Cameroon: Brewers fear losses and further price hike, following Beer Labeling Program launch

The Cameroonian government is launching in the coming months a program to label beers and soft drinks. This consists of affixing a sticker to each drink bottle, the Business in Cameroon reported on June 4.

Sources said the program should extend to cigarettes and drugs, which are among the products most exposed to smuggling. In a letter sent in early May 2019 to brewing companies, the Ministry of Finance announced the government's decision to continue this program, despite producers’ opposition.

The reform is expected to increase tax revenues by ensuring traceability and control of products most exposed to illegal trade. It will also make it possible to provide brewers with solutions that enable them to protect and authenticate their production.

Despite these advantages evoked by the government, brewers are reluctant. “Aware of the challenges of food safety and public health, Cameroonian brewing companies have set themselves quality and control standards in terms of food safety, which have forced them in recent years to acquire an automated control and traceability system based on advanced technology,” explained an executive of a brewing company.

The latter said the government decision means that brewers will have to “abandon the marking and traceability system on which each of them invested colossal resources a few years ago.” Decision also requires “modifying the layout of the acquired production lines in order to integrate the specifications of the equipment of the service provider (hired by the government), to bear the losses inherent in the installation and test phases, or to bear the costs of adapting and training personnel in the use and mastery of these new technologies.”

In the face of that scenario, explained a source close to the matter, brewers will “transfer these additional operating costs to the final consumer.” In other words, the beer labelling program will lead to further price hikes, after that in March 2019 decided due to the impact of the 2019 Finance Act on the brewing activity.

The implementation of the program is entrusted to a certain Sicpa, a Swiss company, which already holds similar contracts in Kenya and Morocco. In these two countries, contracts awarded to Sicpa for the labelling of liquors, tobacco, water and sweetened drinks are highly contested.

In 2016, the Kenyan politician Raila Odinga, former Minister of Finance and several times presidential candidate, openly denounced the “dubious conditions” under which the contract was granted. The company had also been accused by this politician of illegally collecting taxes; accusations that Sicpa rejected en bloc.

In Morocco, doubts are raised on the prices applied by the Swiss company. Before the renewal (in 2014) of its contract signed since 2010, and which now extends until 2020, Sicpa sold a sticker on cigarettes 15 times more expensive in Morocco than in Canada or Turkey. In addition, the Moroccan tax authorities have imposed a huge annual fee on producers in the focus sectors in order to remunerate the service provider. Brewers in Cameroon fear the same would be applied to them.

According to a study by Oxford Economics on the economic impact of such labelling process in countries such as Brazil, Canada, Malaysia, Kenya and Malta, the practice is not very effective in combating the consumption of contraband products. According to the study, while this method has often contributed to boosting tax revenues, the persistence of smuggled products on the market reduces its effectiveness.

02 June, 2019