E-Malt.com News article: Malaysia: Brewers bracing for temporary slowdown due to proposed excise duty hike

Malaysia's brewers are bracing for a temporary slowdown following the proposed 10 per cent excise duty hike in 2026 Budget, but analysts believe the sector's rebound could come sooner than expected, supported by strong global catalysts and attractive valuations, The Straits Times reported on October 30.

Hong Leong Investment Bank (HLIB Research) said the proposed adjustment – the first since 2016 – raises beer excise duties to RM192.50 per litre of alcohol from RM175, translating to a 5.8 to 6 per cent rise in brewers' cost base.

Given that taxes make up around 60 per cent of production costs, brewers are expected to fully pass the increase to consumers through roughly 6 per cent higher average selling prices (ASP).

"We expect this impact to be temporary, with sales likely to rebound as consumers adapt to higher prices, reinforced by beer's positioning as the most affordable alcoholic beverage," said HLIB Research in a note.

"A similar trend was observed after the 2016 excise duty hike, when volumes recovered after two quarters and subsequently supported multi-year growth."

HLIB Research estimates a short-term 5.5 per cent to 5.7 per cent dip in the financial year 2026 (FY2026) volumes due to the price adjustment before demand stabilises.

"While brewers have the option of lowering alcohol content to mitigate tax increases, our discussions with brewery management suggest this is not a viable strategy due to the risk of compromising taste and consumer acceptance," HLIB Research said.

The firm said that two major events – Visit Malaysia Year 2026 and the FIFA World Cup 2026 – are expected to fuel demand recovery. Malaysia's target of 47 million tourist arrivals next year could drive on-trade beer consumption, while the World Cup (June–July 2026) has historically lifted quarterly beer sales by over 10 per cent year-on-year, even in challenging economic periods.

"Notably, these event-related spikes occurred despite challenges such as the 2014 excise duty hike, the 2018 US-China trade war, and the 2024 high-inflation slowdown. As such, we are optimistic that history will repeat again in the third quarter of 2026," it said.

On valuations, HLIB Research said both Carlsberg Malaysia Bhd and Heineken Malaysia Bhd are now trading at steep discounts – 13.1x and 13.8x FY2026F P/E, respectively – or around 40 per cent to 46 per cent below their five-year averages, hovering near pandemic-era levels.

HLIB Research favours Carlsberg as its top pick, citing its diversified earnings exposure with about 30 per cent of sales from Singapore. Heineken Malaysia, while offering a solid ~6 per cent dividend yield, remains more exposed to domestic regulatory risks and digital investment costs.

The firm is maintaining an overweight stance on the sector. It said the overall risk-reward profile remains attractive, with sentiment likely to improve once the excise duty adjustment is fully priced in.


30 October, 2025