Malaysia: Carlsberg stands steady on the market

Carlsberg Brewery Malaysia Bhd has reaffirmed its commitment to doing business in Malaysia and will boost its export sales amid a sobering domestic alcoholic beverage market, The Edge Daily reported May 7.

From 2004 to 2006, the beer and stout market in Malaysia saw heavy increases in duties, resulting in the country having the second highest beer prices in the world after Norway.

At the same time, beer and stout faced stiff competition from other alcoholic products such as wine and liquor as well as low-priced imported beer and stout.

Carlsberg, which has been operating in the country for over 35 years, felt the brunt of the duty increases. Its net profit fell from RM95.4 million in 2002 to RM85.9 million last year.

What is more alarming is that many beer and stout customers began to switch to wine and liquor due to the low price difference between the two types of products.

The situation could get worse. But for Carlsberg, it is staying put in Malaysia. This country is its crown jewel, despite the fact that the local beer and stout market has reached saturation point.

Carlsberg’s newly appointed managing director Soren Holm Jensen (pic) reiterated his company’s commitment to Malaysia.

“We would never choose to exit the industry. But depending on the development, there could be implications for employment or how much we can give back in tax money and to charity. So there could be some effects if the tax increases continue,” he told The Edge FinancialDaily in an interview in Shah Alam on Thursday.

Jensen, who took charge of Carlsberg Malaysia eight weeks ago, believes the company could ride out the challenge of a saturated market like Malaysia by exporting more.

In fact, plans are afoot to grow the company’s export volume and explore more opportunities overseas.

The brewer now exports between 15% and 20% of its total production volume to the Maldives, Singapore and Taiwan, via Carlsberg Distributors Taiwan Ltd, in which the company has a 50% stake.

“The expertise we have in this organisation is skewed towards how to sell, distribute and market beer in Asian society. So it would make more sense if we were to expand our international operations, to do it in the vicinity,” Jensen said.

Recognising that the high price of beer and stout in Malaysia could lead to more consumers turning to wines and liquor, the company is bringing in more premium quality beers for the sophisticated drinkers.

These include the newly introduced Saaz Blonde and Bramly Witt beverages which make up the company’s high-end offerings under its premium Jacobson range.

Jensen said the company hoped to grow the premium-end beer market in Malaysia by introducing more of such beverages, as the demand for premium quality drinks increased among discerning Malaysian customers.

He also said the company did not rule out exploring opportunities in the wine and spirits market as this segment was growing in popularity. He declined to elaborate.

Another step that the brewer is also considering is to introduce non-alcoholic beer, which has been successfully marketed in the Middle East.

“Carlsberg sells non-alcoholic beer to the Muslim population in Saudi Arabia, Yemen, Kuwait and the United Arab Emirates. We will constantly look at the opportunities here but brewing is still in our hearts,” he said.

For the current financial year ending Dec 31, 2007, the company expects the local beer and stout market to stabilise as the government did not announce any increase in duties for this year. But it still has to contend with stiff competition and declining margins.

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