Lion Brewery sees continuous slump in beer volumes

Lion Brewery (Ceylon) PLC said its beer volume sales fell 20 percent in the three months ended in December 2023, after a 12 percent decline seen in the previous three months, extending its quarters-long loss of volumes.
The company mainly attributed the sales volume slump to people trading down to illicit liquor, as they lost their disposable income on the back of the elevated prices of everything, caused by the economic crisis and also the 44 percent increase in the excise duty during the year, pushing people further into illicit liquor.
The company has been extremely vocal in the past calling for a saner tax system on the legal alcobev industry, to both prevent people from consuming illicit liquor and also to prevent the government losing large amounts of tax money.
However, diametrically opposite happens in Sri Lanka and in the last couple of years in particular, the taxes became more hostile, bringing the undesired outcomes.
“The illicit trade in alcohol has exploded in all areas, consumers move into this category as a cheaper alternative and the limited access to legal alcohol has amplified the same,” the company said in an earnings release.
The company also said the thumping increase in the excise duty had also not brought the desired results for the government, as the legal beer sales volumes had slumped, while the revenue from the excise duty had risen by only 5 percent in the calendar year through 2023 to Rs.178.0 billion.

The company reported revenues of Rs.26.91 billion in the October-December quarter, the company’s third fiscal quarter, up 13.0 percent from a year ago.
The company reported earnings of Rs.27.03 a share or Rs.2.16 billion, compared to Rs.25.85 a share or Rs.2.07 billion in total earnings reported in the corresponding period in 2022.
The company said its gross margins narrowed, as it was unable to fully pass down the full impact of the excise duty, due to the already hammered consumer and the fixed cost leverage caused by the lower volumes.
To navigate these challenges, the company has introduced new pack sizes to reduce the incidence of consumers trading down to illicit liquor.
Despite the challenges in the home market, the company’s export business has continued its growth by 16 percent over the same period in 2022.