Mention Carlsberg (KLSE: CARLSBG) or Heineken (KLSE: HEIM) to anyone, and they will automatically have a preferred brand in mind.
However, when it comes to which of the 2 is a better dividend stock, even I myself have switched sides over the years.
Both companies are the only 2 licensed beer breweries to have their Malaysia and/or Singapore businesses listed on Bursa Malaysia.
So it’s inherent that both are a duopoly in a high alcohol by volume (ABV) tax regime country like Malaysia.
While they share a similar business model, there are still some differences that have made either one the better dividend-paying stock over the years.
So here are some things to note before determining the better dividend-paying one.
Market share & Geographical reach
Both breweries used to report their production volumes in hectolitres in the past, but this practice has sadly stopped in recent years.
Due to its more well-known brands, Heineken Malaysia has an estimated market share of 60% of the total Malaysian beer market. This is followed closely behind by Carlsberg Malaysia.
Heineken Malaysia’s business is primarily in Malaysia, while its Singapore sister company, GAPL, handles the export markets and Singapore’s demand. GAPL is also the majority shareholder of HEIM.
Carlsberg, on the other hand, operates a brewery in Malaysia and is also responsible for the consumption requirements in Singapore. It also holds 25% of Lion Brewery (Ceylon ) PLC, a Sri Lankan brewery catering to the Sri Lankan market.
Revenue track record-wise, we can see HEIM consistently having an edge over Carlsberg over the past 5 years.
Product offerings and categories
Beer and its varieties are among the most diverse of all alcoholic beverages. Due to similarities in raw materials and brewing processes, breweries can produce different types of beers, each catering to a specific consumer group.
Both breweries have brands and offerings that cover most of the beer spectrum.
| Carlsberg’s Brands | Beer Type | Heineken’s Brands |
| Carlsberg, SKOL, 1664 Brut | Lager | Heineken, Anchor, Tiger |
| Somersby’s | Cider | Apple Fox |
| 1664 Blanc, 1664 Rose | Wheat | Eldeweiss |
| Royal Stout, Connor’s Stout | Stout | Guinness |
| Nutrimalt, Carlsberg 0% | Non-Alcoholic | Heineken 0.0 |
| – | Ale | Kilkenny |
| Jolly | Shandy | Anglia |
Heineken, Tiger, Carlsberg, SKOL and 1664 both have an equal share of supporters in the lager segment. While Somersby’s Cider is more receptive and well-known, Anglia takes the lead in the shandy category.
Top and bottom line track record
Next, let’s dive into the nitty gritty part – the top and bottom line track record of both HEIM and CARLSBG.
| CARLSBG | Metrics | HEIM |
| 2,261 | FY’23 Revenue (MYR Mil) | 2,638 |
| +3.67% | 9-year revenue CAGR growth | +5.63% |
| 327 | FY’23 Net income (MYR’Mil) | 387 |
| +4.97% | 9-year net income CAGR growth | +7.71% |
| 24% | FY’23 Return on Assets | 24.4% |
| 172.3% | FY’23 Return on Equity | 81.7% |
| 5.15% | Dividend yield | 5.71% |
The operating margins and net margins of HEIM have seen periods where it expanded against CARLSBG. Even with just a Malaysia-centric market, HEIM proved that it is still possible to beat CARLSBG which has exposure in Singapore and Sri Lanka.
When it comes to dividend per share (DPS), both companies have a track record of paying a higher DPS YoY over the long run. The sudden dip in FY2020 was due to a pandemic-stricken year, where restriction on dine-outs and a tough blanket on pubs and nightlife entertainment affected both breweries significantly.
Over the years, HEIM’s dividend per share has grown at a 9-year CAGR rate of 7.82%, while CARLSBG’s DPS CAGR growth over the same period is 3.04%
The fact that HEIM is trading at a better dividend yield of 5.71% even with superior financials points it as the better dividend-paying company.
The ceiling or upside cap you might not know of
According to a report by the Confederation of Malaysian Brewers Berhad (CMBB), each brewery has a brewing limitation of 1.8 million hectolitres each.
Due to the lack of up-to-date figures, the only available data dates back to 2019, 5 years ago, where back then HEIM was producing 1.3 million hectolitres, while CARLSBG was doing 700k-800k hectolitres.
Looking at the revenue, it is evident that the COVID-19-affected periods are now a thing of the past, but I would say that the figures would be within those ranges.
It would be difficult for both breweries to grow by leaps and bounds since Malaysia is majorly a Muslim population country, where alcohol consumption is strictly prohibited.
I used to think that CARLSBG had the ace up its sleeves
There was a time when I thought CARLSBG could overtake HEIM based on the differences it held.
Most, if not all, of the brands under the Carlsberg umbrella are brewed and distributed by CARLSBG and its subsidiaries, while GAPL, which owns HEIM, has a Singapore brewery that caters to the local SG demand.
Not to also mention, CARLSBG held a 25% stake in Sri Lanka’s Lion Brewery, which is listed on the Colombo Stock Exchange and part of the S&P Sri Lanka Index. Even though 70% of the religion is Buddhism, with a population of over 22 million, it has a strong drinking culture.
But back in 2022, the country faced a sovereign debt crisis. The Sri Lankan rupee depreciated during the scare, and that also hurt the profits attributable to CARLSBG.
My thoughts and evolution throughout the years
I own both HEIM and CARLSBG. They were back then the key foundation stocks when I started my investing journey in the Malaysia market, and have been great dividend paymasters.
Their business model is solid. The high excise duty structure serves as both a moat and a hindrance – imported beer prices are more ridiculous than the locally brewed ones, and Malaysians are generally very price-conscious. However, this also allowed illicit beer and alcohol to command a 30% market share across Malaysia.
However, I notice that the beer-drinking culture has evolved and become more affluent. Plus the limited demographic and brewing limitations do put a cap or drag on how these 2 breweries can grow.
Both are definitely what I call “Jaguh Kampung” (National heroes), but nowhere close to being world-class dividend stocks.
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