A huge buying spree began for alcoholic beverages

The increase in the excise tax on alcoholic beverages resulted in early purchases, mainly because the company raised prices, which was justified by the increase in the prices of raw materials in addition to the tax increase. Zwack expects a significant drop in consumption in the second half of the year as a result of the advance purchases and the continuously deteriorating purchasing power due to the inflationary environment, but the management considers the annual profit target to be maintainable, especially since the company has already met more than half of it in a single quarter.

Zwack reported a 56 percent increase in revenue for the first quarter of the 2022/2023 fiscal year, April-June, compared to the same period of the previous year. This is largely due to the increase in domestic sales, the majority of the increased domestic sales were generated by purchases due to the tax changes that came into effect on July 1, 2022. As of July 1, as a result of the amendment, the excise tax on spirits increased by nearly 70 percent, while the obligation to pay the public health product tax (NETA) was abolished.

As a combined effect of the two tax changes, the company’s tax liability on spirits increases by an average of 6 percent. This, together with the continuous increase in the price of basic and packaging materials, results in a cost increase to a degree that would have fundamentally shaken the company’s profit prospects, therefore the company implemented an extraordinary mid-year price increase on the entire portfolio with immediate effect, the rate of which is on average 7 percent, the rapid report reads.

The full article can be read on the Portfolio page, here.