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Guinness Anchor and Carlsberg are running neck to neck in Malaysia at the moment. KiniBiz looks at the challenges both brewers face in catering to a new generation of drinkers and the world of social media while utilising entirely different strategies.
A former employee of Anheuser Busch (the beer company that brews Budweiser) when interviewed for a book said, “If you think about beer in your own personal circles, there are probably people who drink a different beer when they’re in a bar than they do at home, when nobody sees them.
“There’s a badge associated with the bottle you’re holding in your hand when you’re out in public or with your friends, and it’s important. That didn’t happen by accident. It happened because beer companies poured a tremendous amount of money into developing the image of their brands.”
In Malaysia, the two main brewers are neck to neck, with Guinness Anchor Bhd (GAB) having the larger market share of 57%, but Carlsberg Brewery (M) Bhd’s Carlsberg Green being the largest selling individual beer.
Some of the sales pitches, “Come up to Carlsberg” and “Guinness Stout is good for you” are entrenched, thanks to expensive marketing initiatives.
According to Carlsberg’s annual report, for its financial year ended December 2012, the company spent RM295.79 million in sales and distribution expenses. GAB for its year ended June 2012, spent RM217.41 million in distribution, marketing and selling expenses.
After customs and excise duties (where Malaysia has the second highest levies in the world), the largest expenditure as percentage of revenue for the brewers is sales and marketing related.
For its year ended December 2012, Carlsberg posted net profits of RM191.63 million from RM1.58 billion in revenue.
GAB meanwhile for its nine months ended March this year registered net profits of RM184.14 million on the back of RM1.26 billion in sales.
Soren Ravn
In separate interviews both managing directors Carlsberg’s Soren Ravn, who is leaving end June and Hans Essaadi who has taken over the helm of GAB for all of four months, talk about the need for exciting beers, and the need to take into account consumer preferences.
Carlsberg’s Soren said to KiniBiz, “Today consumers want variety… If you open up a bar or restaurant, you want to have at least three to four beers on tap and then you want to have another ten beers by bottle.”
Meanwhile Essaadi said, “We try to excite consumers…we focus on big events. But these days it’s more about social media. Facebook is huge, look at the number of followers we have. The next challenge is what we do with it.”
Beer is not just a beer
Both GAB and Carlsberg have strong parentage. Carlsberg’s 51% parent is Denmark-based Carlsberg AG, which has some 300 odd brands under its belt.
GAB meanwhile has Heineken, the world’s third largest brewer with some 200 beer brands under its portfolio, as its parent. The shareholding structure has GAPL Pte Ltd controlling 51% of GAB. Asia Pacific Breweries Ltd, a 95% unit of Heineken’s has 50% in GAPL.
Also GAB with its association with Guinness can tap onto Diageo, the holding company for the stout brewer, which came about from the merger of Guinness plc and Grand Metropolitian, and is the world’s largest whisky producer.
While Carlsberg has such brands as Tuborg, Kronenbourg and Holsten under its belt, Heineken controls Amstel, Fosters, Sol and Kingfisher to name a few brands.
Basically there’s very little differentiating the two brewers.
While Carlsberg’s Soren says that its plate is full, and it is unlikely to come out with any new offerings for the next 12 months, GAB’s Essaadi said that if all went well, in 12 months his company would have commenced brewing new beers.
Although he did not elaborate, indications are that GAB may commence brewing Mexican brands, with Heineken’s subsidiary Cervecería Cuauhtémoc-Moctezuma brewing Sol, Dos Equis and Guadalajara among others..
Analysts’ preference
Carlsberg lost its market leader position in 2006, with GAB taking over. Carlsberg was too dependent on its Carlsberg Green, while GAB gained the upper hand with its variety.
Now Carlsberg has among others Kronenbourg, Asahi and Skol to name a few, while GAB has Tiger, Anchor, Heineken, Guinness and Kilkenny under its belt.
Maybank IB’ analyst, Choong Ooi Ming is more bullish on Carlsberg, and believes that there could be change as far as market leadership is concerned, over the next few years.
“When there are only two players, the market leader is likely to shift between the two. Now Carlsberg looks more aggressive, its beers are more geographically diversified,” he said, explaining his preference for the Danish brewer.
In a report on Carlsberg a week ago, Maybank’s Chong said, “Carlsberg’s focus on new super-premium brews such as Kronenbourg, catering to new, female or young consumers, will continue to drive growth,” he wrote.
While both GAB and Carlsberg pay good dividends, Carlsberg’s cheaper share price makes its yields higher.
Hong Leong Investment Bank’s has a hold call on both counters. “You will never see a downturn in both companies, but both are limited to single digit growth,” the analyst said.
An analyst from a local bank backed brokerage said she would currently shun both stocks as both their prices have run. Over the past 12 months, both GAB’s and Carlsberg’s stocks have gained more than 55%, and about 45% respectively, and both are trading at historical highs, of RM20.82 and RM16.20 respectively.
“Yields are already very low, I wouldn’t buy both at this point,” she said.
However if he were to pick one stock, she would go with Carlsberg, as she feels its portfolio is stronger, and with 30% of its revenue coming from Singapore, the company is better insulated from the expected tax hike this year.
This year there is a strong likelihood that the Government will impose higher excise duties after sparing the two, GAB and Carlsberg, for the last seven years.
Carlsberg in Malaysia brews beer for the Singapore market as well, after Carlsberg Singapore Pte Ltd was taken over for RM370 million in 2009. Carlsberg also has almost 25% equity interest in Lion Brewery Ceylon Plc.
While the analysts fraternity seem to favour Carlsberg, GAB’s Essaadi however could have been brought in to prevent such decline, and the loss of market share.
And then there’s Carlsberg’s new managing director Henrik Juel Andersen, who takes over the helm of the company starting July this year.
What is clear is that the two, both GAB and Carlsberg are likely to be closely scrutinised by the analyst fraternity and market watchers alike. With both offering solid fundamentals, it may just be a matter of investor preference, much like the beers they brew.
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