StarBiz: How do you sum up your performance and investments in Malaysia so far?
Mogens Joenck: Our investments in Malaysia have been satisfactory until recently.
The beer market had been growing naturally on a gradual basis annually until the Government reversed the trend by imposing a continued increase in excise duty for the industry.
This has resulted in an increase in the consumer price that dampened any potential for short and medium term growth in the beer market.
We now have higher priced duty paid beer products competing with hard liquor products and wines due to the continued inequitable increase in duties among the different categories of alcoholic products.
The high consumer prices for duty paid beer products has also resulted in a proliferation of low priced smuggled beer products, depriving both the Government and industry players of revenue.
As a result of the contraction in the duty paid beer market, competition for market share becomes even more intense and spending on marketing activities to retain share will affect margins.
There is a pressure on margins and profitability as a result of having to make additional payments to comply with additional regulatory requirements as directed by the authorities.
StarBiz: How can Malaysia enhance its competitiveness in Asia?
Joenck: Malaysia currently has the highest excise duty for beer products in the world after Norway.
Instead of continuing to raise revenue via annual excise duty increases for the beer industry, the authorities should look more into improving the enforcement against smuggling activities that result in significant losses of revenue annually to the Government.
StarBiz: Which areas would the company invest further into in order to increase efficiency?
Joenck: Our company is facing an overcapacity situation in view of the contraction of the duty paid beer market. Our present investments are focused on productivity and efficiency improvements to reduce costs to maintain margins. We are investing in information technology systems to support commercial strategies as well as in focused training and upgrading the skills of the employees.
StarBiz: What do you think the economic situation would be next year and how would this impact Carlsberg?
Joenck: The Malaysian economy will maintain a reasonable growth in 2006.
The level of domestic consumption growth will also depend on consumers’ confidence and whether inflation can be maintained at current levels with the pressure on price increases vis-à-vis electricity tariffs and further reduction in petrol subsidies.
The company believes that it will manage its margins with the returns from the production and commercial excellence projects aimed to further improve productivity and efficiency.
Despite the obvious challenges, Carlsberg believes that its market leadership position in the Malaysian beer market can be further strengthened with the strong Green Label and Skol beer brands.
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