The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Aquapure executive yesterday estimated its Tampico fruit punch will suffer a 20-30 per cent market share loss from the Government’s revised tariff cuts, but agreed: “It’s not as bad as it could have been.”

Geoffrey Knowles, Aquapure’s operations manager, told Tribune Business that the company could have seen its market share slashed by up to 70 per cent had the Minnis administration persisted with plans to eliminate the 60 per cent tariff on fruit juice drink imports.

The Government partially reversed that proposal on Tuesday night, opting instead to cut the tariff in half to 30 per cent - a level where Mr Knowles said Aquapure would “still lose our price advantage” with Tampico.

He emphasised that Aquapure was not interested in protectionism, but instead wanted government help to compete “on a level playing field” with foreign rivals who enjoyed much lower cost bases and greater economies of scale.

The Aquapure operations manager cited water as an example of how government taxation policies could benefit Bahamian manufacturers, with the duty increase to 100 per cent under the former Christie administration enabling its one-gallon and bottled water products to enjoy a 10-12 per cent sales rise.

Mr Knowles said the manufacturer was using a market study it conducted 18 months ago to determine what the tariff reduction to 30 per cent meant for it, and added: “We know we’re going to lose sales.”

He said Tampico’s main foreign competitor, Sunny Delight, was selling especially well with the smaller food store chains, such as Budget and John Chea, who were buying in bulk from south Florida wholesalers and able to enjoy significant price discounts.

“We are significantly down compared to Sunny Delight [at those stores],” Mr Knowles said. “Price wise it’s [Sunny Delight] good right now, and if they take the duty off by 30 percentage points, there will be at least a 15 per cent decrease in price for them.

“If they pass it on to the consumers, we will lose our advantage. That will definitely be a concern to us, and I think we will lose market share.

“It will not be as great as if they took the 60 per cent off completely; then our market share drops by 70 per cent. Now, maybe, it will drop 20-30 per cent of the market. It’s still not good.”

Mr Knowles said Aquapure was trying to sell Tampico into the Family Islands, but uncompetitive shipping costs from Nassau - the Florida to Freeport route being much less expensive - meant it was losing out to imported products in Grand Bahama.

He added that the tariff rate reduction would be most keenly felt in Nassau, Aquapure’s largest Tampico market, and said: “We’re grateful it remains at 30 per cent, but it’s still going to have an effect and probably substantial.”

Mr Knowles said the opposite had happened to Aquapure’s one-gallon and bottled water products when the tariff on imports was increased, rather than decreased, from 60 per cent to 100 per cent.

“This all started off with WTO, when we fought for an increase from 60 per cent to 100 per cent,” he recalled to Tribune Business. “It was not a significant increase in sales for our business, but it was still a very good one.

“We saw sales, especially in the small packaged water, probably increase by at least 10 per cent. We still have bottled water here from the US, like Nestle, but we’re on the shelves in Super Value and the gas stations. Our water is able to compete with that, and we probably saw a 10-12 per cent increase.

“On the juice drinks side, I think it’s now going to be a 20-30 per cent decrease; not as bad as it could have been.”

K P Turnquest, the minister of finance, yesterday told Tribune Business that the Government had selected the 30 per cent tariff rate for juice drink imports “to be consistent with Gatorade” and other drink products.

“That is to give both local manufacturers, having recently entered this market, time to get established and bring their costs into line,” he said (see articles on Page !B and 3B).

Mr Knowles, meanwhile, lamented that manufacturers such as Aquapure had to cope with policy changes every five years when the Government changed.

“Let’s put it this way: It was a shock,” he told Tribune Business upon hearing the Government’s original proposal. “It’s always a moving target in this business. Every time a new government comes in, we get shaken up. Manufacturing is such an important part of our economy, small as it is.”

Mr Knowles said he was “interested to see” how the Government planned to ‘level the playing field’ for Bahamian manufacturers versus their imported rivals, given that Aquapure currently paid $75,000 per month for electricity alone.

Pointing out that a $25,000 reduction to that bill would be significant, he added: “That’s what we want. We don’t want protection. I don’t like to see it as a protection issue. We want a level playing field.”

Mr Knowles pointed out that while Aquapure and other Bahamian manufacturers were catering to a 350,000-strong market, their US-based rivals served millions, thereby giving them the advantage of greater economies of scale.