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Malaysia. Guinness Anchor Bhd cautious about hiking prices in near term

Brewery Guinness Anchor Bhd (GAB) said it will be cautious not to hike prices of its products further in the near term on pressures of a higher inflation rate in the second half of 2016.

The market leader in the brewery business had adjusted the prices of its product lines as soon as the new tax structure kicked in on March 1 when the Government replaced the malt liquor’s tax struture, which led to a hike in the price of beer by between 8% to 10%.

Asked whether another price hike was likely to take place after the Anti-Profiteering Act period ended on June 30, managing director Hans Essaadi said with consumer sentiment in its 10-year low, it would be wary.

“Hiking prices during this time would not make sense and we are cautious. But, we also run a commercial business where we are diluting our margins.

“It is something that we need to look at, as we won’t be able to do any price hike until a certain period of time,” said Essaadi after a tour of the brewery yesterday in conjunction with its Golden Jubilee.

The procurement agreement with Heineken NV had benefitted GAB, he said, adding that it was able to purchase raw materials at lower price.

“The procurement ensures pricing are stable,” he added.

The tour was also held in line with GAB’s rebranding exercise just after Dutch brewer Heineken NV became the major shareholder of GAB in October last year.

Heineken holds a 100% stake in GAPL Pte Ltd, which in turn owns a 51% interest in GAB.

Upon shareholders’ approval at an EGM to be held on April 20, GAB will be known as Heineken Malaysia Bhd.

Meanwhile, UOBKayHian (UOBKH), in its note, believed that consumers were able to accept the price hike of only 3% to 5%.

Although brewers had partially absorbed the excise duty hike on malt liquor with high alcohol content of more than 6%, the financial impact was modest as these beverages account for less than 10% of the brewer’s sales volume, according to UOBKH.

“Depending on the sales volume and competitive dynamics, the industry would have sufficient pricing power to implement a modest price hike after June 30. Brewers are likely to pass on costs, hence restoring their margins,” it said.

But, Essaadi, still remained leery on the outlook, stating that it hoped to do better this year and perhaps pick up some market share. “We will be having more brand portfolios, but we will also take of those that are not doing well,” he noted.

1 Apr. 2016

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