Red Bull sales cowed by taxes
Published:Wednesday | December 28, 2011 | 12:00 AM
Steven Jackson, Business Reporter
The annual sales of popular energy drink Red Bull dipped from the near US$8 million (J$690 million) recorded last year, due to taxation and the weak economy, its distributor said.
Consequently, consumers are opting for cheaper drinks over J$150 Red Bull.
"Basically the Red Bull business has declined in the last 12 months. The economy has weakened and it has impacted it as well," said William Mahfood, managing director, at the privately owned Wisynco Group.
Wisynco, which became the distributor of Red Bull in 2010, was on track to equal the sales generated in the final year in which Caribbean Producer Jamaica (CPJ) held the distribution contract, before the new tax policy on energy drinks and declining consumer spending power derailed targets, said Mahfood.
CPJ generated sales of US$7.9 million for Red Bull in 2010, according to CPJ company financials.
"We were not that far from that figure, but the problem was impacted by the tax and the economy," added Mahfood.
"When we first took it over, we saw good growth but then last December, we were impacted by tax."
Mahfood added that the tax issue remains unresolved with government. Since December 2010, consumers were paying a 15 per cent special consumption tax (SCT) on energy drinks. The tax was pulled back as a result of challenges brought by distributors based on establishing a definition of energy drink.
Consequently, in Septem-ber the tax was reintroduced, according to Daryl Vaz, then minister with responsibility for information. The definition of energy drink was extended to beverages with ingredients including herbs, amino acids and may include caffeine.
Illegal collection
Mahfood previously said that Government's collection of the tax prior to its September reintroduction was "illegal". Wisynco distributes its own energy drink, Boom, as well as Red Bull.
"We are still hoping that we would have a solution. The overall tax was close to J$100 million between Red Bull and Boom," Mahfood told Wednesday Business in the run up to Christmas.
In 2003, CPJ introduced Red Bull to the Jamaican market, which propelled sales in CPJ's retail division. The company discontinued selling the drink in 2010 after a commercial dispute with the supplier that was eventually settled in a confidential agreement, according to a stock market filing by CPJ.