Plans to increase the rate at which non-alcoholic beers are taxed in Thailand risk disrupting the nascent category, according to analysts at GlobalData.
Presently, low- and no-alcohol beers are taxed at 14%, on a par with non-alcoholic beverages including carbonates, whilst an excise tax of 22% is levied on the retail sales price of alcoholic beer.
However, the Thai Public Health Ministry is mulling over whether to increase the excise tax on non-alcoholic beers, amid suggestions Thai consumers are seeing them as an alternative to other non-alcoholic beverages including soft drinks.
The move, according to Bobby Verghese, a consumer analyst at GlobalData, is also driven by fears alcoholic drinks brands are using their non-alcoholic SKUs to promote their parent brand.
“The authorities are also concerned about the potentially misleading marketing campaigns of no-alcohol beer,” Verghese said. “As no-alcohol beers are registered as food with the Thai Food and Drug Administration, the marketing restrictions are lenient. Contrarily, all marketing content featuring the brand names, logos, and images of alcoholic products, including regular beer, is strictly prohibited.
“No-alcohol beers are not required to display any health or social warnings on their packaging labels, unlike regular beers. Also, despite the broad-based restrictions, there is a risk of brewers leveraging their no-alcohol beer brands as a surrogate for promoting their regular and strong beer brands.”
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Tim Hill, a key account director at GlobalData Singapore, said the increase in taxation on non-alcoholic beers could “clip the wings of the niche no-alcohol beer segment even before it takes off”.
“Most stakeholders agree that no-alcohol beer has the potential to help drinkers to reduce their alcohol consumption,” he said. “No-alcohol beer can breathe new life into the monopolistic market that suffers from a dearth of product innovation.
“Additionally, no-alcohol beers can check the consumer shift to wines, spirits, ready-to-drink cocktails, and hard seltzers, which are perceived as healthier indulgences.”
Low and no-alcohol beer, with an alcohol by volume (ABV) between 0% and 0.5%, is a nascent segment in Thailand, accounting for a fraction of overall beer volumes, which stood at 1.81bn litres in 2022.
The segment’s volumes declined at a compound annual growth rate (CAGR) of 16.3% between 2017-2022 due to the Covid-19 pandemic.
Last year, the UK government said it was not currently considering proposals to increase the ‘alcohol-free’ descriptor threshold in the country to 1% ABV, nor to increase the ‘low-alcohol’ descriptor threshold from 1.2%.