TAC Beverage has announced a reduction in its estimated net profit of between 5 per cent and 8 per cent as a direct consequence of the government's approval of an increase in the price of sugar.

The sugar price was hiked yesterday from Bt11 per kilogram to Bt14.

TAC Beverage managing director Chatchawe Vatanasuk said sugar represented about 30 per cent of the company's raw materials. Its products include Zenya green tea, milk tea and other soft drinks sold from machines at 7-Eleven convenience stores. "The government's decision to increase sugar prices will drive our production costs up by an average of 8 per cent to 10 per cent this year and this will have a negative impact on our net profit, although we will try to reduce our operating costs," he said.

The company cannot increase the prices of its products because it is not only operating in a highly competitive environment, but the price is also controlled by the Commerce Ministry.

TAC Beverage estimates its overall sales will rise to Bt400 million and its net profit will be Bt40 million this year, up 166 per cent from last year's sales of Bt150 million and net profit of less than Bt10 million, Chatchawe said.

In an effort to boost sales beyond the target, the firm will launch a new flavour - Zenya Super Lemon green tea - this summer, and will follow that with another flavour in the third quarter.

At present it offers two flavours - "original" green tea and "tub tim" green tea. Both were launched in the third quarter of last year and recorded sales of Bt60 million out of the company's total sales of Bt150 million last year.

The remaining Bt90 million came from sales of its other products in 7-eleven stores. To drive this year's sales, the company plans to spend Bt30 million on marketing and promoting its new flavours.

Chatchawe said the green-tea market was now expected to tumble from a value of Bt7 billion to Bt5 billion this year because most major producers are unable to employ aggressive marketing tactics after facing controls by the Commerce Ministry during last year's big promotional campaigns.

"This year will see real demand for green tea out of health consciousness, rather than buying green tea because of promotion campaigns," he added. 

Somluck Srimalee 

The Nation