Malaysia: Heineken to hike prices despite very positive results last year

Heineken Malaysia will be raising its product prices as a response to the ‘challenging environment’ in in country, despite reporting very positive results in its 2018 year-end financial report, BeverageDaily.com reported on March 20.

The company said that it was being ‘cautious’ about moving forward, citing factors such as intense competition, the new Sales and Service Tax (SST) being implemented last September, and a continued contraband beer concern.

“The external environment remains challenging,” Heineken Malaysia Managing Director Roland Bala said.

“Amidst slowing global growth rates, currency volatility and uncertainty in the commodity markets, we will need to adopt a cautious approach in cost management.”

Amongst these cost management actions is a hike in the company’s products, which it confirmed would be raised by a maximum of 5% by April 1.

This was in response to increases in operational costs, which would include raw materials and packaging prices.

Heineken Malaysia owns and operates many of the major beer and beverage brands in the country, including Heineken, Tiger, Guinness, Kirin and Kilkenny.

That said, Heineken announced commendable results in its 2018 financial report, with revenue rising to RM2.03 bln from RM1.87 bln the previous year, a growth of 8.3%.

Net profit also increased 4.6% to hit RM283 mln from RM270 mln in 2017.

This was attributed to an ‘increase in sales volume, [previous] price adjustments on 15 April 2018, and the implementation of SST [last September].

“[We] remain focused on the sustainability of our business from barley to bar [and] continue to promote sustainable growth [via our people, brands and environmental conservation efforts],” said Bala.

Heineken was not the only beer company to have raised its product prices in Malaysia in recent months.

Last September also saw its main local competitor Carlsberg Malaysia raise prices by some 5.5% following the implementation of SST in the country.

“We expect the implementation of SST to impact consumer spending on beer negatively,” Carlsberg Malaysia managing director Lars Lehmann previously told us.

“[This is especially so] in on-trade which is exposed to double-taxation from both 10% sales tax on products at a manufacturer level and 6% service tax at the retail level such as restaurants and bars with annual revenue above RM 1.5 million.”

“While off-trade sales are no longer subject to 6% GST, our customers may pass on their additional tax and business costs from the implementation of SST.”

Contraband beer is a major issue within the Malaysian beer industry, and one that Heineken views as a ‘significant’ problem.

“[The] illicit alcohol issue [causes] significant revenue loss to both Government and Industry,” added Bala.

“There have been positive steps [taken], including the increase of minimum penalties against those found dealing in illicit products, [and we will continue to support the government with these efforts].”

21 March, 2019