Staying the course: Carlsberg Malaysia vows to continue premium push despite sales slump

29-Aug-2023 - Last updated on 29-Aug-2023 at 03:12 GMT

Carlsberg has pledged to continue with its premiumisation drive in Malaysia and Singapore. ©Carlsberg Malaysia

Related tags Carlsberg Malaysia Premium

Carlsberg has pledged to continue with its premiumisation drive in Malaysia and Singapore despite seeing its higher end beers suffer a significant slump as consumers tighten their belts.

The firm recently announced its H1FY2023 financial results, reporting a -5% year-on-year decline in group revenue to RM1.17bn (US$252.8mn) and a -8.8% year-on-year decline in profits to RM218.1mn (US$47.1mn).

Despite the overall drop in financial performance, Carlsberg Malaysia Managing Director Stefano Clini highlighted that the firm maintained a positive outlook when looking at the high base of comparison the previous year and when compared to several years back.

“We can attribute the drop in this half of the year mainly to weaker consumer sentiment amidst an overall weaker trading environment, driven by growing concerns over the escalating cost of living especially rising food prices,” he told the floor at an exclusive event announcing the results.

“Basically now when consumers go out, they are being more cautious with their spending and even when they do go and drink it will be more measured and they drink less than before with the idea of making sure essential items are still within reach [even with this expense].

“This is in addition to a normalisation from the huge pent-up demand we saw last year post-pandemic, higher input costs overall as well as increased marketing expenses.”

Carlsberg Malaysia operates across Malaysia and Singapore and also has a share in Sri Lanka’s Lion Brewery, which saw higher profitability this half (RM9.9mn/US$2.14mn) due to the absence of a one-off surcharge tax expense in the country.

Looking more closely at the firm’s different business segments, sales volumes for its mainstream beers such as Carlsberg and SKOL dropped by 8% as a result of all the factors highlighted, and Carlsberg’s star category of premium products such as 1664 Kronenbourg and Somersby ciders saw an even larger drop of 14% this half.

Despite this result, Clini told us that the firm has no intention of slowing down in its premiumisation strategy as the trends continue to indicate to them that this is the right path to take.

“The results over the past three years have been clear that premium products are the items consumers look to for that consumption experience, and even with this drop this time we are confident that we will still be better off pursuing this strategy in the medium to long term,” he said in response to queries from FoodNavigator-Asia.

“Even if there was a strong element of affordable luxury before especially during the pandemic [which has been slightly impacted due to the economic and geopolitical situation], we believe that the trend is our friend and this is the best course to take.

“It is also important to note that trends by no means proceed in a geometrical straight line and just go up and down in a fixed manner but instead can be quite flexible so what does not work today may suddenly work perfectly tomorrow – so we are still confident in this strategy, further bolstered by upcoming new launches that will be revealed in due time.”

Digitalisation and caution

Carlsberg has also been working to improve its digital presence across both Malaysia and Singapore for the past few years, and new rankings have revealed that the firm has successfully made its mark on major e-commerce platforms.

Shopee Malaysia’s best-selling brands ranking for its 6.6 sales saw Carlsberg rank fourth in the groceries category; and the same ranking for Lazada Singapore saw it beat brands such as Pokka, Kleenex and Tiger to emerge in second place behind personal care brand Walch.

“We have also successfully completed the RM108mn brewery upgrade that was announced previously, which will bring a further five benefits in terms of efficiency, quality, capacity, flexibility and environmental sustainability,” Clini added.

“Moving forward, we still maintain a cautious outlook as we anticipate higher inflationary pressures and that geopolitical tensions will continue to post challenges and dampen consumer spending.

“That said, the end of the 2022 Prosperity Tax in Malaysia will have positive impacts on our profits, and we will stay focused on both revenue and cost optimisation initiatives.”