below is info from the Star Online : http://biz.thestar.com.my/news/story.asp?file=/2011/9/8/business/9446081&sec=business
KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd is considering raising its product prices next year with the price of barley, a key material in brewing beer, forecast to be 35% to 40% higher.
Cost of aluminium cans were 27% higher year-on-year as well amid the recent rise in power tariffs and natural gas rates, managing director Soren Ravn said after a roundtable discussion yesterday.
He said the impact of the rising material cost was minor for this year as a big chunk of its hedging was done a year ago, but it would have a big effect in 2012.
Ravn hopes the excise duties on beer would be maintained in Budget 2012 “A price increase seems to be likely by the way things are moving now. It is still too early to say as we have not done our hedging yet, and another price increase this year would be an unlikely event,” he said.
Earlier in May, the brewer had raised its product prices by 3%, citing rising costs of raw materials such as malt and hops as well as packaging materials.
“The price increase was not super popular, and we don't run around smiling as we have not actually passed around our problems, as we are still sitting on a problem and its a bomb with prices of raw materials coming up rapidly,” he said.
At the roundtable discussion with key customers, trade associations and hoteliers, Ravn said he hoped the Government would maintain the excise duties on beer at the current level in the upcoming Budget 2012.
“It has been a good year, and we will still be investing in the market, but with the continuing growing input cost, and the risk of a possible excise duty hike coupled with a likely price rise in raw material, things would look tough next year,” he said.
The dialogue was held to discuss the beer industry's challenges, potential and future growth in Malaysia.
He said although the group was not expecting a hike in excise duty, it was important for the brewery to speak up now and take nothing for granted.
“With the budget coming up, the Government is obviously looking at potential ways of securing its revenue, and I do think that an increase in excise duty would be counter-productive for the Government's Economic Transformation Programme (ETP) as I believe tourist arrivals and foreign direct investments are key elements in the ETP,” he said.
He said Malaysia's current excise duties on beer were already the highest in Asia, and in the long run it would work against Malaysia's ambitions to be a tourism hub when competitors like Thailand, Hong Kong, Vietnam and Indonesia had much lower prices for beer due to much lower excise duties.
The group also noted Malaysia was the only Asean country that saw a decrease in beer consumption from 23.5 to 21.5 litres per capita in 2010 despite no tax increases over the last five years. However, the local premium beer market has been experiencing growth with the sector expanding 20.8% in 2010, compared with 2005.
“There is a misleading notion that by increasing excise duties on beer, tax revenues will be automatically raised. Experiences in other countries show that such a move can lead to increasing smuggling activities and other unintended consequences such as switching to lower priced high alcohol beverages,” Ravn said.
In 2010, government taxes contribution increased to 55% of brewery revenue, but breweries' profit and capital fell to 9% of the revenue.
Carlsberg said that despite the maintenance of excise duties over the last five years, the industry recorded RM1.4bil in total tax contribution in 2010 with a compounded average growth rate of 9.9% in tax revenue from 2006 to 2010.
Currently, Malaysia's excise duty on beer is the second highest in the world after Norway at RM740 per hectolitre (one hectolitre is equivalent to 100 litres).
Meanwhile, a local research house analyst said the possibility of an excise duty hike was still 50:50 although the excise duty had remained the same for the past five years.
“It is very hard to determine right now, as there is no indications from the authorities and even the brewers themselves are unclear,” he said.
He said a hike in excise duty would be difficult to gauge as it would shift consumer consumption behaviour and impact total volume.
“Brewers would usually rely on internal cost savings and improved operational efficiency first, I believe a price hike would be the last resort for the brewers in the face of escalating raw material costs,” he said.
OSK Research said although there has not been a hike in almost six years, one must bear in mind that Malaysia's duties are the second highest globally.
“In view of the government's tourism push and efforts to encourage the return of locals abroad, a hike in duties would only be counter-productive,” it said in a research recently.
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