Written by Daniel Khoo
Friday, 01 October 2010 10:58
PETALING JAYA: Having achieved nine consecutive years of growth in profit and market share since FY2000 ended June 30 is certainly a good reason for Guinness Anchor Bhd (GAB) to celebrate.
Another reason to cheer is that its managing director Charles Henry Ireland is upbeat that the stellar performance will continue riding on the back of a growing population in a modernising society and mindset despite critics saying otherwise.
“As a business, we have managed to consistently outperform the competition and the market through a good strategy. And we’ve still got some way to go before we fully exhaust the opportunity that comes from that strategy,” said Ireland.
He reckoned that as the country’s economy progresses further, the demand for beer will increase in tandem with it.
However, industry observers noted that the local beer market is maturing, in addition to the share-of-throat competition from other alcohol beverages like wine.
But, Ireland who has been with GAB for four years, does not agree that the domestic beer market is maturing. “You guys keep on talking about saturated market, but that’s not the way I see it”, he told The Edge Financial Daily.
“If you look at per capita consumption in the western world, it is higher than in the less developed countries.”
Malaysia has the lowest per capita consumption of alcohol in Southeast Asia. Statistics show that the per capita consumption of alcohol within the Indian and Chinese community is 21 litres per adult per year, whereas the figure in Thailand is three times more.
“Per capita consumption will increase gradually over the years. The growth has been quite stagnant over the past years because the government has over the last 10 years raised taxes from being one of the lowest in the world to one of the highest,” Ireland said.
Ireland’s belief is certainly not baseless, judging by the mushrooming of pubs and bars, particularly in the cities.
GAB distributes its products mainly through pubs and bars that have supply contracts that are renewable annually.
“Two years ago, we’ve got about 75% of all the new pubs that were opened that came up for supply contract. Last year, it was above 80%. So when a new bar opens in Malaysia, four out of every five have contracts with GAB. This creates the demand for our brands for consumers access to our products,” Ireland said.
Industry analysts estimate that GAB has a 57% market share of the Malaysian beer and stout industry.
GAB’s net profit had more than doubled to RM152.7 million in its FY2010 from RM60.95 million in FY2000 despite the several hikes in excise duty on alcohol drinks. Another reason to cheer is that its managing director Charles Henry Ireland is upbeat that the stellar performance will continue riding on the back of a growing population in a modernising society and mindset despite critics saying otherwise.
“As a business, we have managed to consistently outperform the competition and the market through a good strategy. And we’ve still got some way to go before we fully exhaust the opportunity that comes from that strategy,” said Ireland.
He reckoned that as the country’s economy progresses further, the demand for beer will increase in tandem with it.
However, industry observers noted that the local beer market is maturing, in addition to the share-of-throat competition from other alcohol beverages like wine.
But, Ireland who has been with GAB for four years, does not agree that the domestic beer market is maturing. “You guys keep on talking about saturated market, but that’s not the way I see it”, he told The Edge Financial Daily.
“If you look at per capita consumption in the western world, it is higher than in the less developed countries.”
Malaysia has the lowest per capita consumption of alcohol in Southeast Asia. Statistics show that the per capita consumption of alcohol within the Indian and Chinese community is 21 litres per adult per year, whereas the figure in Thailand is three times more.
“Per capita consumption will increase gradually over the years. The growth has been quite stagnant over the past years because the government has over the last 10 years raised taxes from being one of the lowest in the world to one of the highest,” Ireland said.
Ireland’s belief is certainly not baseless, judging by the mushrooming of pubs and bars, particularly in the cities.
GAB distributes its products mainly through pubs and bars that have supply contracts that are renewable annually.
“Two years ago, we’ve got about 75% of all the new pubs that were opened that came up for supply contract. Last year, it was above 80%. So when a new bar opens in Malaysia, four out of every five have contracts with GAB. This creates the demand for our brands for consumers access to our products,” Ireland said.
Industry analysts estimate that GAB has a 57% market share of the Malaysian beer and stout industry.
Revenue had also doubled to RM1.36 billion in FY2010 from RM682.4 million in FY2000. Earnings per share had also shot up to 50.5 sen from 20.2 sen during the period.
Consequently, shareholders have been rewarded with higher dividend. GAB declared dividend per share of 45 sen in FY2010 versus 18 sen in FY2000.
GAB will continue to grow its market share by spending more on advertising and promotion (A&P) activities through simple leisure group activities especially through football sporting events.
“One of the things that we were doing four years ago is Tiger Football Club which is our platform around football.
“We have increased our A&P budget again this year; we increased it last year and the year before. This is the fifth year I have been in the company now and every year we’ve increased our budget,” Ireland said.
“We do that because we see A&P as investments, you make wise investments and you will get superior returns.”
The company has seen its main product brand Tiger beer outperforming the overall market with “double digit growth rates”, and this has been its key growth driver of profits and revenue.
Tiger is its biggest brand, in terms of sales volume. However, Heineken and Guinness Stout command better margin due to the more premium price.
Asked about GAB’s individual market share for its brands, Ireland did not want to divulge specific details but gave rough estimates saying “Tiger’s (market share) is 2.5 times the size of Guinness, and Guinness is twice the size of Heineken. Heineken is twice the size of Anchor”.
According to Charles, the company’s management had this year raised salaries for its staff that he said are “above market rates”.
He stressed that the amount spent on human resources, such as higher salaries, is a form of investment, not costs.
“It is people that make the difference in a business, and we want to retain the best talent. Lots of businesses have got great brands; lots of businesses have got good profit and loss, balance sheets and cash at hand,” Ireland said.
“To be able to sustain performance over the medium and long term and to beat the competition year after year — it takes great people doing the right things in the right way.”
This article appeared in The Edge Financial Daily, October 1, 2010.
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