Malaysia: Some RM189 mln in tax revenue could be lost a month if breweries operations continue to be suspended
Malaysia stands to lose some RM189 million in tax revenue a month if the operations of breweries continue to be suspended, according to the estimate by industry players, The Edge Markets MY reported on April 12.
The industry players also noted that the lack of supply of legitimate products in the market will further spur the demand for illicit products.
In 2019, the brewery industry brought in some RM2.27 billion in tax revenue to the public coffers.
But there is an estimated tax revenue loss of RM1 billion a year caused by illicit alcohol, according to the Confederation of Malaysian Brewers Bhd (CMBB).
When contacted, CMBB said it was committed to helping build a better Malaysia through its various projects.
“Besides the significant amount in taxes contributed annually, we are proud to generate employment and contribute to building a vibrant food and beverages industry that drives tourism.
“Through our sustainability and corporate responsibility initiatives, we are committed to help build a better Malaysia through projects supporting the protection of the environment, as well as in promoting education access, community partnerships and advocating responsible consumption. We remain committed to be a partner in nation building,” it said.
On March 23, Carlsberg Brewery Malaysia Bhd said in a bourse filing that in line with the movement control order (MCO), the company’s Malaysian operations were temporarily closed and necessary arrangements for its employees to work from home were in place.
On April 6, Heineken Malaysia Bhd said it had received approval from relevant authorities to allow a minimum number of workers to be on-site to ensure the safety and integrity of the brewery whilst the company’s employees are working from home during the stipulated period.
Since the commencement of the MCO on March 18, both breweries had been allowed to have a bare minimum of staff work to maintain the security and integrity at their factories.
Both breweries then appealed to authorities to allow a minimal workforce of not more than 10% for packaging and logistics.
However, shortly after this, Federal Territories Minister Tan Sri Annuar Musa said the government had revoked the permission given to breweries to operate during the MCO period.
“[The permission] has been cancelled, as it was not in line with the government’s policy,” Annuar said in a tweet.
Subsequently, Heineken said the company will continue to engage the government on this matter whilst ensuring it mitigates the impact to its business.
It is understood that Heineken and Carlsberg employ more than 61,000 people directly and indirectly with annual salaries in excess of RM752 million, while total trade partners number around 35,000, including supermarkets, convenience stores, coffee shops, restaurants, pubs and hotels.
Another added cost for the brewers in a prolonged shutdown arises from yeast cultures.
For the uninitiated, there are several steps in the brewing process, which may include malting, mashing, lautering, boiling, fermenting, conditioning, filtering and packaging.
The brewing process is a continuous production process. Fermentation processes and yeast management processes cannot be interrupted.
Yeast management is one of the main processes in brewing. It includes a few phases: yeast strain selection, yeast maintenance, propagation, viability and vitality control, pitching, harvesting, storage, washing and handling. Only the propagation step could take up to 25 days.
During the fermentation process, beer is conditioned, matured or aged, in one of several ways, which can take from two to four weeks, several months, or several years, depending on the recipe.
An extended stop in operations will mean having to re-start the yeast cultivation before the industry can resume full production, and this is a process that will take months before the supply of beer can be normalised again.
12 April, 2020
