Malaysia sugar tax: Carlsberg promises no price hikes for beers and ‘minimal’ impact on other brands

By Pearly Neo contact

- Last updated on GMT

Carlsberg has pledged not to increase the prices of any of its beers for the rest of this year, as the company prepares for the country’s impending sugar tax this July. ©Carlsberg
Carlsberg has pledged not to increase the prices of any of its beers for the rest of this year, as the company prepares for the country’s impending sugar tax this July. ©Carlsberg

Related tags: Malaysia, Carlsberg, Beer

Carlsberg has pledged not to increase the prices of any of its beers for the rest of this year, as the company prepares for the country’s impending sugar tax this July.

Carlsberg Malaysia Managing Director Lars Lehmann told FoodNavigator-Asia​ that: “We do not have any plan to adjust product prices to distributors and retailers this year, after the last adjustment that took effect on April 1st​.

“The upcoming sugar tax will only impact our Nutrimalt and Jolly Shandy brands, which is relatively minimal.”

He added that ‘barring any unforeseen regulatory or macroeconomic factors’​, any future price adjustments would be ‘kept at a minimum’​ to ensure product affordability and competitiveness.

Carlsberg Malaysia had raised its product prices by 3% to 6% earlier this year on April 1, the initial date that the country’s sugar tax was supposed to be enforced​ before it was postponed by three months​ to July 1.

Back then, the main reason cited for the price hike was escalating malt and barley prices, which remain chief concerns for the company currently, though it appears that no problems are foreseen with their supply for the rest of 2019

“We have seen a significant increase in the costs of packaging and raw materials. Packaging and raw materials are the highest contributor to rising costs with malt prices increasing due to bad barley harvests in Europe and Australia caused by exceptionally bad droughts and heat waves in 2018,” ​said Lehmann.

“Other factors include increased electricity costs and a rise in minimum wages which drove up contract labour costs.”

According to the company, malt prices increased 15% to 20% year-on-year in 2019.

Other challenges

At the company’s annual general meeting last month, other challenges highlighted included the country’s smoking ban implemented on January 1 this year at all food service outlets, as well as the continued issue of contraband beer​.

According to Lehmann: “The smoking ban is not helping our industry and that is a bit of a new phenomenon this year that is also impacting consumption in outlets where there is food.”

As of last month, contraband beer still made up 25% of the total beer consumption market share in Malaysia

That said, Carlsberg Malaysia still announced robust growth results for FY2018, with its best-known Carlsberg beer seeing volume growth of 12%, its premium brands Kronenbourg, Somersby, Asahi and Connor’s seeing 20% volume growth, and its Brooklyn Lager brand growing 178%.

Zero-alcohol beer segment

Responding to queries about intentions to expand into the zero or non-alcoholic beer market, Lehmann said that the company was ‘exploring’ this area.

“Our global sustainability ambition towards ZERO Irresponsible Drinking includes the availability of alcohol-free brews in the market,”​ he said.

“While beer provides a quality low-alcohol choice, there are occasions when consumers also look for options that do not contain alcohol. For this reason, we are exploring non-alcoholic beverages as part and parcel of our on-going product innovations.”

He added that Carlsberg Malaysia’s main focus and growth over the past three years had been reinvestment, brand innovation and consumer activation-focused, and that this path would be similar in 2019.

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