Lion seeks greater export flexibility with Vietnam brewing tie-up

• Lion paid Rs.1.46bn to Carlsberg Vietnam Breweries for contract brewing in FY2026, up from nil year before — a previously unreported shift in company’s manufacturing footprint
• Move comes in same year Lion paid Rs.103.8bn in taxes domestically and as Chairman D.A. Cabraal calls for a more efficient excise tax rebate framework for exports
• Read together, numbers suggest Vietnam-brewed export volumes could let Lion sidestep Sri Lanka’s tax burden altogether — though company has not said so on record

By Nishel Fernando

Lion Brewery (Ceylon) PLC’s newly disclosed move to begin brewing beer in Vietnam raises a question the company itself has not addressed directly: whether the shift is, at least in part, a hedge against Sri Lanka’s own alcohol tax burden. 

Lion paid Rs.1.46 billion to Carlsberg Vietnam Breweries Limited for contract brewing services in the financial year ended March 31, 2026, up from nil the previous year, according to the related party transaction disclosures in the company’s newly released annual report. It marks the first indication that Lion has begun sourcing beer production outside Sri Lanka, an arrangement that does not appear to have been reported previously.

The disclosure sits in the notes to the financial statements rather than in the report’s strategy narrative but the company’s value chain section offers its own rationale. 

Beer is “brewed at the primary facility in Sri Lanka, while also leveraging contract brewing arrangements in Vietnam, to mitigate single-site risk, move closer to key export markets and enhance pricing competitiveness,” Lion said. 

Biyagama remains Lion’s only brewery in Sri Lanka and the same single-site exposure is behind a separate Rs.500 million investment programme now underway to strengthen the plant’s flood defences following Cyclone Ditwah. 

Contract brewing in Vietnam, arranged through Carlsberg’s regional network, given the Danish group’s shareholding in Lion, effectively gives the company a second production base, without building a second factory.

It is not immediately clear from the disclosures, however, whether the Vietnam-brewed volumes are intended primarily for the markets in East and Southeast Asia or whether the arrangement is aimed more broadly at cost or tax advantages, since Vietnam is not obviously closer than Sri Lanka to Lion’s principal growth markets in Africa, the Middle East and South Asia. That gap between the stated rationale and geography is what invites the tax question.

The timing is suggestive. Lion paid Rs.103.8 billion in taxes to the Sri Lankan government in FY2026, equivalent to 82 percent of every rupee of value the company generated. 

In the same report, Chairman D.A. Cabraal made a separate case for policy support on exports, saying that “given the important role exports play in Sri Lanka’s economic growth, we believe there is an opportunity to further enhance competitiveness and grow our international volumes through a more efficient excise tax rebate framework”.

He said that such a mechanism “would support long-term pricing competitiveness, improve cash flow efficiency and enable reinvestment towards export expansion”. 

Read plainly, that is an acknowledgement that exporting from Sri Lanka currently carries a tax cost that is not efficiently rebated.

Beer brewed in Vietnam for onward export would bypass that friction altogether, since the volume never enters Sri Lanka’s excise system in the first place. Set against a company facing that scale of domestic tax exposure, building export capacity outside Sri Lanka’s tax perimeter looks, at minimum, like a rational hedge — even though Lion has not named taxation as a factor in the Vietnam decision and the point would need to be put to the company directly, before it could be reported as more than analysis.

The shift also comes as international business has become Lion’s fastest-growing segment. The group international revenue rose 57 percent year-on-year to Rs.8.78 billion in FY2026, from Rs.5.58 billion, though it remains a modest 6.6 percent of total revenue, up from 4.5 percent a year earlier. 

Chief Executive Officer Rajiv Meewakkala described international operations as “an important source of growth and diversification”, crediting continued expansion in the African markets, steadier contributions from South Asia and a Middle East business that softened towards the end of the financial year. 

Meewakkala was separately named winner of the Sectoral Award for Best Exporter – Beverages, at the 27th Presidential Export Awards.

At Rs.1.46 billion, against group revenue of Rs.132.4 billion, the Vietnam arrangement remains a modest one. However, taken together with Rs.500 million earmarked for flood resilience at Biyagama and against the backdrop of Lion’s own complaints about its domestic tax burden, it points to a company quietly building redundancy into its supply chain, its revenue base and possibly, its tax exposure all at once.