Heineken tightens belt to keep costs down

Teo: ‘We need to weigh it out first to see if the market can accept a price increase.’

PETALING JAYA: Heineken Malaysia Bhd says it has opted to tighten its belt amid the challenging market condition via various cost management measures and will not increcase prices of products any time soon.

Its finance director Teo Hong Keng said any price increase will only be carried out on the basis of commercial consideration, which among others include commodity price hikes on the backdrop of global uncertainties.

“We need to weigh it out first to see if the market can accept a price increase. However, in a soft market such as this, we have resorted to tightening our belts to keep costs down,” said Teo at the sidelines of Heineken’s financial results announcement for the quarter ended Dec 31, 2016.

Heineken last increased price of products in July, 2016 after the implementation of Anti Profiteering Act.

Teo said because the company was part of Heineken N V, it benefitted them as the group purchased raw materials under the global procurement.

Hence it wasn’t too worried about the rising raw material prices.

Despite the subdued economic landscape, Heineken posted a good set of results for its financial quarter ended Dec 31, 2016.

Its net profit was up 15.2% at RM104.68mil from RM90.84mil, a year ago, on improved cost efficiency in commercial spend, benefits from Project Breakout - an integrated system that optimised efficiencies in the entire value chain from brewery to trade as well as savings from global procurement initiatives.

The market leader declared a final dividend of 60 sen, which will be paid out in May.

Meanwhile, managing director Hans Essaadi said Heineken’s effective sales execution and robust growth in the off-trade segment and continued volume growth for Heineken and Guinness premium brands were drivers for better revenue growth.

“We are in a dialogue session with the ministry with regards to the Anti Profiteering Act, as constant freeze in price hikes does have an impact.

“We will see if it works to raise prices only if input costs go up,” he noted.

In the meantime, Essadi expects the year to be challenging due to global and domestic economic uncertainties, cautious consumer spending, increase in regulatory requirements and rising demand for contraband products.

“We will nevertheless continue to leverage on integrated global supply chain, strengthening our iconic portfolio and investing in developing our people,” he concluded.

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