Booze sales rebound as impact of tax hike fades

At convenience stores, supermarkets and provision shops, sales of mainstream brands have dropped, while high-strength, lower-priced Indian beers such as Kingfisher, Haywards, Godfather and Knock Out are increasing in popularity.
At convenience stores, supermarkets and provision shops, sales of mainstream brands have dropped, while high-strength, lower-priced Indian beers such as Kingfisher, Haywards, Godfather and Knock Out are increasing in popularity.

Consumption holding steady despite duties rising 25% in Feb; some turning to cheaper brands

February's 25 per cent rise in alcohol duties had a brief sobering effect on drinkers.

New figures show consumption of alcoholic drinks dipped sharply following the hike, with just 8 million litres bought in March, 28 per cent down on the previous month.

But recovery was quick and volume climbed back up to 10.7 million litres in April, according to Singapore Customs data.

Alcohol consumption has since held steady, with experts saying that demand does not depend too heavily on price.

"These products generally have some addictive quality, or they have few substitutes," said Nanyang Technological University economist Walter Theseira.

"What would you drink at a nightclub, if not alcohol?"

An affluent consumer base has helped modern pubs and bars sustain their business despite the hike, though some - like Timbre and Brewerkz - chose to absorb the tax increase.

"Business is normal - sometimes good, sometimes bad," said Mr Wee Lu Fa, 60, a pub owner. "Most people who come here have money to spend."

Meanwhile, heartlanders seemed to accept the 50-cent rise in coffee shop prices, said Mr Thomas Foo, chairman of the Kheng Keow Coffee Merchants Restaurant and Bar Owners Association.

In Singapore, liquor duties are aimed at moderating alcohol consumption. To keep pace with consumers' rising incomes and purchasing power, the Government raised the alcohol tax on Feb 21.

But drinking is, in fact, a lifestyle choice for many, who are grudgingly paying more rather than cutting back.

Among the more price-sensitive members of the beer-drinking class, preferences shift rather than disappear.

"From March to July, sales of higher-strength beers in the lower end of the market, like Anchor Strong and Kingfisher, rose 23 per cent from the same period last year," said Mr Samson Wong, general manager of Asia Pacific Breweries Singapore.

Mr John Botia, managing director of Carlsberg Singapore, agreed that consumers are "trading down" the spectrum towards cheaper beverages.

At convenience stores, supermarkets and provision shops, sales of mainstream brands have declined 15 per cent from a year ago, whereas "value brands" have gained 17 per cent, he said.

Much of this is due to the rise of high-strength Indian beers such as Kingfisher, Haywards, Godfather and Knock Out, said Mr Botia.

Most younger drinkers have not been hindered by the tax hike. Nightclub Zouk said that "sales have remained consistent" despite a 5 per cent price increase.

Polytechnic student Ng Theng Wei, 19, goes clubbing with his friends every week.

"But we'll definitely cut down when we grow older, and have jobs and responsibilities," he said.

In February, the Government also raised tobacco excise duties by 10 per cent, and after an initial dip, retail sales of cigarettes have remained flat.

Trading down has also been seen in the cigarette market, with cheaper brands selling for below $10.50, compared with $13 for premium ones like Marlboro.

"The growth of the low-price cigarettes has accelerated," said Mr Ann Hee Kyet, corporate affairs manager of Philip Morris Singapore.

With Marlboro cigarettes selling for as little as $1.70 a pack in Indonesia, Mr Ann said the company is concerned that there may be increasing incentives for smuggling, despite a recent decline in contraband.

So far, tax collected from the ramped-up liquor and cigarette excise duties has been falling short of the levels projected by the Government in February.

marilee@sph.com.sg