KENYA – COVID-19 restrictions implemented to curb the spread of the virus in Kenya have had a negative impact on the performance of the soft drinks’ category.
Temporary foodservice closures and reduction of sitting capacity implemented in order to prevent crowds of people, are reported to have dampen the demand for carbonated beverages which are popular products in restaurants, bars and cafés.
According to reports by Business Daily, production of soft drinks in the year 2020 slumped, the first time in nearly a decade.
Data by the Kenya National Bureau of Statistics shows that production of drinks such as sodas dropped by 80.4 million litres in 2020, bucking a trend of increases since 2012.
Beverage companies recorded a production of 550.6 million litres in 2020, compared to 630.9 million litres the previous year.
Despite the players adopting omnichannel commerce such as online selling and retail stores, which have increased at-home consumption, but out-of-home consumption – which historically generates the highest margin has come to nearly a standstill thus registering an overall decline in sales.
“Covid-19 lockdowns put tremendous pressure on all retailers, particularly small, independently operated stores in high-density urban areas that depend almost solely on foot traffic.”Coca-Cola
Also, many households have cut back on consumption of items such as soft drinks that are deemed non-essential following the shrinking of disposable income during this economically challenging times.
The country’s leading beverage maker Coca-Cola, recorded a 13 per cent drop in net operating revenue to post Ksh3.5 billion (US$32.5m) in 2020, down from Ksh3.9 billlion (US$36.3m) in 2019.
“Covid-19 lockdowns put tremendous pressure on all retailers, particularly small, independently operated stores in high-density urban areas that depend almost solely on foot traffic,” Coca-Cola noted in their annual Company report.
The trend has also been reflected globally with the make of Coca-Cola, Sprite and Minute maid brand, registering a 11% decline in net revenue for the full-year to US$33 billion.
Ugandan beverage manufacturers ask govt to bear cost of digital stamps
Meanwhile in Uganda, the beverages manufacturers through the Uganda Manufacturers’ Association (UMA) have asked the government to bear the cost of implementing the Digital Tax Stamps (DTS), introduced in 2019/20 to help the government monitor tax compliance.
According to the manufacturers, this would help them control their production costs, especially during the COVID -19 periods, as well as reduce the cost of recovery to the sector whose market is currently crippled.
The move, they said, would also protect the beverages sector from insolvency and closure, since its current production capacity has fallen by about 40% while sales have dropped to approximately 65%, reports New Vision.
“This COVID-19 outbreak is already taking a toll on many manufacturing facilities, but the beverage sector could be the worst hit. Already our capacity to produce has been reduced to 40% and yet we have to pay for the digital tax stamps.
“This will result in additional costs on the already financially distressed sector players and may result in job cuts and even closures,” said Morgan Bonna, the secretary-general for the Uganda Water and Juice Manufacturer’s Association.
On November 1, 2019, Uganda Revenue Authority (URA), under the digital tracking solutions strategy, announced it would roll out Digital Tax Stamps for all excisable products.
The tax was first applied to selected products such as water, soda, spirits, cigarettes and wines, as the taxman sought to plug revenue leakages, combat illicit trade as well as boost and increase efficiency in tax administration.
According to Bonna, Finance minister, Matia Kasaija indicated in a letter written to manufacturers in November last year, that the cost of installing the machines and the Digital Tax Stamps would be borne by government.
In the letter, he said, Kasaija promised that the government would meet the cost for one calendar year, yet later, they were told the program would run for only four months.
“This program was launched in February of this year, which only leaves us four months to start meeting the cost of the machines and stamps. This is contrary to our initial agreement, that they would shoulder the cost for one calendar year as we adjust and adopt,” he said.
He said although government is currently meeting the cost of installing the machines, the manufacturers want the government to also meet the cost of the stamps as agreed to before.
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