Probably not the best situation: Carlsberg Malaysia ‘conservative and cautious’ about 2021 outlook due to ongoing COVID-19 concerns

30-Aug-2021 - Last updated on 30-Aug-2021 at 02:07 GMT

Carlsberg Malaysia has posted a highly cautious outlook for the rest of 2021 despite successfully growing its net profits in the first half of the year. ©Carlsberg

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Carlsberg Malaysia has posted a highly cautious outlook for the rest of 2021 despite successfully growing its net profits in the first half of the year, citing ongoing COVID-19 restrictions in Malaysia and impacts from its enforced brewery closure.

In the company’s H12021 financial results announcement, Carlsberg Malaysia said it had posted flat revenue (+0.5%) in the first six months of the year (January to June 2021) to hit RM881.2mn (US$208.5mn), but managed to grow net profits by 23.9% to RM103.6mn (US$12.5mn).

However, according to Carlsberg Brewery Malaysia Bhd (Carlsberg Malaysia) Managing Director Stefano Clini, the rise in profits is due to having come from a very low base in the previous year.

“MCO 1.0 in 2020 saw the suspension of brewing and distribution for seven weeks with on-trade sales significantly impacted, [and in this year we also] accelerated the growth with new product launches before the abrupt disruption in June (when Malaysia implemented the Full Movement Control Order (FMCO)”, said Clini.

So despite the seemingly positive growth in profits, the firm is maintaining a very wary outlook for the rest of 2021, especially as the brewery is currently still considered a non-essential service in Malaysia.

“We were placed under the negative list of non-essential services [forcing us to suspend operations at the brewery] for a prolonged period of 75 days this year, from 2 June to 15 August. Right now, we are actually still under the negative list, it is only because we have managed to fully vaccinate all our employees at the brewery site that we are now able to operate again starting 16 August,” he said.

“The [suspension] of almost 3 months was a major impairment to business operations, [and coupled with] ongoing restrictions in the on-trade sector [which coupled with the extended brewery suspension] will continue to adversely impact revenue and profitability until more of the economy is open, accelerated by progress of Malaysia’s national vaccination drive.

“In Malaysia, some dining in is resuming but we have already seen the uptake is very slow in some places like Penang as people are still scared, and it is really hard to say what will happen next [so] we are being very cautious about the outlook. We are positive in the long term and the mid-term, but for now we are remaining conservative, concerned and cautious.

Clini also highlighted that the extended suspension took a toll on the company’s stocks which are currently low, but that he expects to get redistribution back to sales channels very quickly.

“Before we had to stop production, we took measures to increase stock in May and this helped to sustain market supply until July – but as of end-July many places were already starting to see our products out of stock. [This is not to mention there was also] inconsistent enforcement on beer sales in supermarkets, hypermarkets and convenience stores, [so some stores were selling alcohol but some were not],” he said.

“The suspension also disrupted supply to Carlsberg Singapore which is heavily reliant on Malaysian production, [and] and exports to regional and other foreign markets.

“But production is up and running as we speak, and I believe we can get product redistributed to all sales channels within a week now we’ve restarted.”

The Carlsberg brewery is now operating at full capacity, at a low density of 200 square metres per employee and with biweekly swab tests to continue ‘for the foreseeable future’. No workplace infection clusters have been detected at the brewery since the start of the pandemic.

Bright spots

That said, the firm’s premium brands and new launches this year prior to the disruption have shown some clear indications of growth opportunities for the firm as well.

Carlsberg’s premium brands showed a 16% growth year-on-year, with a particularly impressive performance by its new Connor’s Stour Porter which was launched in cans in April, which saw 125% growth across Malaysia and Singapore.

“We saw this 16% increase for premium even in Malaysia amidst the very restricted operating environment and brewery closure, with all brands growing by double digits,” said Clini.

“The Connor’s Stout is the only can in the market with a double dose of nitrogen injected to replicate the experience of drinking stout in a pub, with that thick creamy foam on top, and this really appealed to consumers who wanted the stout experience at home.

“Another new launch, the Somersby Watermelon which hit Malaysian markets in March this year after a limited edition launch in Singapore, also quickly grew to be the number two variant of Somersby within two months of launch, showing that this really fits the South East Asian taste.

“So overall, the premium products and new launches clearly also helped to grow the profits despite the situation in Malaysia, which shows us the opportunities to be found.”

Clini also highlighted e-commerce as a key area of growth for the firm, citing a 205% growth in e-commerce volumes year-on-year across various platforms including Lazada, Shopee, pamdamart, redmart, Amazon and more across Singapore and Malaysia. The firm is also exploring the potential to create a digital B2B platform for dealing with customers.