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Author: Tan KW   |   Latest post: Tue, 11 May 2021, 12:12 PM


Carlsberg Malaysia vs. Heineken Malaysia: Which is the better dividend stock? - Shak Chee Hoi

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If you have bought beer in Malaysia before, chances are that the brand of the beer you bought belonged to either Carlsberg Brewery Malaysia Berhad or Heineken Malaysia Berhad. They are the only two licensed breweries operating in Malaysia.

Carlsberg Malaysia is of Danish origin while Heineken Malaysia has a Dutch heritage. Both of them produce and sell alcoholic drinks, primarily beer. I have always heard that these two companies are good dividend stocks that should be added to income investors’ watchlists. In case you also wonder which of the duo is actually better, here is a comparison of their businesses, growth drivers, risks, and financial performance.


Carlsberg Malaysia has business presence across Malaysia, Singapore, and Sri Lanka via subsidiaries and associates. In 2019, it obtained 70.1% and 27.5% of its revenue from Malaysia and Singapore respectively. On the other hand, Heineken Malaysia’s business activities are largely confined to Malaysia – only 1% of its sales in 2019 was exported.

I tried to group their products in the same segments to do a comparison. As you can see below, both companies have very similar and competing products in almost every segment.

Some notable brands are Carlsberg Malaysia’s Carlsberg Danish Pilsner, Somersby; and Heineken Malaysia’s Heineken®, Tiger Beer, and Guinness. They have strong brand equity among consumers — although the pair have increased their product pricings in the past and did so more often in the 2010s, consumers were still willing to pay for their products and continue to value their products’ safety and quality. From time to time, branding and marketing activities are conducted to keep consumers updated of their latest launches.

Raw materials of the breweries include imported barley, hop, yeasts, aroma from Europe and Australia. The duo also buy finished goods from related companies. Their products are then brewed, packaged, and distributed to retailers. Consumers can buy their products at various distribution points such as pubs, coffee shops, mom-and-pop stores, supermarkets, and convenience stores across Malaysia. The two companies effectively control up to 98% of the beer market share in Malaysia with Heineken Malaysia owning the majority of market share at 60%.

Consumer behaviours continue to evolve. There is a constant shift in purchasing patterns from traditional (e.g. coffee shops) to modern on-trade channels (e.g. pubs), from on-trade to off-trade channels (e.g. supermarkets, sundry stores, and convenience stores), as well as from offline to online (e.g. e-commerce platforms). The shift was accelerated by COVID-19.

In 2018, Heineken Malaysia launched its own e-commerce platform, drinkies.my to deliver chilled in-house and external alcoholic beverages to consumers’ doorsteps. In general, on-trade channels are estimated to contribute to up to two-thirds of the brewers’ revenue while the rest of sales is generated from off-trade channels and e-commerce.


Both companies depend a lot on festivities like Chinese New Year and sports events to boost sales. In 2020, international tourism came to a halt while domestic tourism was stunted because of intermittent travel bans as Malaysia fought the pandemic. As people adhered to social distancing rules and could only dine in occasionally, beer consumption was affected during the year.

Source: The Edge. * Excise duty switched from excise per litre of beverage to excise per litre of alcohol

Singapore and Malaysia have one of the highest excise duties on alcohol in the world after Norway. This will be a risk if the excise duties are raised drastically and frequently because the pair may not be able to pass on the cost increases to consumers effectively.

An unfavourable regulatory environment poses a risk to the businesses as well. During the Movement Control Order (MCO) period in 2020 in Malaysia, the two breweries were not given permission to operate for about seven weeks between March and May as they were not essential services. At the point of writing, only pubs (a modern on-trade channel) that serve food alongside alcohol are allowed to open in Malaysia and Singapore. The road to recovery for the pair is still long.

In 2019, the European Union-Singapore Free Trade Agreement was implemented and the import tax on beer and stout from the EU was removed. As a result, Carlsberg Malaysia’s operations in Singapore could face stiffer competition as it derived 27.5% of its revenue from the country in 2019.

Growth drivers

The two companies can continue to grow from increasing product prices. They have done so in the past and more often in the 2010s. These actually resulted in revenue increases of the duo.

Contraband alcohol made up around 30% of the total beer and stout market share in Malaysia. The proportion of illicit alcohol is even higher in East Malaysia. Each year, the Malaysian government loses at least RM1.2 billion in taxes not paid because of this issue. This actually presents an opportunity to both brewers to expand their market share by tackling the issue together with the authorities.

Carlsberg Malaysia banks on portfolio premiumisation to expand its revenue and margins. Its premium brands – Kronenbourg 1664 Blanc, Somersby cider, Connor’s Stout Porter, and Asahi Super Dry – seem to be growing rapidly by recording overall double-digit growth since 2016. The actual segmental revenue contribution was not reported.


Here is a comparison of the companies’ financial performance between 1999 and 2019:

Company Carlsberg Malaysia Heineken Malaysia
Revenue CAGR 5.5% 6.2%
Net profit CAGR 4.2% 6.6%
Average gross profit margin 33.4% 34.9%
Average net profit margin 10.7% 11.1%
Average return on equity 49.6% 43.3%
Average cash conversion cycle 22.7 days 32.9 days
Average dividend payout (inclusive of both ordinary and special dividend) 124.6% 126.8%
Average cash-flow-to-net-income ratio 1.2 1.2
Debt servicing ratio (2019) 2.3% 0.5%
Year-on-year change in revenue in 2020 -20.9% -24.0%
Year-on-year change in net profit in 2020 -44.4% -50.7%
Year-on-year change in dividend per share in 2020 -60.0% -52.8%

Source: Carlsberg Malaysia and Heineken Malaysia annual and quarterly reports. 2020 data was not included assuming both companies will recover from the impact of COVID-19.

Heineken Malaysia has recorded larger growth in terms of both revenue and net profit over the past 20 years as it expanded its market share from 47% in 2002 to 60% in 2020. It is slightly more profitable than Carlsberg Malaysia in terms of both average gross and net profit margins. Carlsberg Malaysia posted higher average return on equity as Heineken Malaysia had much higher reserves.

Both of their dividend payouts have already been stretched and have no room for further increment. Any further increase in the dividend per share will have to come from business growth. They will most likely cut dividend amounts during economic downturns. In 2020, dividends from both of the companies dropped. In 2020, the Carlsberg Malaysia’s dividend payout ratio of 77.6% was much lower than the previous year’s in a bid to preserve cash during this uncertain time since it has lower reserves. The debt servicing ratios of both companies have always been low even in 2020. They are able to service their debt quite easily.

As both companies have strong business models and are cash generative, they can literally be helmed by any experienced professional. As a result, the C-suite positions are regularly shuffled within the parent groups without causing major business interruptions. Carlsberg Malaysia and Heineken Malaysia have had eight and six different managing directors respectively since 1999. Most of the board of directors either have no stakes or own small parts of the company. These two companies are majority-owned by their respective foreign parents. In 2020, Carlsberg Malaysia’s board of directors willingly took a 20% pay cut in response to the current challenging business environment. At the same time, they are better paid compared to Heineken Malaysia’s management.

The fifth perspective

Based on a 20-year timeframe below, Heineken Malaysia has performed better than Carlsberg Malaysia. However, the outcome could be different if a different timeframe was used.

Company Opening Price (4 Jan 1999) Closing Price (26 Feb 2021) Capital Gain (%) Dividend Income* Total Return (Capital Gain + Dividend)
Carlsberg Malaysia RM5.15 RM23.96 365.2% RM11.94 597.1%
Heineken Malaysia RM3.82 RM25.60 570.2% RM13.71 929.1%

*Based on dividend income between FY1999 and FY2020

At the same time, both of these companies are fundamentally sound and have strong brand equity. They may be affected in the near term, but in the long run, they will probably still do fine because of their business resiliency and the duopoly they hold over the domestic beer market. Carlsberg Malaysia and Heineken Malaysia are both equally good dividend stocks that are worth taking a closer look at when the valuations are low.



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