Analysis executions in a challenging external environment. On the

Analysis overview

Heineken
Malaysia Berhad, formerly known as Guinness Anchor Berhad is the leading brewery
that is based in Malaysia. The company was established in 1964 and subsequently
listed on the Main Board of Bursa Malaysia in 1965. It involved in production,
marketing, packaging and distribution of malt liquor brewing and has been
distributing most of the well-known beer brands in Malaysia such as Heineken,
Guinness, and Tiger that are not far from the top of the beer drinker’s list. (Lim, 2017)

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            The
performance of Heineken Malaysia was much better than expected probably due to Euro
2016 football tournament held from June 10 to July 10. The consumer sentiment
in the alcoholic beverage industry in Malaysia is weak. However, even the
consumer sentiment is soft and several unfavourable market conditions existed
in the industry, Heineken Malaysia was still able to outperform in 2016. The
company managed to report double digit growth while further improving their
efficiency of cost in 2016.  This
outperformance may also probably due to the strong brand portfolio, effective
commercial strategy adopted by Heineken, investment behind brands as well as
the channel executions in a challenging external environment.

On the other
hand, Malaysia appears to be the tenth largest consumer of alcohol in the world
with spending of US$500million every year on alcohol even though it is just a
small country. Per capita consumption in beer is 11 litres in Malaysia and this
consumption is considered light. Although this consumption is relatively high
for Asia,  it still is less than many
western countries. However, this figure was understandable since Muslims took
up approximately 60% of Malaysia’s population. Muslims are prohibited to
consume alcoholic drinks as this action is against their laws. (Alcoholrehab.com,
2017)
The average age for alcohol dependence is 22 years and Malaysia’s legal
drinking age is currently to be at least 18 However, this is going to be increased
to 21 and this will take effect from 1 December 2017 Health warnings are also
going to be imposed on alcohol products soon This action is believed to have
negative impact to companies whose core business is to sell alcoholic
beverages.

Malaysia
government levies a sales tax of 20 percent whist the collection of duties and
excise tax. On the whole, the government will collect a total of about RM1 billion
as taxes every year from alcohol industry which consist of sales tax, import
duties as well as excise duties. (Asunta, et al., 2017) Price for beer rose
after the implementation of Goods and Services Tax in 2015. The demand for beer
affected by the new excise tax in 2016, particularly for beer with an ABV of higher than 5%, as
the new tax structure is calculated based on alcohol strength. Total
volume growth of beer has slowed down due to the announcement made by leading
breweries about the increment in price per barrel for alcoholic drinks that they
sold through bars and clubs and consequently lead to stagnant demand with significant
decrease in total volume growth in 2016 if compared with the average for the
review period.

            Besides,
the alcoholic beverage companies faced the issues in advertising alcoholic
drinks. Product placement for alcohol products are restricted. To be precise,
alcohol products are required to be displayed in a separate cabinet or shelf
apart from those for food. A penalty of a maximum RM10,000 or a jail term of up
to 2 years may be imposed if companies fail to adhere to the laws which will be
effective from 1 December 2017. Restrictions on alcohol advertising and the
product placement are likely to influence the implementation of marketing
strategy of alcoholic beverage companies.

            Tax
is one of the important sources of revenue in Malaysia. Due to the high excise
tax that breweries need to pay, Heineken Malaysia also contributed around RM122
million. As mentioned previously, government collects around RM 1 billion taxes
from alcohol industry as a whole which means Heineken Malaysia has made up
approximately 12% of the tax collected by the government. The contribution to
government revenue in turns affect a wide variety of economic activities. Besides,
GNP per capita of Malaysia was US$3500 while GDP appeared to be US$85 billion.
Since we are unable to find out how much Heineken Malaysia has contributed to
the GNP and GDP of Malaysia after the research is done, we assume that nearly
half of the revenue that was amounted to US$500million, as emphasized
previously, collected from alcohol industry was contributed by Heineken
Malaysia due to its strong brand portfolio, brand awareness creation among the
beer drinkers as well as its largest market capitalization in its industry. In
addition, Heineken and Carlsberg have been dominating the Malaysia MLM with a
combined market share of approximately 98% in 2016 plus most mainstream pubs and
bars in Malaysia sign contracts with either Heineken or Carlsberg to serve
beers exclusively, and there are hardly any that serve beers from both
breweries. However, the statistics showed that Heineken Malaysia has a market
capitalization of US1.2 million which is relatively larger than Carlsberg
Malaysia whose market capitalization makes up only US1.0 million. Hence,
Heineken Malaysia has been contributing revenue to the country and subsequently
indirectly supporting the economic development of the country through its high
contribution of tax due to relatively higher profit and its strong brand
portfolio. (Cheah, 2017)