Probably the best strategy? Carlsberg Malaysia pins hopes on e-commerce after COVID-19 sinks financials

The firm’s recent announcement of its Q2 and H1 2020 financial results saw massive drops in both revenue and profit for Carlsberg Malaysia.

For Q2 2020, the firm saw an 83.7% drop in net profit year-on-year to RM10.5mn (US$2.5mn) and a 40.2% drop in revenue to RM287.3mn (US$68.5mn), whereas for H1 2020 the net profit drop was 45.3% to RM83.6mn (US$19.9mn) and the revenue drop was 23.1% to RM877.1mn (US$209.2mn)

In hopes of recovering from this devastating decline, Carlsberg Malaysia has opted to shift focus away from the traditional on-trade channel such as coffee shops despite this having customarily always been its strongest performer, and focus on digital efforts instead.

“We saw a significant pick-up in the e-commerce channel during the lockdown, as is probably the same for most FMCG categories, and will be increasing investment and marketing activities in this area to take advantage of this upward trend,”​ Carlsberg Malaysia Managing Director Stefano Clini said to us.

“We started to do this during the lockdowns, [and have seen good results] so will continue this post-lockdown as well.”​

He added that increased focus would also be channelled to digital marketing efforts and virtual launches, citing the company’s premium beer Kronenbourg 1664 Blanc (Blanc) as a successful case study of such a virtual launch.

“Blanc was the only beer within our premium category that performed well even during the lockdown, it was the only premium brand to not see a double-digit decline thanks to the virtual launch,”​ said Clini.

“The virtual launch was a collaboration between Carlsberg and Nerdunit streetwear, and the entire campaign was done virtually but it really positively impacted the results of the brand [so] we will focus on efforts such as these.”​

Carlsberg Malaysia’s entire premium category including brands like Asahi Dry and Somersby cider recorded double-digit declines (with the exception of Blanc) and averaged a 20% drop, whereas its core Carlsberg beer category saw a 17% decline overall.

“The premium portfolio did perform well in off-trade at retail outlets even during lockdown, but this was not nearly enough to compensate for the losses seen in on-trade sales, where these normally sell the most,”​ said Clini.

Cost saving measures​

Apart from a digital focus, Carlsberg Malaysia also has plans to optimise its cost saving measures, building on an existing business strategy dubbed ‘Fund the Journey’ which already looked to improve costs and efficiencies before COVID-19.

“Our strategy for the rest of 2020 is similar to pre-COVID-19, but with a little bit of changes in the focus,”​ said Clini.

“There will be an emphasis on delivering efficiencies and savings in operating expenses, value management, and ways to have savings along the supply chain, all in line with our ‘Fund the Journey’ strategy, so as to be able to make up for part of the profit margin lost.​

“We will also look at focusing to support more of off-trade as this part of the business has been growing; whilst still helping our on-trade customers to ensure they can still operate after the lockdown.”​

Other initiatives undertaken by Carlsberg Malaysia to raise sales have included its limited-edition Carlsberg Liverpool Champions packaging promotion, changing the packaging for all its Carlsberg core beer formats to Liverpool colours to celebrate the football team’s recent Premier League win, as well as a ‘Bring Me Home’ campaign enabling consumers to takeaway beer and stout from on-trade outlets to consumer at home.

Government support​

That said, Clini expects business recovery to be slow even after the lockdown is lifted due to the effects of COVID-19, prevailing social distancing measures and financial and operational challenges being faced by F&B businesses.

“[In view of challenges due to COVID-19], we appeal to the Malaysian government to support the F&B and hospitality industry by facilitating the approval for liquor license renewals and new liquor license applications. [This will help] to stimulate homegrown F&B businesses,”​ he said.

He also urged the Malaysian government not to raise excise duties any further as part of the upcoming National Budget 2021 announcement this November, citing the dangers of illicit contraband alcohol and loss of government tax revenue as major reasons.

According to the firm, Malaysia has amongst the highest excise duty for beer in the world, which is taxed at RM175 (US$41.74) per litre of alcohol by volume (ABV).

“In Malaysia, the biggest challenge remains the prevalence of illicit beer which is estimated at more than 1 million hectolitres and [a loss of some] RM1.5bn (US$357.8mn) to government tax revenue by occupying around 20% and 80% of total beer sales by volume in Peninsular Malaysia and East Malaysia respectively,”​ it said.