THE beer industry has braced itself for the effect of the outsized 26% hike in excise duty imposed since September last year in the 2005 Budget.
That is believed to be the largest increase in excise duty confronted by the industry in any single year.
The immediate effect on consumption was still not known, said CARLSBERG BREWERY MALAYSIA BHD's newly appointed managing director Mogens Joenck (pronounced Morgan Yonk).
Whatever the outcome in the short term, he is confident there will still be sales growth for Carlsberg here in the long term.
It's too early to see the impact of the duty hike on sales, as there was a lot of forward buying and stocking-up by customers prior to the budget last year. There would naturally be reduced orders after that. It will take some time to get back to normal sales patterns.
The Chinese New Year will provide a good indication of the effect of the increased duty. “It's the peak season for beer sales. After the Chinese New Year, we'll be wiser,” he said.
In spite of the high duty structure, it is still a good industry to be in. After all, there are not many companies out there that can earn about RM100mil a year like Carlsberg does.
Joenck is confident that any drop in demand in the industry as a result of the higher duty will be temporary. “It'll come back,” he said.
Although he expects consumers to continue to have their beer, the industry is likely to face slower growth than before.
This is due, in his view, to not only the high duty hike on beer, but also on the relatively smaller duty increase for the competing hard liquor products of whisky and brandy.
In the last budget, the excise duties for whisky and brandy were increased by 6% and 2% respectively, compared with the 26% hike for beer. Duties for hard liquor are, however, still higher than for beer. The gap has, however, narrowed. There could therefore be a switch to hard liquor by some drinkers.
The industry has to bear all that. As Joenck puts it, “as an industry, we have to adapt to that (the duty increase).”
In his mind, Carlsberg as a company will continue to grow in this country. His confidence is partly based on an independent survey that shows that Carlsberg is the fastest growing beer brand in the world.
Carlsberg's brand positioning has been very successful in consumer markets all over the world. In recent years, the beer has been globally positioned as a drink that's enjoyed with friends in a social setting.
“Wherever you go, you can enjoy the same excellent beer among friends,” he said.
In projecting this image of camaraderie, the group is visible in sponsoring sports. Carlsberg was a sponsor, for instance, for the Euro 2004 football games.
It will also be sponsoring the Carlsberg Malaysian Open golf championships that will be held later this month.
“So, when you watch football with your friends, you have a beer and you'll also see the football player wearing a Carlsberg jersey,” he said.
At the same time, Carlsberg is mindful of its role as a corporate citizen that makes products with alcohol content.
“We would not, for instance, sponsor motor sports. That’s to make sure we don't confuse people by associating drinking with driving,” he said, adding that it “has to be moderate the way we approach the market.”
Although Carlsberg is generally seen as an alcoholic drink, Joenck sees it more as “a refreshing drink with a kick in it.”
It has a small alcoholic content. “We don't really look at it as an alcoholic product,” he said.
As he starts his tenure here, Joenck has decided he will not change Carlsberg's tried and tested strategies. “What we're doing is right – the right cocktail of activities,” he said.
The company may introduce more brands to offer a wider range of prices and tastes. It launched, for instance, Skol beer late last year, which is priced slightly below the premium brand of Carlsberg.
At present, the company's brands in this country now are Carlsberg, Carlsberg Ice, Danish Royal Stout and Skol.
The company, through the global Danish group, has access to a wider range of brands.
“We've been acquiring other breweries and brands. These could be brought here,” he said.
We're sorry, this article is unavailable at the moment. If you wish to read this article, kindly contact our Customer Service team at 1-300-88-7827. Thank you for your patience - we're bringing you a new and improved experience soon!
What do you think of this article?