21 April, 2006

Malaysia: High excise duty for beer would make 2006 a challenging year for the industry

Carlsberg Brewery Malaysia Bhd is initiating several promotion exercises this year to boost sales of its beer products and increase its market share for Royal Danish Stout, The Edge Daily posted on April 19.

Its chairman Datuk Lim Say Chong expressed confidence that the company will maintain its market leadership for beer products this year even if the government decides to increase excise duties for the fourth straight year. However, if higher taxes and duty were the government's strategy to discourage Malaysians from picking up the bottle, the plan seemed to be working, said Carlsberg chairman Datuk Lim Say Chong.

“The third consecutive increase in duties (last October) has caused a contraction in the size of the market," he said, adding that the government's revenue from the excise duties will be reduced because of the smaller beer market.

Carlsberg Brewery Malaysia Bhd has reiterated that high excise duty for alcoholic beverages, particularly for blond beer and stout, would make 2006 another challenging year for the brewery industry.

Speaking to reporters after Carlsberg’s AGM in Shah Alam on April 19, Lim said the company had found ways to reduce costs through logistic efficiencies and optimising production and work processes since the last excise duty hike in October 2005.

He said Carlsberg was aiming to achieve growth in net profit this year despite the latest excise duty increase that had resulted in a difficult year for the beer and stout industry.

The duty hikes over the last three years have resulted in a 30% increase in the recommended consumer prices for beer and stout products.

If there is another increase in duties this year, Lim said the market size would shrink further as the price of beer and stout would be too high for consumers. Already, he said, Malaysia had the second highest excise duties for beer and stout products globally.

As a result of the high prices, he said, the smuggling of cheaper beer and stout products had become rampant, hurting the domestic brewers, and another round of increase in duties would only make smuggling more lucrative to smugglers.

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