FOR THURSDAY
Now is the time to raise so-called "sin" taxes slapped on tobacco, alcoholic and sugary drinks as these industries' global sales recovered quickly post-pandemic, according to the Washington-based Center for Global Development (CGD).
"The generally harmful impact of the pandemic on company profits did not apply to tobacco companies and was temporary for alcohol and sugar-sweetened beverage (SSB) companies. Therefore, arguments for holding back on health taxes never applied in the tobacco sector and only applied temporarily for the alcoholic and SSB sectors," CGD said in its report titled "Navigating the Pandemic: Health Taxes and the Financial Performance of Large Tobacco, Alcohol, and Beverage Companies."
For this report published last November, CGD assessed the financial data of six alcohol companies, four tobacco manufacturers, as well as seven SSB firms that all operate globally.
"Sales volume data indicates that the Covid-19 pandemic did reduce the volume of consumption of cigarettes, alcoholic drinks, and SSBs in 2020, although tobacco was previously on a declining trend, whereas beverages were on a slight upward trend. These volume declines were temporary for alcohol and SSBs but were sustained for cigarette consumption at least through 2023," CGD's assessment showed.
According to CGD, tobacco firms were able to maintain their revenues amid the pandemic as price hikes offset the sales volume decline.
CGD noted that global tobacco players have "strong control" over pricing.
"For four large multinational tobacco companies, sales revenues held up during the pandemic ($106 billion in 2020 compared to $104 billion in 2019), gross profit margins increased, and gross profits and net profits (adjusted for special factors) were maintained," CGD said.
As for alcohol and SSB sales, CGD said revenues and profit margins dropped in 2020 due to the pandemic as decreased demand from the hospitality industry outweighed increased retail sales.
Alcohol and SSB "faced larger overall demand declines than tobacco" at the height of the pandemic, the report pointed out.
Still, CGD cited that the alcohol and SSB industries suffered from an only "temporary" sales drop as they already recovered in 2021 and 2022, respectively.
"Five large alcohol producers' sales rose to $122 billion compared to $120 billion pre-pandemic and seven large SSB producers' sales rose to $208 billion compared to $186 billion pre-pandemic," CGD noted.
"In general, alcohol and SSBs are more price sensitive than cigarettes. Alcohol and SSB companies have weaker pricing power than tobacco companies, and they sought to offset demand declines by reducing prices and profit margins," the report explained.