Philippine sugar producers call for boycott on Kraft products

The boycott, announced Tuesday by the Confederation of Sugar Producers Association on the island of Negros-Panay, follows a long-running dispute over the tariffs Kraft should pay on drinks that it makes in Thailand.In 2004 the Philippines amended customs regulations so that all drinks imported from AFTA countries and containing at least 65 per cent imported sucrose should pay a 38 per cent sugar tariff. But Kraft continues to pay the 3 per cent tariff that applies to finished products on its Tang and Kool-Aid, and says it cannot be considered as sugar. "Tang is made in such a way that it is classified in the AFTA as a finished good. When it leaves our plant in Thailand it goes straight to retail,"​ said Tod Gimbel, Kraft Foods Asia Pacific corporate and government affairs director. "Also, it is not sugar. It is a drink mix that also contains flavours, colours and vitamins and minerals as part of a government fortification programme,"​ he told AP-Foodtechnology.com. The company has had several court hearings since 2004 to clarify how the product should be classified and says it has not broken any laws until the litigation process is finished. It is currently seeking to reverse the order before the Court of Tax Appeals. While a boycott by sugar cane growers and their sympathizers might not have much impact, a higher import tariff would certainly have repercussions for Kraft, given that Tang - one of its global brands - is its most important product on the islands. "It's a popular-priced product so an increase from 3 per cent to 38 per cent would be too much for us to absorb, and yet passing on costs to consumers would not be an option either,"​ said Gimbel. Kraft Foods has had operations in the Philippines for more than 40 years and currently employs around 550 people manufacturing cheese and dressings. It is one of its oldest, and most important bases in south-east Asia, says Gimbel, and a growing market. The company used to make Tang and Kool-Aid, a children's powdered drink, in the Philippines but moved production to Thailand in 2000. However Gimbel says Kraft still buys sugar from the Philippines for the other products it makes there. "We're in compliance with all laws and we're paying what we're supposed to. In fact, in 2004 we were given an award by the government for being one of the country's highest taxpayers," he added. But Luis Tongoy, chairman of Confed, says that Kraft's refusal to pay the higher tariffs may encourage other manufacturers to move outside the Philippines and damage both the sugar industry and the local food and beverage manufacturers who have respected the tariffs. The Philippines produced around 2.15 million tonnes of raw sugar in 2005-06, enough to meet domestic demand, but its sugar has been more expensive than Thai sugar in the past. Although prices are leveling out now as global trends boost sugar prices around the world, sugar growers are concerned that manufacturers will move their operations to other Asian markets. "It is time the national government put its hand down and collect the proper taxes to even the playing field, not only for the sugar industry but for other manufacturers who respect our laws," Tongoy said.