Nestle mulls halt to powdered juice, coffee production

MANILA, Philippines — Food and beverage giant Nestle Philippines Inc. is considering the discontinuation of its Nesfruta powdered juice business amid declining volume following the implementation of the first package of the government’s tax reform law.

Nestle, which also has local coffee manufacturing operations, is pushing for government to consider providing incentives to local manufacturers using local agriculture produce, citing they are at a disadvantage compared to other players who import finished products.

Ernesto Mascenon, senior vice president and head of corporate affairs at Nestle Philippines, said the implementation of the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law earlier this year, which slapped higher taxes on fuel, cars, tobacco and sugary beverages, has affected its powdered juice brand Nesfruta.

“Hardest hit are powdered juices like Nesfruta…So we are looking at whether we will continue with the business or not. Volumes have dropped significantly, (by) more than 30 percent,” he said.

Following the implementation of the law, Mascenon said the company had to raise the price of Nesfruta to P15 per liter from P9 previously.

TRAIN imposed a P6 per liter tax on drinks containing caloric and non-caloric sweeteners and P12 per liter tax for beverages with high-fructose corn syrup.

While the Department of Finance earlier said the excise tax on sugar-sweetened beverage would promote a healthier Philippines, Mascenon said the consumption of Filipinos of sugar from beverages is small.

As Nestle Philippines mulls whether or not it would continue the Nesfruta powdered juice business, Mascenon said the company may also consider transferring its coffee manufacturing operations in other countries as they are at a disadvantage compared to the players which import finished products.

He said the company has requested government to consider providing incentives to local manufacturers like Nestle which use local agricultural produce for goods to have a level playing field.

“From Nestle’s point of view, what we have raised to them (government) in terms of incentives is we are the only local coffee manufacturer in the Philippines now. We are buying as much coffee as we can. Our competitors are importing coffee. We are at a disadvantage because sugar prices are cheaper, electricity costs are lower. For example, if you import finished products from Indonesia or Vietnam, you make more money because the costs there are lower. Whereas, here in the Philippines, we still manufacture here, our costs are high,” he said

Nestle Philippines manufactures the Nescafe Classic coffee and coffee mixes.

Paolo Mercado, senior vice president for communication, marketing and innovation at Nestle Philippines, said while it is easier to just import finished coffee products, the firm would still want to maintain manufacturing operations in the country.

“We prefer to manufacture here because that’s job creation,” he said.

Apart from direct employment, he said the firm’s coffee manufacturing operations also support local coffee growers.

For its coffee products, the firm buys coffee beans from Philippine producers and gets the bulk or more than 50 percent from overseas as local supply is currently not enough.