This article first appeared in The Edge Financial Daily on March 12, 2019

KUALA LUMPUR: The prices of beer are about to be raised by up to 6.2% with effect from April 1, with the country’s two leading brewers blaming it on rising costs.

This price hike will be the first since Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd raised their prices after the reintroduction of sales and service tax on Sept 1 last year.

In their letters to retailers sighted by The Edge Financial Daily, the brewers said the higher prices are due to the continued escalation of prices of raw materials and packaging.

Heineken also highlighted that the upcoming sugar tax of 40 sen per litre on beverages will also impact the pricing of its non-alcoholic beverage Malta.

Last Thursday, the government decided to postpone the imposition of the 40 sen per litre excise duty on two categories of sugary drinks to July 1, instead of the initial proposed date of April 1.

“The decision to adjust prices is made after careful consideration of various factors, primarily due to the significant increase in costs of raw materials and packaging materials, resulting from the rise of global commodity prices,” Heineken managing director Roland Bala (pic) told The Edge Financial Daily.

Heineken can confirm that a majority of the price adjustments are of between 0% and 5%, he added, noting that every effort has been taken to ensure the impact of the price adjustments is minimal.

According to its new price list, Heineken has raised the prices of some of its products — per pack — by between 3% and 5%, while Carlsberg has increased the prices of some products between 3% and 6.2%.

“Whilst consumer sentiment improved in 2018, we are mindful of the impact of a price adjustment on sales. As such, we have done our best to keep the adjustment to be as minimal and least disruptive as possible,” Heineken said in its letter.

Meanwhile, in a separate letter, Carlsberg said: “We are mindful that taking a price hike under the current tough trading environment is challenging for all parties, hence we have tried to absorb as much inflation in our cost of goods and only taking a minimum price adjustment.”

Both the brewers have recorded stellar earnings for their respective financial year 2018 (FY18) ended Dec 31, 2018.

Heineken saw an increase of 4.62% in its net profit to RM282.52 million, from RM270.06 million in FY17, while revenue was up 8.29% to RM2.03 billion from RM1.87 billion.

Carlsberg’s net profit grew 25.32% to RM277.15 million in FY18, from RM221.17 million a year ago, while its revenue rose 12.11% to RM1.98 billion from RM1.77 billion.

Shares in Heineken closed 14 sen or 0.61% lower at RM22.82 yesterday, valuing the company at RM6.89 billion, while Carlsberg shares closed down 10 sen or 0.39% at RM25.74, bringing its market capitalisation to RM7.92 billion.