Takeshi Minakata, Managing Director, Myanmar Brewery: Interview

Interview: Takeshi Minakata

What are the main challenges for the growth prospects of the beverage industry?

TAKESHI MINAKATA: Since the transition towards democratic rule, Myanmar has become a much more competitive market with new players entering the country. In recent years the beer market has registered growth rates of 7%, with canned products becoming an increasingly valuable product category for manufacturers. Notwithstanding the interesting growth prospects, Myanmar still needs more time to develop into an efficient, rules-based and truly competitive market. In this context one of the challenges we face is illicit trade; in particular, beer smuggled into Myanmar from Thailand and China. Illicit trade not only negatively affects domestic producers, but also hurts the fiscal revenue of the state. According to our estimates, illicit trade of beer costs around $45m in uncollected taxes. Nearly 30% of beer consumed in Myanmar enters the country illegally, with only 70% contributing to the formal economy. While the public and private sector need to join efforts to tackle this issue, I firmly believe the government should maintain the import ban on beer until at least 2025. This would allow enough time to effectively tackle smuggling, and allow local producers to gain some competitive edge and create new original products.

To what extent is the cost structure of the fast-moving consumer goods (FMCG) segment affected by gaps in national infrastructure?

MINAKATA: In Myanmar the unstable supply of electricity is responsible for higher costs and lower productivity. When we use a generator during a power outage our production costs increase three times – not to mention that it takes much longer to bring the manufacturing process to a normal pace. The condition of local roads and highways is another essential element for us, since we need to transport our beer products across the country to supply stores and distribution centres in suburban areas, small villages and rural areas. Beer is heavy to transport, and the poor condition of local roads can damage our products, affecting its taste. On top of that, transportation costs are higher than in most countries in the region.

What existing policy initiatives should be prioritised, and what further initiatives could be introduced to support the development of the industrial sector?

MINAKATA: A stable macroeconomic environment is essential for business and investors. The government should focus on taming inflationary pressures and maintaining a stable exchange rate. As 70% of our industrial inputs are imported, having a stable exchange rate is vital for us to develop our business in a sustainable way. Combating illicit trade by strengthening border controls and establishing robust regulations should be another top priority. Looking at the FMCG segment, I believe that a great variety of Myanmar products could become extremely competitive in global international markets; for example, locally produced coffee and tea. The focus of the government and local enterprises should also be on finding strategies to raise quality and safety standards. Introduction of tax incentives to research and development or labelling a mark of official certificate on the products would be beneficial.

How do you foresee local consumption patterns for alcoholic beverages being impacted by Myanmar’s projected economic development?

MINAKATA: Recent consumer surveys show that people are becoming increasingly conscious about food and drink prices. If economic development slows down, consumers tend go for cheaper beers and whiskies. The immediate impact of such a trend is two-fold: first, we might see a rise in illicit beer trade because of its lower price. As a response to that, the alcoholic beverage industry will have to look for ways to diversify its product offerings to match new consumer demands, particularly when targeting a younger consumer group.