Beer gains head globally, regulations and illicit market pose a problem in Sri Lanka

• Heineken’s Asia-Pacific Corporate Affairs Director pours his pint on the future of the industry

By Darshana Abayasingha

Sri Lanka presents one of the most difficult excise and regulatory regimes for beer in the Asian region, and recent tax increases, like the can tax, have made it a difficult market to operate in, avers Jeremy Beadles, Regional Director Corporate Affairs Asia-Pacific for Heineken. 

Following its acquisition of Asia Pacific Breweries in 2012, Heineken has invested steadily in Sri Lanka with a good portfolio of products, but continues to import its premium brand, Heineken, despite the very high import levies. 

“If we move towards a different way of regulating beer, then we could get to a point where we could make further investments work financially and consider manufacturing it here ourselves. But that means we would need to have confidence in the future stability of the market, economic and regulatory climate, as it would be an investment for the longer period,” Beadles remarks. 

A former Chief Executive Officer of the Wine and Spirit Trade Association in the UK before joining Heineken, Beadles was an Attorney-at-Law, a home decorator, worked in the retail sector, as an environmental consultant, and is now relishing his role in the heart of the commercial agenda of the business fuelled by the different teams, countries and cultures. 

“Lots of those things from the past don’t seem connected, but there are threads that run through all of them, and if you pull these threads together it makes complete sense of where I’ve got to, and being in corporate affairs it gives you the opportunity to interact with every single department of the business in various markets. It’s the best job I have ever had,” he enthuses.

Bounce back for beer

When asked if he feels the global alcohol industry is having it easier than it did five years ago, Beadles insists no. Focusing on the beer trade, Beadles points the industry was impacted by global economic trends like every other sector. 

Following a downturn, he points to a bounce back for beer in Europe, driven by the craft movement. This has worked well for the beer industry he says, as more people have moved back from other segments like wine. He also points to growing interest and conversation in a number of countries on responsible drinking and moderation, as younger generations become more health conscious. 

“Heineken is set up for global trade, our strategy is to be all over the place in lots of different markets, and our competitors are in a small number of big countries, and therefore we are balancing our risk between developed market places and developing market places. We opened a brewery in East Timor earlier in the year, and not many other businesses are looking to open breweries in East Timor. The other emerging aspect is non-alcoholic or low-alcohol beers, and for the first time in 154 years, Heineken has brewed a non-alcoholic beer, ‘Heineken 0.0%’, launched in Europe earlier this year. So, we provide a solution to people who don’t consume alcohol. We see zero and low alcohol beers as a serious part of our future development and we are investing in it,” Beadles states. 

Asian market potential

Commenting on the potential of the growing Asian market, he recognises China as a market with huge potential and volumes, but one in which Heineken is not looking to compete head-to-head with mainstream Chinese brewers. “The aim with markets like China is to capture the top slice of the premium market with brands like Heineken and Tiger.” 

Mainstream brands are very strong in these markets and are not declining, but at the same time the premium beer market is growing there “and that’s where Heineken sees its sweet spot”. Whilst a number of markets in Asia pose a challenge for the beer industry due to religious, cultural and political issues, for the industry the question is about where do they win with the drinking population recognising their drinking cultures and patterns, what’s the right beer for the individual markets.

“In Asia there is no one answer; every country has different trends appearing everywhere. Indonesia was our first brewery outside of Europe 86 years ago, Tiger brewery in Singapore is 85 years old this year, and Vietnam is 25 years old. In terms of how we go into markets, it’s very much in terms of what’s the local opportunity? How are we going to do operations in some of them where beer runs alongside soft drinks as well? 

“For example, in East Timor if you are going to build a beer business then we have also decided to build a soft drinks business to operate alongside it. We have a strong portfolio and it helps, we have over 280 beer and cider brands from around the world. If you look at Tiger Beer, it started as Singapore’s beer; then it became the region’s beer and now it is the number seven premium beer in the world. It going to Russia, Nigeria, the US, UK, France… you have an Asian beer brand that is travelling,” he adds. 

Health agenda and premiumisation

Looking ahead, Beadles believes the health agenda will play a pivotal role in future engagements in the sector over the next decade, which is why the industry is also focusing more attention on the low and no alcohol segment. It is very challenging to create a good non-alcoholic beer he says, adding that cider will follow into the same space. 

Premiumisation is a trend in almost every country and very relevant to the beer industry, with whisky, gin and other drinks also moving in that direction. “There isn’t a beer market in the world that won’t ‘premiumise’ over time. Consumers aspire to move forward in life and that includes moving up the beer ladder.” 

People are looking for wider choice, even with beers, and craft beer provides for that alongside premiumisation. 

Sri Lanka

Commenting on cider, Beadles says in a country like Sri Lanka, Heineken believes that if it can make the economics around the import tax work, cider could have a good market opportunity here as it could fit consumer palates.

“In Sri Lanka, we cannot use our global advertising platforms because of the regulation, and we have some great operating platforms globally in terms of the brand. We also have a global sustainability platform which advocates the ‘Responsible Consumption’ campaign and we spend 10% of our Heineken media budget in every country on raising awareness on ‘Responsible Consumption’ of alcohol, which is significant. Heineken is all about bringing people together over a beer; it’s about sociability, accessibility and breaking down some of the barriers and rules that we draw up between ourselves. What country doesn’t need that?” he enthuses.

Commenting on the illicit trade which is rampant in Sri Lanka, Beadles acknowledges that illicit is the market in every country, but it is the size of the illicit market – which is significant in Sri Lanka – that makes it a problem. Extremely high excise rates create opportunity for illicit trade, Beadles states, whereby the legitimate industry loses out alongside Government which is starved for revenue, with the consequences of crime, social disorder and health issues. 

“We don’t advocate a no regulation market place, we do believe there should be laws on drink driving, underage selling and we accept licensing systems – that’s part of running it well. It’s a case of balancing it and understanding that if you push the balance too far one way; the likely outcome will be damaging your own industry or revenues. That is what you see here in Sri Lanka. There is lot of optimism on economic development here, foreign investments, economic hub, a port hub, tourism… and a huge part of that is how you build a good night-time economy experience and how you build a tourist experience where people want to come to. It’s about getting the balance right and we advocate that, where all legitimate sectors can compete on a level playing field,” Beadles avers with optimism.