Sri Lanka: Alcohol Tax Hike Unfolds Effects
An alcohol taxation increase, introduced by the government two years ago to curb alcohol-related harm, is showing its effects, as – for example – beer producers report shrinking profits.
Sri Lanka’s Lion Brewery Plc, reported a 315 million rupee profit in the June 2017 quarter helped by 600 million rupee insurance receipt while revenues fell and gross profits shrank after alcohol tax hikes in Sri Lanka are unfolding their effects.
Lion received a 608 million rupee insurance claim for interrupted business when a flood hit its plant, which is now back in operation.
Higher alcohol tax, lower sales, shrinking profits
Lion Brewery reports to its shareholders that revenues fell 3% to 5.4 billion rupees in the June quarter, and cost of sales went up 1% to 4.49 billion rupees, shrinking gross profits 20% to 939 million rupees.
An alcohol taxation increase, introduced by the government two years ago to curb alcohol-related harm, is showing its effects. A tax on cans was also introduced.
Lion Brewery – that is owned by Carlsberg Group, the third largest beer producer worldwide – produces the highest selling beer, Lion Lager, in both Sri Lanka and the Maldives.
As a result of these multiple taxes, the price of beer increased by as much as 75% over a 14-month period,” the firm told shareholders.
Currency depreciation and inflation, following a bout of money printing by the government in Sri Lanka in 2015, are shrinking consumer disposable income, and most consumer firms are seeing tighter venues.