By Janina C. Lim, Reporter
THE Frabelle Group of Companies said the price of hotdogs may jump by 20% next month if the government fails to retain the 5% import tariff for mechanically deboned meat (MDM) for chicken which meat processors have enjoyed for nearly a decade.
The government recently ordered the reversal of the low tariff to the 40% tariff, the original rate in 2012 before the country offered MDM, among other agriculture products, as a concession to allow the Philippines to continue placing a quantitative restriction on rice imports.
Under the concession, the MDM import duty will revert back to the higher rate after a law lifting import limits on rice is implemented.
The rice tariffication law took effect on March 5, so the 40% tariff on MDM is currently being implemented at the borders.
“We are going to feel the effects maybe starting next month on our production because we still have stocks of the old tariffs,” Frabelle Group President Francisco Tiu Laurel, Jr. told reporters on Monday in Makati City.
Mr. Tiu Laurel said the company has not felt the impact of the new regulation since it still has stocks of MDM imported at the low tariff level.
“The consumers have not felt it. If the government will not put it back to the 5%, we will expect that the consumers all over the country will expect a price hike of at least 20% on the midpriced to the economically priced hotdogs,” Mr. Tiu Laurel said.
The company may see a 35% hike in its production cost once its starts importing MDM at the 40% duty.
“But I believe the government is looking into our association’s request to maintain the 5% chicken MDM only. We hope the government will soon sign the retroactive incentive to lower it back to 5% to benefit the Filipino consumer,” Mr. Tiu Laurel added.
The interagency Committee on Tariff and Related Matters has decided to retain the 5% tariff on MDM chicken despite appeals from the poultry sector which argued that such low tariff opens an avenue for importers to misdeclare goods so as to escape higher tariff rates imposed on premium meat products, the entry of which can pose an unfair competition on the local poultry sector.
Meanwhile, Wisconsin-based Johnsonville LLC which the Frabelle Group recently tied up with through its subsidiary, Frabelle Fishing Corp., said the low tariff on MDM does not present incentives for them to manufacture here as they do not utilize MDM so much, but the 40% tariff on importing sausages from the US is a factor to consider.
“It is a 40% tariff coming in today for US sausages. If we can produce here, we can offer much more economical solution to the sausage category on the high end,” Michael Stayer-Suprick, president of the company’s international division, said during the media briefing.
Johnsonville CEO Nick Meriggioli said the firm is looking at locally manufacturing Johnsonville’s premium sausages here “as one of the options” for the firm to gain a wider reach and be more affordable in the local setting.
The joint venture between the two firms will be called Frabelle Corp., which will house the Bossing Pinoy, Yummy, Cheezydog, and Premium meat brands of Frabelle Fishing and manage Johnsonville’s business in the Philippines.
The joint venture will focus on the production, distribution and sales of chilled and frozen meats, primarily: sausages, tocinos, burgers, tapas, longganisa and hotdogs in the Philippines.
Frabelle’s current brands will continue to be made in Manila and sold through its current sales network, while Johnsonville-brand sausages will now be sold exclusively through Frabelle’s sales and marketing network.
The Frabelle Corp. manufacturing operations will be fully integrated into the Johnsonville supply chain network.
The Frabelle Group is engaged in diverse business lines, primarily in fishing, seafood processing, meat products, shipbuilding, energy and real estate.