Analysis overviewHeinekenMalaysia Berhad, formerly known as Guinness Anchor Berhad is the leading brewerythat is based in Malaysia. The company was established in 1964 and subsequentlylisted on the Main Board of Bursa Malaysia in 1965. It involved in production,marketing, packaging and distribution of malt liquor brewing and has beendistributing most of the well-known beer brands in Malaysia such as Heineken,Guinness, and Tiger that are not far from the top of the beer drinker’s list. (Lim, 2017) Theperformance of Heineken Malaysia was much better than expected probably due to Euro2016 football tournament held from June 10 to July 10.
The consumer sentimentin the alcoholic beverage industry in Malaysia is weak. However, even theconsumer sentiment is soft and several unfavourable market conditions existedin the industry, Heineken Malaysia was still able to outperform in 2016. Thecompany managed to report double digit growth while further improving theirefficiency of cost in 2016. Thisoutperformance may also probably due to the strong brand portfolio, effectivecommercial strategy adopted by Heineken, investment behind brands as well asthe channel executions in a challenging external environment. On the otherhand, Malaysia appears to be the tenth largest consumer of alcohol in the worldwith spending of US$500million every year on alcohol even though it is just asmall country. Per capita consumption in beer is 11 litres in Malaysia and thisconsumption is considered light.
Although this consumption is relatively highfor Asia, it still is less than manywestern countries. However, this figure was understandable since Muslims tookup approximately 60% of Malaysia’s population. Muslims are prohibited toconsume alcoholic drinks as this action is against their laws. (Alcoholrehab.com, 2017)The average age for alcohol dependence is 22 years and Malaysia’s legaldrinking age is currently to be at least 18 However, this is going to be increasedto 21 and this will take effect from 1 December 2017 Health warnings are alsogoing to be imposed on alcohol products soon This action is believed to havenegative impact to companies whose core business is to sell alcoholicbeverages. Malaysiagovernment levies a sales tax of 20 percent whist the collection of duties andexcise tax. On the whole, the government will collect a total of about RM1 billionas taxes every year from alcohol industry which consist of sales tax, importduties as well as excise duties.
(Asunta, et al., 2017) Price for beer roseafter the implementation of Goods and Services Tax in 2015. The demand for beeraffected by the new excise tax in 2016, particularly for beer with an ABV of higher than 5%, asthe new tax structure is calculated based on alcohol strength. Totalvolume growth of beer has slowed down due to the announcement made by leadingbreweries about the increment in price per barrel for alcoholic drinks that theysold through bars and clubs and consequently lead to stagnant demand with significantdecrease in total volume growth in 2016 if compared with the average for thereview period. Besides,the alcoholic beverage companies faced the issues in advertising alcoholicdrinks.
Product placement for alcohol products are restricted. To be precise,alcohol products are required to be displayed in a separate cabinet or shelfapart from those for food. A penalty of a maximum RM10,000 or a jail term of upto 2 years may be imposed if companies fail to adhere to the laws which will beeffective from 1 December 2017. Restrictions on alcohol advertising and theproduct placement are likely to influence the implementation of marketingstrategy of alcoholic beverage companies.
Taxis one of the important sources of revenue in Malaysia. Due to the high excisetax that breweries need to pay, Heineken Malaysia also contributed around RM122million. As mentioned previously, government collects around RM 1 billion taxesfrom alcohol industry as a whole which means Heineken Malaysia has made upapproximately 12% of the tax collected by the government.
The contribution togovernment revenue in turns affect a wide variety of economic activities. Besides,GNP per capita of Malaysia was US$3500 while GDP appeared to be US$85 billion.Since we are unable to find out how much Heineken Malaysia has contributed tothe GNP and GDP of Malaysia after the research is done, we assume that nearlyhalf of the revenue that was amounted to US$500million, as emphasizedpreviously, collected from alcohol industry was contributed by HeinekenMalaysia due to its strong brand portfolio, brand awareness creation among thebeer drinkers as well as its largest market capitalization in its industry. Inaddition, Heineken and Carlsberg have been dominating the Malaysia MLM with acombined market share of approximately 98% in 2016 plus most mainstream pubs andbars in Malaysia sign contracts with either Heineken or Carlsberg to servebeers exclusively, and there are hardly any that serve beers from bothbreweries. However, the statistics showed that Heineken Malaysia has a marketcapitalization of US1.2 million which is relatively larger than CarlsbergMalaysia whose market capitalization makes up only US1.
0 million. Hence,Heineken Malaysia has been contributing revenue to the country and subsequentlyindirectly supporting the economic development of the country through its highcontribution of tax due to relatively higher profit and its strong brandportfolio. (Cheah, 2017)