Tanduay sees flat sales this year

MANILA, Philippines - The liquor unit of tycoon Lucio Tan said it expects flat sales this year despite programs to increase its market share.

Tanduay Distillers Inc. is weighed down by strong competition and higher excise tax, a company official said.

“We hope we would maintain the volume this year, same as last year,” said Nestor Mendones, senior vice-president and chief finance officer of Tanduay.

But he said the competitive landscape is getting tougher in the liquor industry.

Profits of the distilled spirits producer sank to P6.9 million in the first quarter from P184.6 million a year ago on the absence of non-recurring items. Last year, Tanduay’s sales picked up to P12.7 billion from P12.2 billion in 2011.

Less one-off items, recurring net income would have been roughly P190 million, almost the same as last year as sales volume of Tanduay’s spirits remained relatively flat, its parent firm LT Group Inc. said.

Mendones said sales volume is flat, with higher taxes, though not as steep as that imposed on beer and tobacco, took its toll on sales.

“There can be no guarantee that the increased taxes will be able to be passed on by Tanduay to its consumers, which may result in lower demand for its products and have an adverse effect on Tanduay’s business, financial condition and results of operations,” LT Group said.

The sin tax law took effect early this year as the government aims to shore up its revenues while discouraging the public to consume alcohol and tobacco.

“Generally, taxes on Tanduay’s products are likely to greatly increase in the coming years,” LT Group said.

For this year, Tanduay’s principal strategy is to gain and increase its market share by introducing new products to cater to the current and emerging market preferences.

It also targets improving its distribution network to expand market reach.

In April, Tanduay decommissioned its Manila production facility to reduce costs. The company still maintains production facilities in Cabuyao, Laguna; Cagayan de Oro and Misamis Oriental.

Tanduay plans to renovate the closed facility to serve as a museum showcasing the production methods of its products and distilled spirits.

Tanduay, the second-largest producer of rum in the world, plans to expand its export business through new rum products that will be sold in the United States starting this year.

It is the company behind the brands like Tanduay Five Years, Tanduay ESQ, Rhum 65, Gin Kapitan and Cossack Blue.