Business

Monday August 3, 2009

Beer rivalry thickens

By ELAINE ANG


Guinness Anchor and Carlsberg in tug-of-war for market share

PETALING JAYA: The competitive and lacklustre local malt liquor market (MLM) has led industry players to look at means and ways to grow the business and boost margins.

In an industry dominated by two players – Guinness Anchor Bhd (GAB) and Carlsberg Brewery Malaysia Bhd – one party’s gain is the other’s loss and brand differentiation determines who holds the bigger slice of the pie. Carlsberg Malaysia, however, bucked the trend with plans to spread its wings to Singapore via a proposed acquisition of Carlsberg Singapore Pte Ltd from holding company Carlsberg Breweries A/S last week.

More acquisitions, however, do not seem to be on the cards for industry players in the near future.

GAB plans to continue with its successful strategy of growing its brands and overall performance locally.

“This focus has been core to our strength and we see no need to look elsewhere. A loss of focus is often cited as a trigger for poor performance,” managing director Charles Ireland told StarBiz.

Carlsberg Malaysia, meanwhile, will focus on consolidating its businesses and growing market share in the country and Singapore.

Nevertheless, a new trend in the industry is the growing imported and premium beer segment.

Managing director Soren Holm Jensen expects the segment to grow further thus providing better margins for brewers.

“The consumption of imported beers is rising as consumers become more sophisticated and want to try different beers. Although the volume is small, it is a profitable growth area,” he said.

Jensen also foresees better profit margins next year as raw material prices have come down.

“Bottom-line will be hit this year though as we bought forward our raw materials for this year at a higher price,” he said.

However, many still expect the MLM to remain very competitive with slow volume growth in the next few years. Assuming no hike in excise duties, OSK Research analyst Lim Vi Ming anticipates industry volume to grow slowly, largely premised on the country’s high percentage of Muslim population and a shrinking Chinese population.

Industry volume has been growing at a compounded annual growth rate of about 0.9% from 2000 to 2008.

“We reckon GAB will continue to maintain its place as a leader in market share due to its wide variety of brands while Carlsberg Malaysia will maintain its loyal customer base,” Lim said.

An analyst from AmResearch is forecasting a flat and light year for the brewery industry, with MLM volume remaining flattish at best for this year and the next, before growing 1% in 2011.

“Beer and stout sales may be flat overall, but there are significant shifts occurring within the beer segment.

“Throughout the last few years, the emergence of the sophisticated drinker has contributed to the changing industry landscape,” she said.

The sophisticated drinker, typically below 30 years old, prefers draft beer and quality imports, opting for upmarket brands perceived to be cooler and trendier, such as Carlsberg Malaysia’s Corona and Tuborg, or GAB’s Kilkenny and the recently-launched Sol.

On excise duties in Budget 2010, Lim does not foresee a hike in excise duties as any increase would be detrimental to sales volume, thus affecting the Government’s tax revenue.

AmResearch reckons the chances of the Government increasing excise duties especially under Budget 2010 are slim.

“However, we are not ruling out the possibility completely, given the growing budget deficit and the Government’s need to source funds to pump-prime the economy,” the analyst said.

Current excise duties for beer are at RM7.40 per litre which is the second highest in the world after Norway.

 
CARLSBG :  [Stock Watch]  [News]
GUINESS : [Stock Watch] [News]


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