A significant decline in the production of non-alcoholic beverages has hit the bottling industry owing to changes the federal government made on excise tax last year.

The 11 percentage point increase passed by Parliament, surging excise tax the industry pays to 25pc, has affected sales volumes and eroded the companies' bottom lines, a study conducted by the Food, Beverage & Pharmaceutical Industry Development Institute found out. Productivity of non-alcoholic beverages across the industry plummeted by 20pc, the study disclosed.

Companies bottling non-alcoholic beverages have been bewailing a surge in excise tax and spiking prices for raw materials, resulting in a significant production decline. Beverage companies such as East Africa Bottling, MOHA Soft Drinks Industry, and Melkam Moringa are impacted. Excise tax – often described as "sin tax" – is levied mainly on luxury products that affect health, such as alcohol, sugary foods, salt, tobacco and beverages.

The industry is pressured due to double taxation, as the beverage companies pay the excise tax for raw materials and at points of sale.

Double taxation is not particular to the beverage industry. Products from the beverage companies may cause concern to health and fall under the excise tax category, but it is reasonable to review the rates considering their contributions to the economy and employment, according to Dawit Tadesse (PhD), a tax expert.

Abdiwaq Tamene leads the beverage processing department at the Institute, which conducted the study. His main concerns are the underlying impact of the excise tax on employment.

According to surveys carried out by the Institute, the beverage industry employs 6,000 people, providing an indirect livelihood for over 100,000 people in the value chain.

East Africa Bottling S.C., bottlers of Coca-Cola for over half a century, suffers from a 15pc fall in production. The company, which produces 800 million bottles of soda annually, paid two billion Birr in excise and corporate taxes last year.

The industry's woes do not stop here, however. Severe shortages in foreign currency and raw materials such as sugar in the domestic market and surged prices overseas have impaired the bottlers' capability for optimum production.

Melkam Moringa bottling plant, located near Sendafa, 35Km north of Addis Abeba, has been unable to surpass 10pc of 140 million litres in annual production capacity. Established by Zebym Trading Plc with a 200 million Br investment, the company struggles to navigate a market traditionally dominated by international brands.