TANDUAY Distilleries Inc. said its brand has retained the world’s top rum brand for the second straight year, beating known brands such as Bacardi and Captain Morgan, but the company is unsettled with the impending excise tax increases that can dampen its growth.
The citation of the world’s top rum brand came from Drinks International magazine, but it was mainly based on the volume of cases sold last year. Drinks International is a global spirits market organization which rewards the greatest drinks in different categories. It releases annual industry updates and rankings of brands that record volumes of a million 9-liter cases or above the previous year.
Tanduay sold 20.1 million cases last year, 3 percent higher than 2017’s 19.5 million cases. This is higher than second-ranked Bacardi’s 17.1 million cases for 2018, and Captain Morgan’s 11.7 million cases sold.
The ranking was based on the magazine’s World Million-Case Spirits Brands, which tracks record volumes sold of all spirits.
“This is a milestone not just for Tanduay, but for the Philippines as well. This shows that Filipino craftsmanship is truly world class,” said Lucio Tan Jr., Tanduay’s president and COO.
“Exports expanded as far as the US, Europe and Asia. We have also embarked on high-profile marketing initiatives. Today, we are reaping the fruits of our hard work. We have once again maintained our stature as the world’s No. 1 rum,” Tan said.
“It was difficult to remain on top. The challenge was to remain on top,” he said. Tanduay admitted it remained mainly a local brand compared to its competitors.
Nestor Mendones, the company’s CFO, said the company will be “lucky” if Tanduay hits 1 million cases from the overseas market over time.
“We are only selling 5,000 cases from the US market alone. But our margins were higher from those bottles we sell from the overseas market,” Mendones said.
The company is bracing itself for another round of excise-tax increases on its products, which when excessively slapped may be detrimental to the industry, Mendones said.
Paul Lim, chief marketing officer of Tanduay, said their company embarked on an “aggressive marketing plan and an intensive dealer retention plan” three years ago.
“The company increased its market presence abroad by expanding its distribution networks in the US, Middle East, Europe and soon here in Asia, starting with a distribution deal for Singapore this July,” Lim said.
In an interview with the Philippine News Agency (PNA), Lim explained Tanduay has adjusted “in every area to meet the rules of liquor of every country their rum products have reached.”
“We had to meet the requirements, observing their restrictions. So, we made adjustments on the rum’s taste, labels, because the liquid profile here in the Philippines won’t be necessarily approved in China and the US, and in the US, every state has regulations,” he said.
For Tanduay rum to be more competitive in Singapore, Lim said they have adjusted their product’s packaging from 750 ml to 700 ml “because all their competitors are packaged in such manner with consideration to excise tax.”
“In the US, we positioned Tanduay on the premium segment, unlike here in the country where our product is in the mainstream. From the consumers’ standpoint, even if they don’t drink, they would really love to see a Philippine product growing globally and being patronized by consumers abroad,” he added.
Gerry Tee, overall head of Distilleries Operations of Lucio Tan Group of Cos., said Tanduay Distillers Inc. is adopting more efficient technologies to decrease its dependence on nature.
“Our industry, the distilleries is one of the most resource-intensive industries that require a huge amount of water and energy, two of the most utilized resources of industrialization in developing economies. So, we have put up our own dehydrator to lessen our dependence on fresh water; we have also installed solar panels on our warehouses to have renewable energy for our operations,” Tee added.
In a related development, Mendones warned there may be an influx of foreign brands, or worse, smuggling of alcohol products into the country when there’s an excessive increase of excise tax, which companies can pass on to the consumers, but may dampen the industry’s growth.
A Senate version of the excise tax for the distilled spirits—such as gin, brandy, vodka, whiskey, rum and tequila—calls for an increase on the specific excise tax rate to P40 per proof liter effective 2019, followed by an additional P5 per proof liter from 2020 to 2022. From 2023 onward, it will be an additional 10 percent.
The ad valorem rate is proposed at 25 percent from 2019 onward.
Mendones said they prefer a version in the House of Representatives that called for a lower rate than the Senate version.
He said beer should be heavily taxed as well since of the entire alcohol universe, 70 percent consumed beer and only 30 percent was from the spirits market.
With a report from the PNA