Singha Corp, producer and distributor of Singha brand soda water, is concerned that the government's plan to increase the excise levied on soda water will add to its production costs.

The company's marketing manager Sant Bhirombhakdi said that given the company's declining sales, it could not increase the price of the product to offset the losses that would result when the government's plan to hike excise takes effect.

The government is mulling increasing the excise levied on soda water from Bt3 to Bt4 per bottle in the next fiscal year to boost income tax collections, in a move to help contain the budget deficit.

"Hiking the product price is not an option for us because the slowdown in the economy has curbed consumer spending, and the cost of living has also gone up," Sant said. He added that the company's sales had dropped an average of 4 per cent in the first half of the year and the signs are this trend would also continue in the second half.

"If we increase the price of Singha soda water following an excise rate hike, it won't help our business recover."

Sant said that if the government went ahead with its proposed hike, the company planned to put a new marketing strategy in place that would focus on boosting sales in the second half.

He added that the company had a Bt50-million marketing budget to try and change customer perception of its brand - from Singha soda water as the preferred mixer with an alcoholic beverage, to Singha soda water as the mixer of choice for both alcoholic and non-alcoholic beverages.

The campaign is scheduled to begin soon and continue till November 11. The idea is to involve teenagers in the rebranding exercise by getting them to come up with their favourite concoction by mixing soda water with a non-alcoholic beverage.

"We believe this campaign will expand the market and help our sales and net profits. And this would also cover our production costs even if the government goes ahead with its proposed excise tax hike," Sant said.

At present, 90 per cent of soda-water sales are as mixers for alcoholic beverages and only 10 per cent of consumers buy soda water to mix it with non-alcoholic drinks.

The company hopes to increase the share of soda-water sales targeted at the non-alcoholic beverages market up to between 20 and 30 per cent in the next two years.

Somchai Suthikulpanich, senior vice president of Thai Beverage Marketing Plc - producers and distributors of Chang soda water - accepted that if the government increased excise duty it would negatively affect the soda water market, which is worth Bt4 billion a year.

Customers will buy water to replace soda as a mixer if we increase our sale price, he added.

The company, however, believes that as the market leader, Singha, which has a 90-per-cent share, will be the worst hit.