HLIB Research has maintained an “overweight” stance on the sector.
PETALING JAYA: Beer prices in Malaysia could rise by around 6% following Budget 2026’s proposed 10% excise duty hike on alcoholic beverages, analysts say.
According to Hong Leong Investment Bank Research (HLIB Research), the impact of the increase in excise duty – the first upward revision since 2016 – is expected to be fully passed on to consumers, which could lead to a 5.5% to 5.7% decline in sales volume next year (FY26).
“Given that excise duties account for about 58% to 60% of brewers’ cost of goods sold, this translates into a 5.8% to 6% increase in their overall cost base,” the research house noted.
It also highlighted that Heineken Malaysia Bhd
, with 100% of its sales exposed to Malaysia, is particularly vulnerable to the excise duty adjustment and a consumption slowdown post-price hike.
While brewers could potentially lower alcohol content to mitigate tax increases, HLIB Research said discussions with management teams suggest this is not viable due to the risk of compromising taste and consumer acceptance.
“In the United Kingdom, for example, Carlsberg Danish Pilsner and Tiger are sold with 0.2% to 1.4% lower alcohol by volume, indicating that brewers do have some flexibility in adjusting alcohol content,” it noted.
HLIB Research expects the impact to be temporary, with sales likely to rebound as consumers adapt to higher prices, reinforced by beer’s positioning as the most affordable alcoholic beverage.
It said a similar trend was observed after the 2016 excise duty hike, when volumes recovered after two quarters and subsequently supported multi-year growth.
The research house also cited two potential cushioning factors – Visit Malaysia Year 2026 and the Fifa World Cup 2026, both of which have historically boosted beer sales.
“Malaysia’s target to attract 43 million tourists this year (versus 28 million in the first eight months) and 47 million next year is poised to lift beer sales.”
“The Fifa World Cup scheduled from June 11 to July 19, 2026, has typically been a strong catalyst for beer demand, with past tournaments delivering over 10% year-on-year revenue growth in the corresponding quarter.”
Notably, the research house pointed out the event-related spikes occurred despite challenges such as the 2014 excise duty hike, the 2018 US-China trade war, and the 2024 high inflation slowdown.
“As such, we are optimistic that history will repeat again in 3Q26.”
HLIB Research has maintained an “overweight” stance on the sector, citing undemanding valuations for Carlsberg Brewery Malaysia Bhd and Heineken, which are trading at steep discounts to their five-year averages.
It pointed out that Carlsberg and Heineken are currently trading at an FY26 price-earnings multiple of 13.1 times and 13.8 times, representing discounts of 46% and 40.2% versus their five-year averages of 24.3 times and 23.1 times, respectively.
“Current valuations suggest much of the regulatory risk may already be reflected in the share price,” HLIB Research said.
“Given that past two rounds of excise duty hikes have occurred at intervals of over five years, the recent excise duty adjustment may temper immediate concerns of another hike, at least in the near term.”
HLIB Research also noted that brewers’ share prices rallied in the first half of this year, but the gains were erased in the second half as the April 1 ban on cigarette displays and talk of higher tobacco duties sparked broader risk-off sentiment for the “sin sector”.
This, it added, was compounded by the government’s broader health agenda, with the 13th Malaysia Plan highlighting a “pro-health” tax covering both alcoholic and cigarette products.
In line with this, Budget 2026 proposed a 10% hike in excise duties on alcoholic beverages, effective Nov 1, raising the effective rate for beer from RM175 to RM192.5 per 100% volume per litre.
