Wine to Malaysia

Trends and opportunities

The market

Malaysia has a total population of 30.8 million people (2016), with over 60 per cent of the population being Muslims, for whom consumption of alcohol is not permitted. No alcoholic beverages or promotional activities in any form should be directed to this segment of the market.

Malaysia’s alcoholic beverage industry is focused on the production of malt liquor products such as beer and stout.

The consumption of wine in Malaysia has increased over the last decade due to:

  • consumers becoming more affluent, sophisticated and well-travelled
  • increasing preference of the younger community, which regards wine drinking as a modern lifestyle
  • increasing awareness, knowledge and appreciation for wines by consumers
  • wine being a more affordable and healthier alternative compared to spirits.

Availability, competitive pricing and extensive distribution in both off-trade and on-trade have contributed to the popularity of Australian wines in Malaysia.

Opportunities

The Malaysian wine market imported value is estimated at A$38 million in 2015, with the total volume of imported wine at 3.2 million litres (Source: Australian Grape & Wine Authority), predominantly from Australia, France, Chile, Italy, and New Zealand.

Glass bottles remain a popular packaging for wines in Malaysia because of its aesthetic and functional values. The majority of Malaysian consumers prefer still red wines over white or rosé wines, because of the perceived health benefits of red wines. There is a growing trend for consumption of still white and rosé, and for sparkling wines in recent years, but the split between red wine and white or rosé wine consumption is still a wide gap at 70:30.

Australian wines are the current market leader with 44.5 per cent market share (2015), followed by the French, Chilean and Italian (Source: UN COMTRADE). They are popular among young consumers due to their preference for sweeter and fruitier wines (New World wines characteristics), and familiarity. Many Malaysian graduate who have studied in Australia at some point, tend to acquire a taste for Australian products and show preference for them when they are available in the local market.

The growing wine drinking culture is largely driven by young adults as they become better educated and more interested in participating in the trends of a modern lifestyle. In addition, more consumers in Malaysia today prefer to dine out at international cuisine restaurants that also serve wines. Seasoned brandy drinkers are switching to wines as it’s viewed by many as a healthier and more sophisticated option.

Other opportunities include a growing market demand for wines in 2nd tier cities and towns (such as Penang, Ipoh, and Melaka), improved consumer accessibility through an increasing number of retail outlets, and a constantly changing and evolving foodservice landscape with growing numbers of restaurants (in hotels or stand-alone) offering impressive wine selection.

Opportunity for entry-level wines (retail price range from RM50 – RM70) is with new and/or young drinkers that prefer the New World style of wines. Opportunity for premium-level wines (retail price range from RM90 – RM120) is with more refined consumers, the largest growing market segment for mid- to high-end wines.

Challenges

The Malaysian Government has imposed tariff barriers and non-tariff barriers on imported wines and spirits. The former expands on the introduction of “Sin Tax” or Excise Duty for all imported alcohol, with all alcohol importers required to pay sales tax in advance. Therefore, the total tariff to be paid is: Import Duty + Excise Duty + GST. The latter includes import licenses, restrictions on display and sales of alcohol, insufficient prior notice, and communication provided by relevant authorities on changes of import regulations, resulting in additional cost of goods to importers.

Competitive environment

The market has become very competitive and saturated with more than 500 labels of wines around the world. Consumers’ preference for style of wines gradually transforms from New World to Old World as they accumulate tasting experience and knowledge.

Bottled-in-Malaysia wines have in recent years become a competitor to imported wines. These wines gained popularity because of their inexpensive pricing and (to a certain degree) consumers’ ignorance. These locally bottled wines are made using imported grape juice mixed with diluted industrial alcohol, sugar and other flavouring agents. Consumption of these wines can be dangerous to health. Additionally, these wines will use unique-sounding names and can be labelled as 'Australian wine' or 'French wine' (on the front label) with 'bottled in Malaysia' in small print on the back label as a disclaimer.

Strategies for market entry

Key importers are likely sole agents for most leading brands of wines, but distribution does not necessarily involve agency appointments.

Wine importers operate in the following categories:

  • importers and distributors
  • importers and retailers (hypermarkets, wine shops etc)
  • importers and direct mailing
  • hoteliers
  • restaurateurs
  • airlines.

Distribution channels

There are several points of entry (POI) for wine distribution in Malaysia. First is the central city – headquarters in Klang Valley (Kuala Lumpur and parts of Selangor), followed by 2nd tier cities – Penang, Ipoh, Melaka and Johor Bahru. Other POIs are in Duty Free islands – Langkawi, Tioman and Labuan, and East Malaysia – Kota Kinabalu and Kuching (direct import or through distributors from Peninsular Malaysia.

It is important to select an importer who is established and has a good reputation in the market regardless of its size. A wine importer’s potential should be ascertained by its marketing approach:

  • Volume sales – importers with interest in large quantity volume wines for distribution to retail outlets (off-trade channel). Low-priced wines are their game.
  • Niche markets – importers with interest to concentrate in targeted channels, such as restaurants and hotels (on-trade channel). Well-known brands with sustainable volume are preferred to create the image of exclusivity.
  • Sales of wines are split into off-trade (retailers) and on-trade (hotels and restaurants) in a ratio of 60:40.

Tariffs, regulations and customs

Customs clearance

All wine importations and shipments are subject to customs clearance by the Malaysian Royal Customs and Excise Department. The clearance process entails:

Documentation

Importers of wines would require the following licenses prior to import activities:

  • Wine store/premise license – permit to store and keep alcohol at a designated location (issued by local Municipal Council)
  • Liquor license – permit to retail or wholesale alcohol (issued by local city council)
  • Liquor import license – permit to import alcohol (issued by the Customs Department).
  • When importing wines, importers need to ensure they have the following documents accompanying their shipments:
    • certificate of origin
    • invoice or proforma invoice
    • bill of lading
    • packing list (indicating number of items packed)
  • The Malaysian Royal Customs must be updated on every new brand the liquor importer brings into the country.
  • Since 1 July 2008, application of new licenses, renewals, adding of brands and importation quantity is permitted based on the following:
    • Authority to approve new licenses, renewals, adding of brands and import quantity will be determined by the Cigarette/Liquor Licensing Panel at the Head Office, Malaysian Custom Department based on quantity, brand, port of entry, license period and authorised auditors approval.
    • Importers and agents importing less than 25 per cent of each approved brand must provide justification for renewal of import license.
    • Brands not imported for the duration of 12 months would be cancelled upon renewal for the next period.
    • Approved port of entry should not exceed two places and must be within close vicinity of the premises where the company operates. Special approval must be obtained from the Head Office, Malaysian Custom Department for new entry.
    • Renewal of license will not be approved for importers and agents who have not transacted any importation for 12 months.
    • Imported wines must be transported by a freight forwarder who has mandatory authorisation to bring wines and alcoholic beverages into the country.

Packaging and labelling

The Malaysian Ministry of Health legislates on labelling, including the design and label content, under the Food Act 1983 (Act 281) and Regulations. The labels on imported wines must have the following information:

  • all information and contact details of Manufacturer and Importer
  • country of origin
  • primary ingredients used in production
  • minimum content by volume
  • MUST give specific description of the product, the alcoholic content in bold-faced lettering of a non-serif character NOT LESS than 12 point size lettering, stating the words “ARAK MENGANDUNGI__% ALKOHOL”(ie. Liquor containing__% Alcohol).
  • the required font size of 12 point is used to alert non-drinkers, especially Muslims that the product contain alcohol and not for their consumption.

Security stamp

  • All liquor and wine importers, distributors and retailers must have their products labelled with security stamps. This exercise is done to reduce counterfeiting and smuggling of liquor and wines into the country.
  • These security stamps must be put on the cover of the liquor or wine bottles as an anti-tempering mechanism and they are torn each time the bottles are opened.
  • The security stamps come in three colour coding:
    • red = import duty has been paid
    • green = duty free
    • purple = locally produced / bottled

Links and industry contacts

Government, business and trade resources for Malaysia

Australia Malaysia Business Council
Central Bank of Malaysia (Bank Negara)
Department of Statistics Malaysia
Malaysia Australia Business Council
Malaysian External Trade Development Corporation (MATRADE)
Malaysian Government Official Portal
Malaysian Investment Development Authority (MIDA)
Ministry of Foreign Affairs
Ministry of Trade and Industry (MITI)
Royal Malaysian Customs Department

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