Domestic beer sales on the rise

The Jakarta Post, Jakarta

After three straight years of decline, brewer PT Multi Bintang Indonesia's (MBI) domestic beer sales grew last year by 18 percent to 110 million liters.

MBI's sales mirrored the 18 percent growth in the overall domestic beer market, which totaled 160 million liters, up from 135 million liters in 2003.

"We were not expecting this growth at all. It was quite surprising," said MBI president director Michiel Egeler, whose company is the market leader in beer sales, holding about two thirds of the domestic market.

Egeler, whose company sells products under the Bir Bintang, Bintang Zero, Heineken, Guinness and Green Sands brands, said that the strong growth came on the heels of increased consumer confidence and improved purchasing power resulting from the economy's strong performance.

"In past years people were not optimistic and since beer is a luxury product in Indonesia, sales largely depended on the consumer's level of disposable income," explained Egeler.

He said that there was still room to grow as Indonesia's per capita beer consumption was still around 0.6 liters per year, as compared to Malaysia's 8 liters per year and the Netherland's 80 liters per year.

"Our projection is that the overall beer market will grow by 3 percent this year," said Egeler.

He explained that growth would be significantly less than last year due to factors such as inflation and the gradual removal of fuel subsidies, which has led to a decline in disposable incomes.

However, he warned that sales would significantly decline if the government decided to increase the excise duty of Rp 2,300 per liter and 40 percent luxury tax imposed on beer.

Egeler added that aside from the weak economic growth in past years, the government's decision in 2001 to increase excise duty was a significant factor that led to the decline of beer sales from 170 million liters in 2001 to 135 million in 2003.

"The market has only begun to recover from the previous excise duty increase," said Egeler, whose company's beer sales contributed Rp 687 billion to government revenue last year.

"We hope the government doesn't increase it this year as it would be counterproductive." (002)