By Xavier Kong
Beer prices may go up pre-Budget, with local analysts expecting a hike of up to 10% in excise duty.
“However, a 20% hike would not be surprising,” said one analyst.
The impact on the companies is most decidedly negative, as this is the first hike in excise duty for the breweries sector in the past seven years. However, if the hike is less than 10%, the impact might not be as serious as it seems, as that would be absorbable by both Guinness Anchor Bhd and Carlsberg Brewery (M) Bhd.
Even if they pass that on to consumers, it would only translate to an increase of about 5% of the current sale price.
On the other hand, if the excise duty hike does hit 20%, the increase by 5% to the sale price might be needed just for the companies to break even. Another possibility is that breweries might follow the route of tobacco, and increase prices by more than the excise duty hike, to compensate for the drop in volume.
An analyst from a bank backed research outfit compared the dilemma breweries could face regarding absorbing or passing on the duty hike as Guinness Anchor and Carlsberg being between a rock and a hard place.
It is generally agreed that a hike would lead to a downward trend in volume, and this would impact Guinness Anchor more, as it has full exposure to the local market, in contrast to Carlsberg, which has an earnings before interest and tax (EBIT) of 30% from its Singapore operations, dampening the impact of the hike.
Local analysts also agreed that illicit beer trades will do little to impact the two companies, and that there is almost no worry with regards to competition from foreign beers, citing that our neighbour across the Causeway would be more heavily affected than the local market.
Malaysia is the only country in Southeast Asia that imposes three different taxes on malt liquor.
Guinness Anchor ended trading unchanged at RM17.80 while Carlsberg closed at RM12.72 down eight sen.
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