Carlsberg hopes for on-trade recovery this year
O MD sees progressive growth when the government eventually eases lockdowns
KUALA LUMPUR: Carlsberg Brewery Malaysia Bhd expects the reopening of pubs and bars to boost growth in its ontrade channel this year, faster than offtrade, given the low-base in the previous year.
“Moving forward, we hope a majority will reopen but it is true that a number of them will not make it, which will have an impact on the economy,” managing director Stefano Clini said after the brewer’s AGM yesterday.
As to Carlsberg’s prospects this year, he stated in broad terms that the brewer is hopeful of growth but conceded that the year did not start on an easy note, given the movement control order (MCO) in the first quarter. If there are no more lockdowns, Clini hopes to see a progressive growth.
“But I do hope we can keep opening the on-trade outlets so we can see an accelerated growth this year, back to almost normal.”
The closure of on-trade channels, such as coffee shops, pubs and bars, was the key cause of its revenue decline in 2020, he elaborated.
“From a longer term perspective, we know that there is always a churn - it might take one or two years, but what closes gets replaced.”
At the height of the pandemic last year, the Pub, Night Club and Bar Association in Klang Valley estimated that 20% of pubs and bars have closed down permanently, which Clini remarked that this definitely has a depressive effect on its on-trade sales, though it is also contributed by those who have temporarily suspended operations.
Consequently, the brewer noted that the pandemic and the ensuing social distancing and lockdown measures have accelerated its off-trade sales growth for the simple reason that people could not consume through the on-trade channels.
He pointed out this growth in the offtrade channel is a global trend that started many years ago.
As for the possibility of a reinstatement of the goods and services tax (GST), the brewer said it is ready and will be able to follow suit with the implementation.
“We don’t expect any material impact on our business, one way or another,” said the managing director.
Chiming in on the issue, Carlsberg CFO Vivian Gun hopes that in the event of the reintroduction of the GST, it will give businesses enough lead time to ensure their systems are working to ensure that they will be able to comply.
With regards to rising raw materials prices, attributed to a commodity supercycle, she revealed that the brewer deals with such issues by hedging its raw materials in advance. Gun pointed out that in 2020 the impact of such increase to its profitability has been minimal.
“Having said that, should the cost keep increasing it will have an impact but at the same time we have taken a couple of measures to mitigate such impact.”
She related that the brewer can leverage the group’s position at the global level to negotiate with its suppliers as well as improved its productivity at its facility to increase efficiency and reduce wastage.