Financial Times

Fillip for Ginger Beer
Ceylon Cold Stores (CCS), a subsidiary of the John Keells conglomerate, expects to improve sales and market share of Ginger Beer, following tax incentives in the government’s 2006 budget.

“This is a welcome move,” a company official said. “This will encourage production of a totally local-based drink. Ginger beer is a local product and it is encouraging the government has given it recognition with incentives.”
Finance Minister Sarath Amunugama announced in the budget that the VAT rate on medicated soft drinks such as Ginger beer and Peyawa will be reduced to 15 percent from 20 percent to promote the use of local agricultural produce.

CCS buys most of its annual natural ginger requirements, grown and supplied directly by 190 farmers under an out-grower programme in Hataraliyadda, in Kandy District, that eliminates market risks faced by farmers due to guaranteed sale prices.

Although Ginger beer now accounts for only a very small percent of CCS’ total beverage portfolio, the tax incentive will help the firm grow the market and have a larger share of the soft drinks market, the company official said.
“The incentive also helps us mitigate cost increases over the year such as wages and sugar prices,” he said. “It also helps us to grow volumes in the category.

Then our costs will come down and we can reduce prices in future.”
CCS is also pursuing wider export markets for the health-based drink.
“It is encouraging to know the category is supported by the state. We have made investments on machinery to extract ginger – the extraction process is available only with us.”

CCS serves Ginger beer on the national carrier SriLankan Airlines and also overseas markets but the canning is done abroad as the local market volumes are considered too small for a canning plant.

CCS has complained rising import costs of raw materials due to a declining rupee and increased import duties and cess levies coupled with increases in excise duty, fuel prices and Value Added Taxes, had depressed profit margins.

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