Muted outlook: Carlsberg Malaysia focusing on e-commerce and retail growth after 44% annual sales slump
Malaysia has implemented various forms of a Movement Control Order (MCO) since last year in response to the COVID-19 pandemic.
The first round of full MCO with strict regulations lasted around six weeks from March 18 and was widely considered a success, but COVID-19 numbers have since resurged in the country since state elections were held in Sabah in September, causing a huge influx of cases back to Peninsular Malaysia and has since risen to number in the thousands daily.
Many industries, including beer, took a hit last year as a result of the strict MCO regulations. Carlsberg Brewery Malaysia Berhad (Carlsberg Malaysia), one of the region’s largest breweries, saw these impacts as a 44.3% drop in net profit year-on-year to MYR162.2mn (US$40.1mn), and a 20.9% drop in revenue y-o-y to MYR 1.8bn (US$445mn) across both its operating markets of Singapore and Malaysia.
Malaysia took a particularly hard hit, which the firm confirmed was largely due to the impacts of COVID-19 on its on-trade business - a 50.6% profit drop y-o-y to RM135.4mn (US$33.5mn) and 23.3% revenue drop to RM1.3bn (US$321.5mn).
“On-trade was obviously the most affected due to COVID-19 last year, but we saw gradual recovery as shops opened after the first lockdown,” Carlsberg Malaysia Managing Director Stefano Clini said during a televised press conference on the firm’s FY2020 results.
“That said, overall we saw a 20% decline in our core beer and 17% decline in premium beers, with Kronenbourg Blanc being the strongest player [but still seeing] single-digit declines.”
Malaysia also implemented a second round of MCO (dubbed MCO 2.0) in January this year, and local analysts at CGS-CIMB predicted that the brewery sector as a whole is likely to take another hit as a result given that on-trade is expected to be further impacted.
“On-trade [brewery sales] in states under the MCO will be affected, [in addition] to off-trade impacts by bans on social activities involving gatherings,” the research firm said in a brewery sector report.
Despite the negative predictions and numbers, Clini remains ‘cautious but positive’ on Carlsberg’s outlook even with the MCO and through the year.
“The second implementation of the MCO [was] untimely as it coincided with the lead-up to Chinese New Year, traditionally a key period for sales. However, our manufacturing, distribution and off-trade availability [remained and still] remain unaffected under the current SOPs [standard operating procedures],” Clini told FoodNavigator-Asia.
“[That said, Carlsberg is still] taking a cautious view over the outlook for the current year due to the persevering effects of COVID-19 that will likely cause on-trade sales and consumer sentiment to remain depressed.
“In light of the re-imposition of the second MCO, the Group anticipates a muted recovery in on-trade sales as well as other factors such as weak macroeconomic conditions and financial challenges that many F&B operators are facing to stay afloat. Limitations set on Chinese New Year reunions, dining-out and travels had also adversely impacted many businesses.”
MCO 2.0 also differs greatly from the first MCO in terms of regulatory stringency – while the first MCO had strict bans on all dining in or travelling, even for grocery shopping, MCO 2.0 is much more tilted in favour of the economy and is allowing dine-in in foodservice outlets, supposedly with SOPs in place requiring patrons to be 1m apart.
“The recent announcement of relaxed dine-in restrictions are positive for the industry after a shaky start to 2021,” said Clini.
“So modern on-trade like bars or bistros and so on are still being impacted but traditional on-trade sectors like food courts, kopitiams, coffee shops and so on are seeing improvements.
“We also look forward to the rollout of vaccination plans in Malaysia and Singapore, as well as the market adapting to new social and business norms such as the growth in off-trade sales volumes and increased e-commerce traction.”
Along these lines, Clini also highlighted that Carlsberg would be focusing a lot more on its off-trade and digital marketing efforts in 2021 in hopes of making up for whatever is lost in on-trade.
“We have put in place numerous measures to mitigate profit impact and preserve cash - [These include] to optimise our costs aggressively, reallocate our investments on e-commerce and off-trade, and extend various support to our business partners,” he said.
“E-commerce in particular is where we want to invest hard as consumers are also moving here – across both Singapore and Malaysia, we saw some 2.5 times volume growth here in 2020, so we will keep investing in this in the future, to platforms like Lazada and Redmart and so on.”
Carlsberg Malaysia is also considering the potential of developing an in-house e-commerce platform.
“Globally, it still makes more sense to partner with players that have their own infrastructure, but things are a bit different in Malaysia as there’s the non-halal concern, so we’re looking at this and making considerations now,” said Clini.
Singapore as a key innovation base
Clini also highlighted that Singapore (Carlsberg Malaysia operates both in Malaysia and Singapore) is ‘leading the way’ in terms of innovative new product development, and the firm would also continue to focus in this area to grow.
“Singapore is where a lot of Carlsberg’s new innovations have been launched, and it is really leading the way when it comes to product innovation,” he said.
“For example, we launched the Carlsberg Alcohol-free Pilsner and Wheat there last year, and spearheaded a whole new category – hard seltzer – under the Somersby brand with mango and lime variants.
“We’ve also [experimented with] some fun flavours there like the watermelon Somersby, and a range of beautiful Asahi can designs. Innovation has and will continue to be a strategic priority for [Carlsberg].”
In Singapore, Carlsberg’s profit dropped 35.7% to RM64.6mn (US$16mn) and revenue dropped 14.6% to RM527.9mn (US$130.5mn).