>\n
Luxury tax hurts sales of soft drinks<\/p>\n
Sudibyo M. Wiradji
\nContributor
\nJakarta<\/p>\n
Unlike most of Indonesia's food-related businesses, the
\nbeverage industry has been experiencing tough times over the last
\ntwo years, partly as the result of country's worst ever economic
\ncrisis.<\/p>\n
And the government's decision to impose a 10 percent luxury
\ntax on prepared nonalcoholic drinks further added to the problems
\nof the already battered beverage industry.<\/p>\n
\"Except for bottled water producers, most companies involved
\nin the beverage business are suffering negative growth,\"
\naccording to a senior official of the Association of Indonesian
\nBeverage Producers, or ASRIM.<\/p>\n
The economic crisis, which has significantly reduced people's
\npurchasing power, the high inflation rate and the imposition of
\nthe luxury tax are major factors for the decline in the beverage
\nindustry.<\/p>\n
\"The nonalcoholic ready-to-drink (NARTD) market is very price
\nelastic. Changes in price will immediately affect sales, thus it
\nis very important to be able to maintain our prices at affordable
\nlevels,\" PT Coca-Cola Indonesia's managing director Sanjay Guha
\nsaid.<\/p>\n
Currently, ASRIM has 22 members, all of which are engaged in
\nthe nonalcoholic ready-to-drink business. They include Teh Botol
\nSosro, Coca-Cola, Fanta, Sprite, Pepsi Cola and Aqua.<\/p>\n
Products included in the NARTD market include bottled water
\nand tea, soft drinks and juices.<\/p>\n
ASRIM members see the imposition of the luxury tax on soft
\ndrinks as unrealistic, and have urged the government to revoke it
\nin order to help revive the industry.<\/p>\n
\"Characteristically, nonalcoholic ready-to-drink products are
\nnonessential, ordinary products intended for the general public,
\nnot a particular group of people. So these products cannot be
\nincluded in the category of luxury items,\" said an executive at a
\nmajor beverage producer who asked not to be named.<\/p>\n
According to Sanjay, the beverage industry, which creates
\nbusiness opportunities for millions of small-scale businesses and
\nstreet vendors, should be supported.<\/p>\n
Despite the difficult situation, Coca-Cola, which control 20
\npercent of the nonalcoholic ready-to-drink market, remains a
\npopular soft drink, especially with teenagers and young adults.<\/p>\n
\"Our business over the last 10 years has grown steadily and we
\nhave always taken a long-term view of this market,\" Sanjay said.<\/p>\n
Unlike beverages in the NARTD category, the bottled water
\nbusiness is much more promising, in part because of the removal
\nof a 10 percent luxury tax in January last year.<\/p>\n
About 340 bottled water companies have registered with the
\nMinistry of Industry and Trade, of which about 200 are already in
\noperation.<\/p>\n
PT Aqua Golden Mississippi president director Willy Sidharta
\nsaid the revocation of the luxury tax on bottled water had helped
\nthe industry greatly, particularly in coping with the decline in
\npeople's purchasing power.<\/p>\n
The health of the bottled water industry can be seen in the
\namount of money that has been poured into the industry recently.
\nIn the last three years, total investment in the industry is
\nestimated at about Rp 3 trillion.<\/p>\n
Industry sources said the sale volume of bottled water reached
\nabout five billion liters in 2001.<\/p>\n
\"In 2002, the sale volume is projected to reach 7.1 billion
\nliters,\" a source at ASPADIN, the Association of Indonesian
\nBottled Water Producers, said.<\/p>\n
Bottled water companies with long-established brands and good
\nbusiness strategies have been able to record solid sales growth
\ndespite the unfavorable economic situation.<\/p>\n
PT Aqua Golden Mississippi Tbk., for example, reported over 50
\npercent growth in sales volume in 2001 to 2.36 billion liters,
\nfrom 1.57 billion liters the previous year.<\/p>\n
\"This year, our targeted sales volume is between 2.9 and three
\nbillion liters,\" Willy said.<\/p>\n
Last year Aqua invested about Rp 147 billion to expand its
\nproduction facilities, an increase from the Rp 133 billion spent
\nthe previous year. The investment was used for capacity-expansion
\nprojects that are scheduled for completion in 2002, the company
\nsaid in its 2001 annual report.<\/p>\n
Another bottled water company, Equil, mostly sells its
\nproducts to four and five-star hotels and fine dining
\nestablishments in the country's larger cities, such as Jakarta,
\nSurabaya, Bandung and Medan. This company is also enjoying
\nhealthy growth despite the difficult economic situation.<\/p>\n
Irawan Siswandi, an executive at Equil, said the company had
\nincreased production to 8,000 bottles per day from 5,000 the
\nprevious year in order to meet growing demand.<\/p>\n
\"Eighty percent of our products are for export consumption,\"
\nhe said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/for-focus-sunday-august-25-1447893297",
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