This article first appeared in The Edge Financial Daily, on April 22, 2016.

KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd is facing a tough year as the slower economic growth in Malaysia and Singapore is pulling consumers away from beer, in addition to the recent increase in excise duty locally.

“We see subdued consumer sentiment; spending power will not come up during the year,” Carlsberg managing director Henrik Juel Andersen told reporters after the company’s annual general meeting yesterday.

He said even though it is a tough year moving forward, there are still opportunities for growth.

“We can still improve our efficiency and cost management,” he said, adding that the brewer will not reduce its investment in its brands.

Andersen, who will be assuming new position in Carlsberg group in Laos, also expressed his disappointment towards the excise duty hike on March 1, which he described as “hefty”, and favours the importers of foreign beer and liquor over local beer producers.

The new tax regime saw the quantum of a tax increase on locally produced beer, stout and cider, ranging from 10% to 99%.

“It has forced us to increase our price,” he said, adding that this may encourage an illicit trading of beers.

With the new tax regime, in which excise duty is based on alcohol content, Andersen said the brewer does not rule out the possibility of launching products with lower alcohol content, but will always be mindful of what consumers want.

Asked if Carlsberg will further increase its price when the anti-profiteering period ends on June 30, Andersen said he would not rule out the possibility of such move.

“The tax increased two months ago, we did not pass all the taxes on our prices. We have to absorb part of the tax increase, which is also why we can’t rule out we will not adjust the prices,” he said.

Carlsberg passed down two thirds of the tax increase to consumers by raising its selling prices early last month. There is an average price increase of 3% to 5% in its products.

The Price Control and Anti-Profiteering Act 2011, via the Price Control and Anti-Profiteering Regulations 2014, forbids any net profit margin rise for 18 months, starting Jan 2 last year, to prevent profiteering post-goods and services tax. The freeze in price rise will end on June 30 this year.

While majority of its revenue comes from domestic business, Andersen said Carlsberg’s export business had helped the company at times it faced fluctuation in the local currency.

The company exports to Singapore, Hong Kong, Thailand, Taiwan and Laos.

For its financial year ended Dec 31, 2015, Carlsberg registered a slight increase of 2.05% in net profit compared with a year ago.