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This article first appeared in The Edge Financial Daily, on July 19, 2016.


PETALING JAYA: Heineken Malaysia Bhd is considering coming out with more non-alcoholic products to offset the impact of the increase in excise duty, which currently is reportedly the third highest in the world.

Its managing director  Hans Essaadi said there are various opportunities to look at with regard to non-alcoholic or low alcoholic products. “Historically, we stayed away from the non-alcoholic segment, but with the revised excise tax in place and consumer trend that we are seeing, we need to explore,” he told reporters during the group’s financial results briefing at its Sungei Way brewery here yesterday.

On March 1, the government revised the excise duty structure by eliminating ad valorem tax, which effectively resulted in a 10% to 12% hike in excise duty on malt beer. It also raised the legal purchasing age for alcoholic beverages from 18 to 21 years, effective December 2017.

Essaadi, however, said any new products from the non-alcoholic segment will only be realised next year.

The only non-alcoholic product that the group is selling now is Malta, a light carbonated beverage.

“It (Malta) is only [a] few per cent of our total revenue ... the contribution is relatively small,” he said. Essaadi also said Heineken will continue its efforts to increase its share of the country’s cider segment.

Currently, Heineken’s cider brand, Strongbow, is the second most popular brand behind Carlsberg Brewery Malaysia Bhd’s Somersby.

While Essaadi does not expect consumer sentiment to recover soon, he is confident that the group will continue to outperform the market.

The group saw net profit for the three months ended June 30, 2016 surge 38.3% to RM60.88 million, from RM44.02 million a year ago, driven by higher sales and more effective commercial investment and channel sales execution. Revenue rose 15.6% to RM459.51 million, from RM397.62 million, mainly due to higher sales driven by the Euro 2016 football tournament, low base of last year as a result of lower consumer demand post-good and services tax implementation in the comparative quarter.

The group declared a second interim dividend of 35 sen, payable on Oct 7.

For the 12 months ended June 30, the group’s net profit jumped 24.5% to RM265.66 million, from RM214.19 million a year ago, while revenue rose 5.7% to RM1.85 billion, from RM1.75 billion. Last November, Heineken changed its financial year end from June 30 to Dec 31.

“[Going forward,] I think the consumer market will remain muted. Although the negative trend may continue, it will not necessarily affect our results,” Essaadi said.

On product pricing following the government’s move to extend the Price Control and Anti-Profiteering Act until Dec 31, Essaadi said the management will keep monitoring the market, but it does not have a specific rising strategy for the future.

Heineken increased its average selling price by 2.5% following the initial expiry of the Anti-Profiteering Act on June 30.

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