Kuala Lumpur: The current sugar tax limits have not affected the business states of Nestlé (Malaysia) Bhd., a leading food and beverage company. The company’s beverage products constitute 30-40% of its sales, reports Business Times.
The company’s beverage line includes both pre-mixed and ready-to-drink (RTD) options. CIMB Securities Sdn Bhd noted in a report that Nestlé’s ongoing investment in product innovation, focusing on nutritional content and healthier lifestyles, has enabled it to avoid the impact of the sugar tax.
Nestlé’s commitment to enhancing the nutritional content of its products, supported by its in-house research and development (R&D) capabilities, has positioned it to adapt to any potential changes in sugar tax thresholds or the introduction of a new sugar-sweetened beverage tax (SSB).
According to Nestlé’s financial year 2023 (FY23) annual report, 32% of its product portfolio, comprising 41 products, has received the Healthier Choice Logo (HCL) certification from the Ministry of Health Malaysia (MOH). Products certified as HCL are exempted from the sugar tax.
Other RTD drinks with sugar content exceeding 5g per 100ml or sugar-based sweeteners, and fruit or vegetable drinks with sugar content exceeding 12g per 100ml are levied at the rate of 50 sen per litre. Excise duty on pre-mixed beverages is flat at 47 sen per 100g when its sugar content exceeds 33.3g per 100g.
Based on profit-earning per share, CIMB Securities kept its previous estimates for Nestlé for FY24-FY26. The ‘Hold’ rating carried over with the target price of RM122.80 was not altered. Strong brand equity and product portfolio diversity across all major food categories support large chunks of earnings to be drawn from inelastic demand for staple goods. The near-term outlook is weak for Nestlé.
