Interview: U Zaw Win Swe
What socio-economic factors drive increased consumption trends in the alcoholic beverage sector?
U ZAW WIN SWE: The market is growing in line with wages and the desire for entertainment. There is a trend towards social consumption, although this is primarily restricted to a younger and urban demographic. This segment is growing quickly and is expected to double before 2025. The trend is not gender specific, and for the first time we are seeing a strong percentage of female patrons. This, combined with an increase in foreign visitors and Myanmar nationals with international backgrounds, shows us that the market is there. In addition, growth in the tourism sector, which is driven largely by relaxed visa conditions, is pushing demand towards the luxury end of the market.
Regulations prohibit us from advertising on television and in newspapers, so our primary advertising technique is via promotions in food and beverage, and retail outlets. Social media also plays a strong role. We have had great success using influencer campaigns, which have contributed to increases in on-site consumption and the flourishing of the food and beverage sector. Differences in consumption habits tend to be split along age lines. People over 40 prefer off-licence sales and at-home consumption, while those under 40 favour on-licence sales. That said, due to Myanmar’s low per capita income, 60% of the market remains focused on price over quality. Expensive outgoings due to tax and compliance mean that some lower-spending customers cannot be served by the formal market, which has historically been filled by unregulated products. The government is working with the Myanmar Liquor Association to reduce the volume of illegal goods, which had a market share of around 35% in 2019.
How might relaxed alcohol importation laws affect domestic retailers in the liquor space?
ZAW WIN SWE: Due to Myanmar’s history of isolation, the country has not been able to import alcohol for decades. However, local consumers have recently been expressing a growing demand for foreign brands.
Because of the nature of supply and demand, and Myanmar’s long and porous borders, the import ban has inadvertently encouraged a flourishing illicit trade in foreign, and often counterfeit, alcohol. This unregulated market raises concerns regarding the health of consumers as well as lost tax revenue. It is due to this that private sector actors and the Myanmar Liquor Association support moves to allow a more open, but regulated, import status for foreign brands. One way this can be done, while still protecting local producers, is to ensure liquor imports from foreign firms are handled via exclusive distribution agreements with a domestic agent. This model has seen success in Thailand and Singapore. However, several agents in those countries are reselling to the Myanmar market, which hurts all legitimate parties and lessens accountability.
Furthermore, we should use bonded warehouses more widely, which will help regulate applicable taxes and identify illicit imports. It is also essential that these imports have the correct cost, insurance and freight value. If this is too low, other ASEAN countries which have trade agreements with Myanmar will export products to the country at artificially low rates, with no Customs duty. This disrupts the local market and prices foreign alcohol far below the fair retail rate. Only hard liquor that is 30% more expensive than local products should be imported.
There are movements in the Ministry of Commerce to allow for the restricted importation of foreign alcohol, and I expect that this will be formalised in 2020. Once it is permitted, import substitution based off of bottling and packaging will present a new opportunity for domestic players in the sector. The ability to localise the industry would save on transportation costs and enable new products to emerge. At the same time, local manufacturers are working to comply with laws on wastewater management and environmental safety.
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