Beer price hike to have limited impact on market

A bartender serves a glass of Carlsberg beer at a bar in Kuala Lumpur, Malaysia in this July 4, 2012 file photo. - REUTERS

PETALING JAYA: The quantum of price increase for beer is manageable and has a limited negative impact on the malt liquor market volume, said CGS-CIMB.

The research house said the price increase did not come as a surprise as breweries have been affected by rising key raw material prices.

The commodity prices of malt and barley have been on the uptrend since last year due to low crop yields.

“In our view, brewers have no choice but to raise selling prices as any further increase in raw material prices will lead to significant margin erosion.

“We believe that brewers were able to maintain selling prices in 2018, as a portion of their raw material prices was hedged, for an estimated six to 12 months,” said CGS-CIMB.

Beginning April 1, 2019, Malaysian brewers will raise the average selling prices of beer by an average 3% to 5%.

This is mainly to pass on the escalating prices of raw and packaging materials in tandem with the rise in global commodity prices.

Heineken Malaysia Bhd shall see price increases for its products (per pack) range from 0% to 5%, while Carlsberg Brewery Malaysia Bhd will raise prices for its products (per pack) by 3% to 6.2%.

Despite the upcoming price hikes for beer, CGS-CIMB noted that beer remained the cheapest form of alcohol in Malaysia as compared to other available alcohol products like hard liquor and wine.

Based on the research house’s estimates, Heineken and Carlsberg’s financial year 2019 to 2021 earnings per share are likely to be lower by an average of 0.5% to 1.2%, following the price increase.

In 2019, malt liquor market volumes will be supported by the reduced availability of illicit beer in the market.

“Based on our estimates, illicit volumes are now lower, making up 20% to 25% of total beer market, from 25% to 30% in 2016.

“This is mainly thanks to better enforcement by the authorities as well as better consumer awareness of the dangers of illegal alcohol consumption due to the deaths that occurred in 2018,” said CGS-CIMB.

Heineken Malaysia closed 0.9% lower at RM22.70, traded on a volume of 127,800 shares while Carlsberg Malaysia closed unchanged at RM25.80 on a volume of 394,500 shares.

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