There are only 3 listed companies under the sub-sector of
Breweries in
KLSE/Bursa Malaysia.
Guinness Anchor,
Carlsberg and the third is a distributor of wine.
Napex, which brews Jazz and Starker(served at the very popular Overtime chain of pubs) is not listed.
Since I have covered
Guinness Anchor Berhad (GAB) here,
here and
here, I might as well do it for its strongest competitor. Yea,
That Calls for a Carlsberg.
Carlsberg Breweries Berhad is a direct competitor of
Guinness Anchor Berhad, for it does the same thing. Brews, markets and distributes beer,stout and shandy. Its
product line up is more extensive compared to GAB, which has 10 brands. Carlsberg has more than double.
Beer Brewed LocallyCarlsberg
Skol
Tuborg (Premium Beer)Stout Brewed LocallyDanish Royal Stout
Connor's (Premium Stout)Super Premium BeerKronenbourg 1664Imported BeerCorona
TetleysNon-alchoholic Produced LocallyNutrimalt
Jolly ShandyBy subsidiary
Luen Heng F&B Sdn BhdBecksBudweiserCrown LagerFoster'sFranziskanerHoegaardenLowen BrauPure BlondeVictoria BitterWarsteinerStella ArtoisLeffeErdingerAsahiBy Joint Controlled Entity
Cottingham & Co Ltd (Taiwan)Beers, spirits, and alcoholic beverageBeers include lagers, ales, dark beers, wheat beers and stouts. Brands are Carlsberg,Corona Extra, Erdinger, Guinness, Kronenbourg 1664 and Tetley's Also distributes Glenfarclas single malt Scotch whiskyBy Associate Entity
Lion Brewery (Ceylon) in Sri LankaLion Lager, Carlsberg, Strong Beer, Special Brew and Lion Stout.Carlsberg Malaysia has presense in countries
outside Malaysia unlike GAB which only operates in Malaysia.
Wholly owned subsidiaries of Carlsberg Malaysia are
Carlsberg Marketing Sdn Bhd &
Carlsberg Singapore Pte Ltd. Carlsberg Msia has a 70% stake in Luen Heng F&B Sdn Bhd.
Carlsberg Malaysia makes its presense in Taiwan via jointly controlled Entities, Carlsberg Distributors Taiwan Limited ('CDTL') 50% and Carlsberg Cottingham 75%. In Sri Lanka, Carlsberg Malaysia has an investment of 24.6% in Lion Brewery (Ceylon) PLC.
How do these entities contribute to Carlsberg Malaysia Bhd's bottom line?Operations in
Malaysia contributes to
71% of profit.
Singapore 29%. And others made a loss of 2 million in 2010.
In term of
revenue,
Malaysia contributes
76%,
Singapore 23% and others 1%.
My discussion hereafter will focus on Carlsberg Malaysia and Singapore.
Mainstream beer accounts for
80% of its
revenue.
Premium beer,
10% of revenue, will be the segment targetted for
growth. 3 years ago, Carlsberg has less than 5% market share in the premium beer segment. Now, Hoegaarden and Kronenbourg have a
market share of 20% in
premium beer market. MD Soren Ravn expects its
premium beers to account for
40% of revenue within the n
ext 3-5 years once Carlsberg starts
brewing them in-house. The plan is to brew 2 premium brands in 2012. My guess is Hoegaarden and Kronenbourg. Makes better sense right?
How does brewing premium beer in-house translate into higher earnings?First, Carlsberg saves on
logistics costs. Second, it enjoys an
exemption of RM5 per litre on
import duty. By the way, GAB brews Kilkenny locally.
In Oct 2009, Carlsberg Berhad
acquired Carlsberg Singapore for 370 million. Carlsberg Singapore has
20% share of the beer and stout market in
Singapore. It is at second position after market leader Asia Pacific Breweries (APB) that commands 63% market share. Tiger rocks Singapore. Annual beer consumption per person is 20 litres which is surprisingly the same as Malaysia. I had the impression that Singaporeans party harder and thus guzzle more beer.
The million dollar question... Can Carlsberg Singapore wrestle away some market share from APB? It has doubled its market share from 10% in the 1990s to 20% currently. Garnering more market share is an uphill battle due to strong branding of Tiger in Singapore. Let's just assume Carlsberg Singapore maintains its market share of 20%, Carlsberg Bhd still enjoys some upside of synergy in marketing and better utilization of capacity at its Shah Alam brewery. I'll be keeping an eye on Carlsberg Singapore growth.
Dividend and share priceCarlsberg is a
dividend stock. Dividend payout took a beating in 2008 and 2009 due to the acquisition of Carlsberg Singapore, draining its coffers dry. Last year,
2010,
gross dividend yield was
4%. And this year, total of 0.555 of dividend has been distributed.
Gross yield of 7% at current market price of 7.25. Welcome back to the dividend camp Carlsberg.
CAGR of Carlsberg from
2007-2011 is
14.35%. A little lower than GAB at 19%. But still a fantastic return none the less.The trend of Carlsberg's stock price is somewhat similiar to GAB.
Resilient and rising steadily. Major event in 2012 is the
UEFA European Cup, of which the group is the official sponsor. Drink up people.
Like GAB, Carlsberg also faces the problem of
increasing costs of raw material, mainly malt which accounts for 30% of total raw material costs. Carlsberg counters by
hedging up to 85% of its 2012 malt requirements.
Brewers escaped an excise hike in Budget 2011. But there is still a risk of off-budget duty hike.
However, Carlsberg has been able to
pass costs to consumer. A raise of 3-5% in price may happen in year 2012 and is likely not to affect sales.
In SummaryThe story on Carlsberg is a tad more interesting than Guinness. Carlsberg sells a
wide range of beer. It makes sure there is beer for every segment of consumer out there. Carlsberg has also more potential to increase its profit. First, its plan to
brew 2 premium beer in-house. Second, at 20% market share,
Carlsberg Singapore has room to grow. In the stout segment, we can forget about Royal Stout. Stout here goes unanimously with Guinness. I favor the story on
Carlsberg as there is more to look forward to.
