Emerald Emerging Markets Case Studies
Thai Beverage Public Company Limited: Thailand leader, global challenger
Amonrat Thoumrungroje, Olimpia C. Racela,
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Amonrat Thoumrungroje, Olimpia C. Racela, (2013) “Thai Beverage Public Company Limited: Thailand leader, global
challenger”, Emerald Emerging Markets Case Studies, Vol. 3 Issue: 2, pp.1-20, doi: 10.1108/EEMCS-03-2013-0020
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Thai Beverage Public Company Limited:
Thailand leader, global challenger
Amonrat Thoumrungroje and Olimpia C. Racela
As part of our diversification strategy, our non-alcoholic business has also gained momentum to
become a driver of sales growth. The non-alcoholic drinks segment is an extremely attractive
market that shows great growth potential. Given our strong existing branding in the alcoholic
beverages market and our robust distribution infrastructure, we are well-positioned to capture the
growth in this market and emerge as Asia’s leading beverage producer (Thapana
Sirivadhanabhakdi, President and CEO, Thai Beverage Public Company Limited, Business
Times (Singapore), 15 May 2010 (Ramchandani, 2010)).
During the third week of August 2010, Marut Buranasetkul, Senior Vice President of
Corporate Service and Deputy Managing Director of Thai Beverage Marketing, the sales and
marketing arm of Thai Beverage Public Company Limited (ThaiBev), was reviewing the
product portfolio of ThaiBev’s non-alcoholic beverage products and brands. ThaiBev had
been into the second year of it is aggressive diversification strategy. The company had
recently re-launched its Wrangyer brand energy drink, a move toward making ThaiBev a
global comprehensive and integrated beverage company. Yet, the company’s books
showed that non-alcoholic beverage revenue was contributing around 5 percent of the
ThaiBev’s total revenue (The Nation, 2009). Moreover, although ThaiBev had been
performing considerably well in the region, its international sales revenue represented only 3
percent of the company’s total sales (FinanceAsia.com, 2010).
Since incorporating in 2003, ThaiBev had become Thailand’s largest and best-known
beverage conglomerate and was among Southeast Asia’s major alcoholic beverage
producers. With a relatively high degree of vertical integration, ThaiBev comprised operations
in breweries and distilleries, bottling and packaging, distribution, and marketing for a portfolio
of products including beers, spirits, soft drinks, and foods. Its foreign investments included
operations in several countries throughout Asia, Europe, and North America and its brands
were sold in over 20 countries.
By the end of the first quarter of 2010, ThaiBev’s revenue rose 8.6 percent to Bht30 billion
(US$946.4 million[1]) from the previous year revenue of Bht27.6 billion due to an increase in
sales from the group’s beer, spirits, non-alcoholic beverages and food businesses. However,
owing to lower contribution margins from both of its alcoholic and non-alcoholic beverage
businesses, coupled with its higher costs, its new profit fell 17.5 percent in the first quarter.
This resulted in a decline of a three-month profit from Bht3.02 billion to Bht2.49 billion at the
end of 31 March compared to the same period in 2009.
Revenue from ThaiBev’s spirits business rose 5.6 percent to Bht18.97 billion, while
contributions from the non-alcoholic beverages business rose 42.3 percent to Bht1.58
billion. Costs of sales and services rose 10.4 percent to Bht21.5 billion from Bht19.5 billion
(Holmes, 2010). These substantial changes in ThaiBev’s revenue structure prompted Marut
and ThaiBev’s top management team to identify beverage markets with more headroom for
further growth opportunities, both locally and internationally.
DOI 10.1108/EEMCS-03-2013-0020 VOL. 3 NO. 2 2013, pp. 1-30, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
Amonrat Thoumrungroje is
based at Assumption
University, Bangkok,
Thailand.
Olimpia C. Racela is based
at Mahasarakham
University, Mahasarakham,
Thailand.
Disclaimer. This case is written
solely for educational purposes
and is not intended to represent
successful or unsuccessful
managerial decision making.
The author/s may have
disguised names; financial and
other recognizable information
to protect confidentiality.
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Global packaged beverage industry and market structure
The global market for packaged beverages had undergone major significant changes within
the last decade. Shifts in consumer taste preferences, growing consumer and public health
conscientiousness, and greater environmental concerns had brought both challenges
and opportunities to beverage suppliers, producers, marketers, and distributors. Such
challenges were mainly driven by special interest and consumer groups, pressuring
government and industry leaders to reconsider existing regulatory and legal frameworks
overseeing virtually every facet of the alcoholic and non-alcoholic beverage sectors. For
instance, the growing popularity of energy drinks and their known performance enhancing
benefits raised health concerns, particularly in the USA and the UK, calling for tighter
regulations and for greater public awareness of energy drink ingredients, their potential side
effects, and risk of addiction. In response, companies in beverage and related industries
made further investments in product ‘‘hybridizations’’[2] and innovations, specifically in
developing new production techniques, packaging, unconventional promotion campaigns,
and more creative and expanded channels of distribution.
From 2005 to 2009, the global packaged beverage industry revenue and volume production
showed a compound annual growth rate (CAGR) of 2.6 and 4.0 percent, respectively.
In 2009, the global packaged beverage industry revenue reached US$1.5817 trillion, while
volume totaled 458.3 billion liters in 2009[3]. Market analysts forecasted that by 2014,
industry revenue would reach US$1,775.3 billion and volume would increase to 542.5 billion
liters, indicating a slight fall in the CAGRs. These figures of the global packaged beverage
industry comprised two major categories, namely alcoholic and non-alcoholic.
Beverage production
The three general major considerations in beverage production have been in the raw
materials and ingredients, the production process or technique, and the packaging.
A fundamental and crucial ingredient of beverages has been water. The quality of water
used in beverage production has been critical to the taste, color, and shelf-life of the
beverage. Impurities, such as suspended particles, organic matter, and bacteria, could
degrade taste and color, and have been generally removed through the traditional process
of a series of coagulation, filtration, and chlorination. While access to adequate drinking
water has become a major global concern, beverage producers have had a strong reliance
on water purification mechanisms. Other than water, there has been a wide array of raw
materials used in the industry as a result of the various types of beverages. For instance,
wines have been typically made from grapes but could also be made from other fruit or
non-toxic plant material; spirits have been made from cereal grains whereas beers have
been made from malted grain and hops; and soft drinks have required natural and synthetic
sweeteners to make a syrup concentrate.
Beverages of different types had to go through different production processes. For instance,
the production of alcoholic beverages could involve malting, brewing, distilling, and/or
fermenting, whereas non-alcoholic beverages may involve simply mixing and blending
before the beverage was ‘‘filled’’ into a container (i.e. bottle, can, box, etc.). The production
processes may also involve some stages that required a considerable amount of time for the
beverage to ‘‘age’’, as in the case of certain spirits and wines. Therefore, beverage
production processes varied in terms of design of plant facility, equipment used, production
line phases, and cost structures. Beverage companies (i.e. brand owners) may choose to
invest in producing their own beverages in-house and often did so when they desired a high
degree of control over the production process; possessed a propriety production method,
technique or equipment; and/or had enough market demand to achieve sufficient
economies of scale or economies of scope. The other beverage production option was to
hire or license a beverage manufacturer. There were many different types of beverage
manufacturers in the world. Coordinating with a beverage producer to process and fill the
product into its container was a difficult task. Whether to choose a contract beverage
manufacturer or filler (or both) depended on a host of factors, mainly in location. Thus, it was
preferable to hire an experienced and reputable beverage producer who had a
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manufacturing plant in close proximity to the beverage company’s network of distributors.
A distant location could adversely affect profit margins or ultimately the beverage price, due to
added transportation and shipping costs, storage fees, labor and other collateral expenses.
For packaged goods, packaging has been an important consideration not only because of
its primary role to protect its contents, but also because of its role to attract attention,
differentiate brands, and to communicate information to buyers. Packaging has also been
critical because of its significant impact on manufacturing, retailing distribution costs, and
logistics. Packaging accounted for a substantial portion of the total cost structure in
beverage production, and therefore usually became a focus for companies to improve their
margins (Bernstein Research, 2007). Primary packages and the packaging materials used
in the beverage industry were typically produced by beverage package suppliers that could
be hired to discover new packaging materials, develop new packaging designs, and to
produce beverage containers and packages. The beverage packaging and materials
industry had also undergone dramatic changes, mainly driven by environmental concerns.
Thus, the beverage packaging industry placed much more emphasis on environmentally
friendly packaging, recycling, and waste disposal systems.
With these three production considerations in mind, there had been a wide variety of
suppliers in the beverage industry. Despite this wide range, beverage companies required
highly specific raw materials and were therefore, highly dependent on suppliers. However,
these materials tended to be highly undifferentiated; thus, beverage companies switched
suppliers when necessary. To minimize dependence on suppliers, some beverage
companies integrated backwards into producing their own input materials. Alternatively,
suppliers could also minimize their reliance on beverage producers by providing their
products to other markets, such as selling barley for animal feed and/or integrating forward
into beverage production, which enhanced supplier power.
Global alcoholic beverage sector
The global alcoholic beverage sector, which accounted for roughly about two-thirds of the
global beverage industry, mainly included spirits, beers, wines, ciders and FABs (i.e. flavored
alcoholic beverages). The sector saw an increase of 1.6 percent in 2009, reaching a market
value of US$966.2 billion while consumption volume grew by 3.6 percent, reaching 458.3
billion liters[3]. In 2009, beers, ciders, and FABs generated revenue of US$488.2 billion,
accounting for 50.5 percent of global alcoholic beverages revenue. The sales of wine
reached US$264.3 billion or 27.4 percent, while sales of spirits constituted the remaining 22.1
percent. In terms of geographic region, Europe accounted for 56.5 percent, followed by the
Americas with 25.6 percent and Asia-Pacific with the remaining 17.8 percent. The global
alcoholic beverages sector was considered highly fragmented, with the top three firms,
Anhauser-Busch InBev N.V., SABMiller Plc. and Heineken N.V., together holding 38.9 percent
of the global market. The global alcohol beverage sector was forecasted to reach US$1,060.3
and 209.5 billion liters in 2014[3].
A major threat to the alcoholic beverage industry was the increase in health consciousness,
as consumers demonstrated moderation in their consumption of alcoholic drinks. Another
significant threat to the industry was advertising restrictions of alcoholic products. Many
countries imposed greater restrictions on alcohol advertising due to the growing
‘‘binge-drinking’’ culture of the ‘‘under 25’’ age consumer group.
For the past several years, many alcohol manufacturers opted to pursue premiumisation
strategies, which involved persuading consumers to pay more for the same volume of
alcohol by providing them with product and brand attributes that fit their desires to improve
their lives, lift their social status, acquire a taste experience, and better understand the
product they consumed. At the same time, economic recessions and low consumer
confidence in developed markets resulted in a change in consumer life styles, e.g. declines
in ‘‘going-out’’ spending or consumers’ switching to cheaper brands of alcohol. However,
growth remained strong in developing markets, thus diversification into emerging markets
had become a key trend in the industry.
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The global non-alcoholic beverage sector
The global non-alcoholic beverage sector, which was sometimes referred to as ‘‘soft drinks’’[4],
accounted for about 30 percent of the global packaged beverage industry value. This sector
saw an increase of 3.1 percent in 2009, reaching a market value of US$440.3 billion and was
forecasted to reach US$511.6 billion in 2014, while consumption volume rose by 3.2 percent
reaching 398.7 billion liters and was expected to grow to 465.4 billion liters in 2014[3].
The sector mainly included carbonates along with ‘‘New Age’’ beverages of bottled and
flavored water, fruit/vegetable juices, functional drinks, ready-to-drink (RTD) tea and coffee,
andsmoothies. TheAmericasaccounted for 43.9 percent,followedbyEuropewith36.3 percent
and Asia-Pacific with 19.8 percent. These non-alcoholic beverages were distinguished mainly
by their raw material inputs and production processes. In this sector, intense competition
among different product markets and across various brands were apparent.
The global market for carbonated soft drinks
Carbonated soft drink accounted for the largest global share of the non-alcoholic beverage
sector and was comprised of standard cola, diet cola, fruit flavored carbonates and mixers.
The market value increased by 1.5 percent in 2009, generating revenue of US$186.7 billion,
while consumption volume grew by 1.0 percent reaching 179.1 billion liters[3]. The Americas
region constituted 54.4 percent of the global carbonated soft drinks market value. The global
market for carbonated drinks was expected to reach US$209.1 and 197.2 billion liters in
2014[3]. Major carbonated soft drink companies earned most of their revenue from the
production of concentrates that were sold to bottlers, who may have been independent
licensed bottlers or subsidiaries of the carbonated soft drink companies. Thus, entry into this
industry typically involved the establishment of operations either as a concentrate producer or
as a bottler, or as both. The main inputs to carbonated soft drinks were sugar and packaging.
The global market for bottled water
The global bottled water market included sparkling flavored water, sparkling unflavored
water, still flavored water and still unflavored water. In 2009, the global bottled water market
value grew by 4.7 percent to US$79.845 billion and the volume increased by 4.6 percent to
135.12 billion liters. Still unflavored bottled water accounted for 65.8 percent of the market’s
total value, followed by sparkling unflavored bottled water, which captured 29.2 percent.
Region-wise, the largest share of the global bottled water market was Europe, with 50.9
percent, followed by the Americas with 30.3 percent, and Asia-Pacific with 18.8 percent.
Nestle´ SA of Switzerland held a 14.8 share of the market and had been the dominant global
player. Other major global players included Group Danone of France and Coca-Cola
Company. Consumption of bottled water was driven mainly by consumer perceptions of the
product’s greater safety and higher quality compared to tap water, as well as views of its
healthful benefits when compared to soft drinks or alcohol. The market value and volume of
the global market for bottled water was expected to increase 25.1 and 23.3 percent,
respectively, in 2014.
The global market for fruit and vegetable juices
The global market for fruit/vegetable juices comprised five main varieties: 100 percent fruit
juice from concentrate; 100 percent fruit juice not from concentrate; nectar (30-90 percent
juice); fruit drink (0-29 percent juice); and, vegetable juice. In 2009, this market grew by 6.4
percent reaching a value of US$40,240.7 million, while the volume grew by 6.6 percent,
reaching 12,704.5 million liters. By 2014, this value was expected to increase 18.8 percent
from 2009. The largest share of this non-alcoholic beverage category was accounted for by
‘‘fruit drink’’, followed by ‘‘100 percent fruit juice not from concentrate’’, ‘‘100 percent fruit
juice from concentrate’’, ‘‘nectar’’, and ‘‘vegetable juice’’. The Europe market accounted for
46.6 percent of the market value, followed by the Americas with 36.8 percent and
Asia-Pacific with 16.6 percent. PepsiCo. Inc. was the leader in the global fruit/vegetable
market with a 12.6 percent share in 2009. With juice considered a relatively unsophisticated
product, manufacturers applied a broad range of differentiation tactics, including the
development of new flavors, the creation of innovative packaging formats, and the targeting
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of multiple segments. The global market for fruits and vegetables juice was forecasted to
reach US$53,478.3 and 16,812.9 million liters in 2014[3].
The global market for functional drinks
Functional drinks have offered a specific benefit other than merely to quench thirst, and thus,
usually fit into the premium price category. Functional drinks have mainly included energy
drinks, sports drinks and nutraceutical drinks (Exhibit 1). In 2009, global functional drink
sales rose 6.4 percent to US$40,240.7 million, while volume grew by 6.6 percent to reach
12,704.5 million liters. Of the total market, the energy drinks segment accounted for 57.9
percent, followed by sports drinks then nutraceutical drinks, with 25.0 and 17.2 percent
share, respectively. Nutraceuticals have been considered a niche in most regions, yet, a few
developed economies had shown significant consumption volumes (Zenith International in
Market Research, 2009). The Americas had held the largest share of 46.3 percent, followed
by Asia-Pacific with 31.5 percent, then Europe with 22.2 percent. The leading companies in
the global functional drink market have been PepsiCo. Inc., Coca-Cola Co. and Red Bull
Gmbh. Market analysts forecasted that by 2014, global functional drinks revenue would
reach US$53,478.3 million and volume would increase to 16,812.9 million liters.
Thailand packaged beverage market
In 2006, the total value of the Thailand beverage market reached US$12.537 billion, Asia’s
third largest market after China and India (Jittapong, 2010). This value had been considered
impressive, considering that Thailand comprised a relatively small population of nearly 64
million, ranking the country 11th in size among the 51 Asia nations[5]. In 2009, four to 500 new
products entered the Thai Beverage market (Parnsoonthorn, 2010). With such proliferation,
market experts forecasted Thailand’s beverage market value to reach US$13.457 billion in
2010 (www.bevindustry.com/articles/asia-an-emerging-market).
Thailand alcoholic beverage industry
The history of the alcoholic beverage industry in Thailand could be divided into three
periods: state-run, concession and liberalization. Under the period of state-run (established
1678-1959), liquor distilleries were government owned and managed through various
government ministries and departments. Special category spirits including Western-style
brandy and whisky and fermented beverages, such as beer and wine, were mainly produced in
private factories and were not included in the concession system. However, owners of such
factories were required to obtain government approval. Boon Rawd Brewery Co. (Boon Rawd)
was established in 1933 as a private company and was the first Thai beer producer after
launching the ‘‘Singha’’ brand of beer. It was in 1941 that the Thailand Excise Department first
launched the ‘‘Mekhong’’ liquor brand. Whiskey and brandy were special blend liquors that
were eventually produced and distributed locally. The year 1959 was the beginning of the
period of concession (1960-1979), when the government called upon the private sector to rent
ten-year concessions to produce and sell liquor products from the state-owned distilleries.
All 32 spirits distilleries were state-owned enterprises but were managed and distributed by
private entities through concession bidding. Thus, in the late concession period, alcoholic
drinks in Thailand came from three main sources: importation, state-owned enterprises/
factories, and private companies/factories. In the early 1990s, the government revoked the
concession system and most of the distilleries and plants were either privatized or demolished.
By 1991, beer consumption was on a steady rise, and the Thailand Government liberalized the
beer industry as a means to improve beer production efficiency and to increase product quality.
In 2006, Thailand’s alcoholic drinks industry accounted for 60.3 percent of the country’s total
beverage revenue. From 2006 to 2010, slight revenue changes and varied growth rates were
anticipated in the industry, with sales to be dominated by beer, followed by spirits, wine and
premixes (www.bevindustry.com/articles/asia-an-emerging-market).
In 2009, the market performance of alcoholic drinks in Thailand showed a slight decline due to
several internal and external negative factors that included government excise tax hikes and
deterrent campaigns (e.g. ‘‘Drink, Don’t Drive’’ campaign), a sluggish economic climate,
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increasing health concerns, and the fall in tourism. In 2008, the Thailand Government passed
the Alcohol Beverage Control Act, which imposed strict regulations on the distribution,
marketing, and advertising of alcoholic beverages. Consequently, alcoholic drinks companies
shifted their marketing budgets to focus on below-the-line marketing strategies in order to
target specific consumer groups. The higher excise tax for beer not only increased unit prices
across beer categories, but also curbed beer distribution among channel members. Some
consumers switched to off-trade outlets where alcoholic drinks were cheaper and some
consumers, particularly those in the mid- and lower-income groups, switched to cheaper
alcoholic drinks. The growing health concerns led to many consumers decreasing their alcohol
intake and more people had changed from dining out to eating and socializing at home, which
reduced on-trade alcohol consumption. In response, alcoholic drink producers and importers
invested in aggressive and continuous marketing campaigns, innovative marketing tactics,
and new campaign launches that minimized the impact of such negative factors.
Thailand’s alcoholic drink industry has been characterized by the dominance of two major
Thai Beverage conglomerates, namely ThaiBev and Boon Rawd. Other competitors have
been firms in the beer industry with local production facilities in Thailand, which included
Thai Asia-Pacific Brewery and San Miguel Corporation of the Philippines, of which the latter
had acquired Thai Amarit in 2004 (Rungfapaisan, 2004). In the spirits segment, the major
competitors have included local Regency Thai Brandy Co. as well as global companies such
as Rich Monde (Bangkok) Ltd (importer), Diageo Moe¨t Hennessy (Thailand) Ltd (importer/
distributor), and Allied Domecq Spirits & Wine (Thailand) Ltd (importer/distributor).
Thailand non-alcoholic packaged beverage industry
In 2006, the non-alcoholic packaged beverages segment accounted for 39.7 percent
of Thailand’s total beverage revenues and was expected to reach 42.9 percent in 2010.
The carbonated drinks segment dominated the sector’s total revenue, capturing over half of the
share in 2010, followed by bottled water, functional drinks, fruit/vegetable juice, RTD tea, Asian
speciality drinks, and RTD coffee (www.bevindustry.com/articles/asia-an-emerging-market).
These figures exclude non-alcoholic beverage sales made by the hundreds of lower-priced
on-site drink makers, such as street-vendors and beverage-kiosks selling freshly made fruitand vegetable-based drinks, smoothies and juices, as well as coffees and teas.
Thailand carbonated drinks
The two dominant players in the carbonated drink market in Thailand have been Thai firms,
namely Serm Suk Co. the licensed bottler and distributor of PepsiCo. and ThaiNamThip Ltd,
the licensed bottler and distributor of Coca-Cola. The two global brands have been sold
throughout Thailand for over 50 years. In 2009, Thailand’s carbonated drink market value
was estimated to range between Bht35 million and Bht100 million, with projected minimal
growth for the next few years due to the emergence of a variety of ‘‘health’’ drinks.
Thailand was one of the few markets in the world where Pepsi cola had been a market leader.
In 2003, Pepsi controlled market share of about 65 percent, while Coca-Cola held about
38 percent. Coca-Cola’s global aggressive initiative to be the market leader in every market
in the world helped bring Coca-Cola’s share in Thailand closer to that of Pepsi’s share. By
2010, Coca-Cola had claimed to have captured a majority share while at the same time
PepsiCo. had claimed it held more than 60 percent of the cola-drink segment.
PepsiCo. and Coca-Cola had sought to expand their shares by introducing new soft drinks
(e.g. Pepsi Green, Pepsi Blue, Pepsi Gold and Coke Zero) and to grow their beverage
revenue by entering other beverage categories. For instance, both companies had expanded
to sugar-free cola and juice, with sugar-free cola becoming the next battlefield between
‘‘Pepsi Max’’ and ‘‘Coke Zero’’. This sugar-free market had a 30 percent growth rate and an
even greater growth opportunity. Although this market was worth only about Bht400 million, or
2 percent of the soft drink market, many analysts expected the market share to be 20-30
percent, equaling that of many other countries. In terms of expanding into non-alcoholic
drinks, Coca-Cola announced its plans to launch four new health beverages by 2012, which
was aligned with its worldwide ‘‘Live Positively’’ program (FoodBizDaily.com, 2009a).
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While PepsiCo. and Coca-Cola had demonstrated mobility within the non-alcoholic
beverage markets, very few category competitors attempted to directly challenge either
brand, and instead, launched carbonated soft drinks that targeted niche markets. For
instance, while Coca-Cola and PepsiCo. went head-to-head in the sugar-free soft drink
market, energy drink producer Red Bull had launched its ‘‘Krating Daeng’’ (the Thai brand
name for ‘‘Red Bull’’) cola, with targeted sales of Bht300 million or 1 percent market share,
and at the same time built its ‘‘Red Bull Cola’’ brand in foreign markets. The Krating Daeng
cola strategy had been driven by price, with the 325 cc can sold at Bht10, while similar
products had been sold at Bht13.
PepsiCo. and Coca-Cola conducted their business operations in Thailand similar to the way
they did in other markets. As brand owners, the companies were responsible for providing the
cola concentrate and for running the overall marketing operations. The bottler was
responsible for investing in the plant that converted the concentrate into the packaged drinks
that were sold through retail outlets, and for distributing and merchandising the products
nationwide. In other words, as brand owners, PepsiCo. and Coca-Cola focused on building
market share and total consumption and were continuously looking to innovate. In contrast,
the local bottler was more cautious about activities in which it would have to bear the cost of
any additional investments, such as in the production of new brands or packaging as well as
handling the sales and distribution logistics of actually getting the products onto store
shelves. In June 2010, Serm Suk and PepsiCo. which owned 24.94 percent of the Thai bottler,
were in heated discussions to renegotiate the licensing terms, a move intended to enable
PepsiCo. to have a greater role in marketing and distribution (Bangkok Post, 2010b).
Thailand bottled water
Thailand’s bottled water market value for 2010 was estimated to reach as high as Bht18
billion. In 2006, the Bht13 billion bottled water market had been dominated by four brands,
namely ‘‘Singha’’ from Boon Rawd, ‘‘Nestle´ Pure Life’’ from Nestle´, ‘‘Crystal’’ from SermSuk,
and ‘‘Namthip’’ from ThaiNamThip, who together accounted for almost 60 percent of the total
market (Rungrapaisarn, 2007). The competition within still bottled water remained intense
and focused on emotional marketing with communication beyond functional benefits. In the
past, the leading brands had focused on communicating the benefits of bottled water, such
as hygienic, safe, clean and high quality standards to encourage people to consume bottled
water instead of tap water.
Thailand saw controversy and growing debate over consumption and marketing practices in
the bottled water industry, which emerged from widespread consumer complaints regarding
the unreasonably high prices of bottled water at specific outlets (Bangkok Post, 2010b).
In turn, Thailand’s Internal Trade Department announced in August 2010 that it would cap
the price of 500-600 cc bottled water at Bht7 at retail shops and food courts, leaving
restaurants, fast-food outlets and hotels to set their own prices. In response, fast-food outlets
opted to install free drinking water dispensers in their establishments and continued to sell
bottled water at above government set prices (Bangkok Post, 2010c).
Thailand fruit/vegetable juice
In 2009, the fruit/vegetable juice market in Thailand totaled Bht5.7 billion and was divided into
the premium, which was valued between Bht2.9 and 3.0 billion and the economy market,
which was valued at Bht2.3 billion. During 2008 and 2009, fruit/vegetable juice demand
registered a slowdown compared to the strong double-digit growth recorded in the previous
year. Packaged fruit/vegetable juices were priced relatively higher than other non-alcoholic
beverages, and were therefore regarded as premium products. While consumers sought
healthier drinks such as fruit/vegetable juice, many were also concerned about their expenses
and limited their spending. Thus, the 100 percent juice segment faced the strongest decline
due to its relatively higher price compared to other types of fruit/vegetable juices. With many
consumers trading down to mid-priced juices, competition in the ‘‘economy’’ or 25 percent
juice segment was intense.
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There was no dominant leader in Thailand’s juice market, although Tipco was the leader of
premium 100 percent juice. Thus, Thailand had become an opportunity for new entrants
such as the Coca-Cola Company, who launched Splash as well as for PepsiCo. who
introduced its major US orange juice brand, ‘‘Tropicana’’. The Red Bull group also
introduced ‘‘Cold Aseptech’’, its own orange juice that used a new cold storage technology
from Germany (Food Industry Thailand, 2010).
Thailand functional drinks
Thailand’s functional drink market, also known as health or stimulant drinks, grew at one of
the fastest rates in the world. The market value was about Bht800 million in 2008 and, while
market value was initially expected to increase to Bht2 billion, by the end of 2009
(Jitpleecheep, 2009) actual estimates indicated that the segment actually reached about
Bht4.2 billion. This sizeable growth reflected Thailand consumers’ increased attention to
health and had attracted many new entrants to the Thailand market. While analysts claimed
consumers were drawn to functional drinks due to the benefits offered, taste still played an
important role in repeat consumption.
Thailand’s leading functional drink brands included Beauti Drink from Sapanan General
Foods Co. B-ing from Boon Rawd, Amino Plus from Oishi Group, Peptein from Osotspa Co.
Ltd, and Skinn Fit from Ajinomoto Calpis Beverage (Thailand)[3]. In 2009, Beauti Drink held a
65 percent share, followed by B-ing with 12 percent, then by Amino OK and Ajinomoto’s
Calpis Lacto, which captured 9 percent each. The biggest competition was in the vitamin
drink segment, which was worth about Bht100 million. The three major vitamin drink players
were B-ing, Amino OK, and Unif I-Firm from Uni-President.
While Japan had been widely recognized as having popularized the energy drink in the
1980s, Thailand had been widely known as the home to the energy drink concept and leaded
the world in consumption per capita. Thailand’s energy drink market value in 2009 was
estimated at Bht15 billion, up 3.0 percent from 2008 (Intarakomalyasut, 2003). Demand for
non-carbonated energy drinks were significantly higher than that of carbonated energy
drinks, unlike in other countries, where demand was stronger for carbonated energy drinks.
Energy drinks, whose market had been considered saturated by analysts, had a long
established and strong customer base in Thailand, especially among low income and blue
collar workers. Many companies attempted to extend their reach to teenagers and white
collar workers through repositioning their brand from an ‘‘energy replenisher’’ to a ‘‘thirst
quencher’’ or a ‘‘drink mixer’’.
There were several well-known energy drink brands in Thailand. In 2009, M150 controlled
the highest market share of about 55.0 percent, followed by Krating Daeng with 20.0
percent, Carabao Daeng (which translates to ‘‘red carabao’’) with 10.0 percent, and
Wrangyer with 2.0 percent[3]. The remaining market shares were captured by carbonated
energy drink brands, namely Sun Spark from Choke Mahachai Beverage Co. Ltd and Shark
from Osotspa.
In 2009, the sports drink market in Thailand was estimated to be worth between Bht75 and
100 million, with 10-15 percent annual growth. Leading sports drink brands in Thailand were
Red Bull’s Sponsor with 60 percent market share, followed by Osotspa’s M-Sport with 25-30
percent share and Pepsi’s Gatorade with 5-10 percent (FoodBizDaily.com, 2009b).
Thailand RTD coffee
Thailand’s RTD canned coffee market emerged in 1993, when the Birdy brand was
launched by Ajinomoto Co. of Japan. In 2008, the RTD coffee market had a value of Bht7.73
billion, up 4-5 percent from the previous year. For 2010, market experts forecasted demand
to grow between 5 and 7 percent to reach about Bht8.2 billion. Birdy remained the market
leader with nearly 70 percent market share, followed by Nescafe´ with a share of 26 percent
(Bangkok Post, 2010a). Most customers of RTD canned coffee were blue collar workers
and consequently, opportunities existed to target high-end consumers (Food Industry
Thailand, 2010).
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Thailand RTD tea
When the RTD tea market in Thailand was at its peak, there were about 40 different brands
available. By 2009, only ten brands endured the intense competition and satisfied the taste
demands of green tea drinkers. By the end of 2009, Oishi maintained its market stronghold
with a share of 60 percent, followed by Puriku (14 percent) and Lipton (12 percent)
(FoodBizDaily.com, 2009c). Oishi focused primarily on the health aspects of its green tea to
urban dwellers in order to appeal to their general desire for ‘‘back-to-nature’’ drinks that
promoted great health, while giving less attention given to consumers in rural areas. RTD
green tea was considered a fairly new beverage among rural consumers, suggesting high
growth potential in the upcountry regions. The estimated value of the Thailand tea drink
market in 2010 was expected to reach near Bht11.94 billion.
Several producers of RTD green tea chose to expand the RTD tea market by riding along the
widespread ‘‘health’’ movement. For instance, Uni-President (Thailand) Ltd launched two
herbal teas, ‘‘Unif Green Tea Relax’’ (in lemongrass and verbena flavor) and ‘‘Unif Black Tea
Refresh’’ (in chamomile) while Unilever introduced a black tea drink, Lipton Night, made
from nine different herbs and positioned as a health and beauty beverage.
ThaiBev background
ThaiBev has its roots with the Thai Charoen Corporation Group (TCC), which was
established in 1960 by billionaire entrepreneur Charoen Sirivadhanabhakdi and his wife
Khunying[6] Wanna Sirivadhanabhakdi as a supplier to distilleries. During the liberalization
of the liquor industry by the Thai Government in the late 1990s, the couple bid for and was
awarded the concession to operate distilleries and produce liquor under the name of the
Sang Som Group. These rights included the production of two of Thailand’s oldest liquors:
a special brand whisky whose production dates back over 200 years and sold under the
Mekhong brand name since 1941 and a rum launched as SangSom since 1977.
Subsequently, TCC further expanded into other related business, such as beer, alcohol,
sugar, packaging and many others to become Thailand’s largest integrated network of
distilleries, breweries, and other related alcoholic businesses (e.g. packaging, distribution).
In addition to its alcoholic beverage business, TCC diversified into consumer products,
agriculture, property investment and development, and financial services. Altogether, TCC
held major interests in four companies, namely ThaiBev, Berli Jucker, TCC Land and TCC
Capital (Figure 1).
The incorporation of ThaiBev
ThaiBev was incorporated in October 2003 to consolidate TCC’s leading beer and spirits
businesses under a single holding company through the merger of 58 companies involved in
the alcoholic drink industry. Thus, ThaiBev acted as the center for management support and
oversaw the overall operation of the company. Charoen Sirivadhanabhakdi has been
ThaiBev’s Chairman and major shareholder. Since 2005, ThaiBev pursued premiumisation
and diversification strategies that resulted in the company adding new businesses,
extending product and brand lines, and further expanding into foreign markets (Tables I
and II, Figure 2).
ThaiBev held a strong position in the Thai alcoholic beverage industry, especially in the
economy segment, and was among the biggest alcoholic beverage manufacturers in
Southeast Asia. Some of ThaiBev’s peers included global firms such as Asahi Breweries Ltd
of Japan, Foster’s Group Ltd of Australia, Fraser and Neave Ltd of Singapore, and Tsingtao
Brewery Co. Ltd of China. In comparison to its peers, ThaiBev operations were more efficient
and profitability was above average. Moreover, ThaiBev was financially strong to repay its
debts and to provide its shareholders with lucrative dividend payouts.
By February 2010, the expansive group had 99 companies that were organized into ten
different business groups (Table III). While ThaiBev’s main lines of business have been in the
production and marketing of alcoholic beverages, the company had been aggressively
expanding into non-alcoholic beverages and foods. Thus, ThaiBev’s products were divided
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Figure 1 Thai Charoen corporation business structure
Source: www.tcc.co.th (accessed 30 August 2010)
Table I Significant events in ThaiBev’s history
| October | 1977 Acquisition of Sangsom Co. Ltd to produce Sangsom rum | |
| May April | 1983 1986 | Successfully bid for concessions offered by the government to build and operate 12 distilleries in Thailand Spirits business was merged with Sura Maharasadorn Group |
| July | 1988 Acquisition of Red Bull Distillery (1988) Co. Ltd | |
| May March | 1994 1995 | Bang Ban brewery commenced operations Joint Venture between Carlsberg A/S and Chang Beer was launched in Thailand |
| July | 1998 Acquisition of United Winery and Distillery Co. Ltd | |
| December | 1998 | Chang Beer became a market leader with approximately 54 percent market share of beer produced in Thailand |
| July January | 1999 Acquisition of Bang Ban brewery from joint venture with Carlsberg A/S 2000 Acquisition of 12 distilleries from the government | |
| October | 2001 | Kampaengphet brewery commenced operations |
| August | 2002 Acquisition of Thai Alcohol Public Company Limited | |
| October | 2003 Thai Beverage was established as a holding company for all the subsidiaries | |
| June | 2004 | Expansion of Kamphaengphet brewery commenced |
| May October October September | 2006 Thai Beverage successfully listed in the SGX-ST 2006 Acquisition of distillery assets from Sin Surang Karn Sura Co. Ltd 2006 Acquisition of PSUK, acquisition of BSHK 2007 Acquisition of United Products Company Limited and SPM Foods and Beverages Company Limited | |
| January September-November | 2008 Acquisition of energy drink and RTD coffee assets from Wrangyer Beverage Company Limited 2008 Acquisition of 43.9 percent of Oishi in September; 89.9 percent following a tender offer in November, for a | |
| total cost of 6.24 billion Baht | ||
| September | 2009 ThaiBev turned a new chapter in the history of ‘‘Beer Chang’’ under one umbrella concept of ‘‘Kon Thai | |
| Hua Jai Deaw Gun’’ | ||
| November | 2009 Acquisition of Yunnan Yulinquan Liquor Co. Ltd, Chinese white spirit distillery in China |
| December | 2009 ThaiBev extended spirits product portfolio by launching Thailand’s newest premium brandy, ‘‘Meridian V.S.O.P.’’ |
Source: www.thaibev.com (accessed 30 August 2010)
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into four main types – beer, spirits (i.e. rum and whiskey), non-alcoholic products (e.g.
bottled drinking water, soda and non-carbonated soft drinks) and products from related
businesses. The company’s distribution network consisted of 753 active agents, more than
1,000 sales persons, and 4,000 transportation vehicles, that serve more than 400,000
points-of-sale throughout the country (Asiamoney, 2008).
With a sizable production base and an experienced management team, ThaiBev benefitted
from economies of scales and scope from a diversified portfolio of beverages that were sold
through an extensive distribution network. As a result of ThaiBev’s product range and market
scope, the company faced different challenges in different beverage sectors. For instance,
when ThaiBev launched its premium Federbrau beer at a competitively lower price to target
the 21-29 year-old age cohort, existing competitors such as Heineken continued to compete
on the basis of quality rather than on the basis of lower prices. When competitors launched
lower-priced beverages to challenge ThaiBev’s stronghold in the economy segments,
ThaiBev would offer more attractive trade incentives to resellers to help push ThaiBev drink
sales in the marketplace.
Table II ThaiBev corporate vision and mission
| Corporate vision | Our vision is to become a leading global beverage company focusing on commercial excellence, continued premiumisation of our products, and professionalism Our mission is to seek ‘‘partnerships’’ among our key stakeholders through six guiding values: Offer quality products for every customer segment |
| Mission |
Satisfy distributors’ needs by offering professional services
Provide first-quartile returns to our shareholders with consistently high revenue growth and profitability
Become a role model for professionalism, transparency, and good corporate governance
Trust, empower, and reward our staff to make them accountable
Contribute to local communities
Source: www.thaibev.com (accessed 30 August 2010)
Figure 2 ThaiBev product portfolio
Source: www.thaibev.com (accessed 30 August 2010)
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Table III ThaiBev business groups as of August 2010
Beer Group Pomthip Co. Ltd
Pomkit Co. Ltd
Pomklung Co. Ltd
Pomchok Co. Ltd
Pomcharoen Co. Ltd
Pomburapa Co. Ltd
Pompalang Co. Ltd (8)
Pomnakorn Co. Ltd (7)
Brewery Group Beer Thip Brewery (1991) Co. Ltd
Cosmos Brewery (Thailand) Co. Ltd
Beer Thai (1991) Public Company Ltd
Vidhayathan Co. Ltd
| Business Development Group (Supply Chain Group) | Thai Beverage Energy Co. Ltd Feed Addition Co. Ltd |
Charun Business 52 Co. Ltd
Dhanasindhi Co. Ltd
Thai Beverage Recycle Co. Ltd
Thai Molasses Co. Ltd
Thai Cooperage Co. Ltd
Pan International (Thailand) Co. Ltd
Thai Beverage Logistics Co. Ltd
Thai Thum Distillery Co. Ltd
Sura Piset Sahasan Co. Ltd
Sura Piset Samphan Co. Ltd
Distillery Group 1 Sangsom Co. Ltd
Fuengfuanant Co. Ltd
Mongkolsamai Co. Ltd
Thanapakdi Co. Ltd
Kanchanasingkorn Co. Ltd
Sura Piset Thipharat Co. Ltd
Distillery Group 2 Sura Bangyikhan Co. Ltd
Mekhong Distillery Limited (2)
Athimart Co. Ltd
S.S. Karnsura Co. Ltd
Kankwan Co. Ltd
Theparunothai Co. Ltd
| Distillery Group 3 | Red Bull Distillery (1988) Co. Ltd* (no affiliation to Red Bull energy drink) Simathurakij Co. Ltd |
Nateechai Co. Ltd
Luckchai Liquor Trading Co. Ltd
United Winery and Distillery Co. Ltd
Sura Piset Pattharalanna Co. Ltd
United Products Co. Ltd
Sura Piset Sahasan Co. Ltd
Liquor Marketing Group Num Yuk Co. Ltd
Num Kijjakarn Co. Ltd
Num Palang Co. Ltd
Num Muang Co. Ltd
Num Nakorn Co. Ltd
Num Thurakij Co. Ltd
Numrungrod Co. Ltd (6)
Numthip Co. Ltd (5)
Marketing Group Thai Beverage Marketing Co. Ltd
Chang Corp Co. Ltd (3)
Chang International Co. Ltd (4)
Dhospaak Co. Ltd
| Non-Alcoholic Beverage Business Group | Wrangyer Beverage (2008) Co. Ltd Thai Drinks Co. Ltd |
Oishi Group Public Company Limited
Oishi Ramen Co. Ltd
Oishi Trading Co. Ltd
SPM Foods and Beverages Co. Ltd
(continued)
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ThaiBev initial public offering
In 2005, ThaiBev announced its plans to list on the stock exchange of Thailand (SET), which
would have made it the first alcoholic beverage company to publicly list in Thailand. The
announcement was met with religious dissent in Thailand and delays by securities market
regulators disrupted ThaiBev’s efforts to list in Thailand. As a result, ThaiBev suspended its
plan to list shares on the SETand instead sold its shares on the Singapore exchange (SGX),
offering a total of 4.89 billion shares, valuing the initial public offering (IPO) at as much as
S$1.76 billion (US$1.12 billion). Cash raised in the IPO was used to repay part of its $965.7
million debt (Reuters, 2006), invest in new projects, acquire shares in its holding company,
and to increase production capacity of breweries by 30 percent in order to maintain its
market lead in Thailand (Bloomberg.com, 2006). In 2008, ThaiBev again submitted an
application for listing on the SET and planned to sell 80 million shares, which would have
accounted for 0.3 percent of the total (Nguyen and Saikit, 2008). As of 2010, ThaiBev was not
listed on the SET.
ThaiBev international expansion
In 2006, ThaiBev’s international sales made up less than 1 percent of the company’s total
sales while its domestic market accounted for over 99 percent, having controlled 70 percent
of the white whisky segment, 63-65 percent of the whisky segment and 60 percent of the
beer segment in Thailand (Asawanipont, 2006). Since it is listing in 2006, ThaiBev
implemented a strategy to allow its overseas expansion through its wholly-owned subsidiary,
International Beverage Holdings Limited (IBHL).
Table III
| Overseas Group | International Beverage Holdings Limited*** International Beverage Holdings (UK) Limited |
The Knockdhu Distillery Company Limited
Blairmhor Limited
Blairmhor Distillers Limited
Best Spirits Company Limited
Speyburn-Glenlivet Distillery Company Limited
Liquorland Limited
Inver House Distillers Limited
Six non-trading subsidiaries
InterBev (Singapore) Limited
The Pulteney Distillery Company Limited
Inver House Polska Limited
International Beverage Holdings Limited USA, Inc.
InterBev Malaysia Sdn. Bhd.
The Balblair Distillery Company Limited
Wee Beastie Limited
InterBev (Cambodia) Co. Ltd
International Beverage Holdings (China) Limited (9)
Inver House Distribution SA
Moffat & Towers Limited
InterBev Trading (China) Limited (10)
Yunnan Yulinquan Liquor Co. Ltd (11)
Sole Agent Group Thipchalothorn Co. Ltd
Krittayabun Co. Ltd
Surathip Co. Ltd
Sunthornpirom Co. Ltd
Piromsurang Co. Ltd
| Trademark Group | Thai Beverage Brands Co. Ltd Archa Beer Co. Ltd |
Beer Chang Co. Ltd
Chang Beer International Co. Ltd (1)
Source: www.thaibev.com (accessed 30 August 2010)
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On 4 July 2007, ThaiBev launched its signature brand, Chang beer in the USA, one of the
world’s largest markets for beer. The initial launch plan focused on 5,000 Thai, Vietnamese,
Cambodian and Asian-fusion restaurants. ThaiBev targeted several key states in the USA,
including New York’s metropolitan area as well as California. ThaiBev anticipated gaining
distribution through some 40-50 percent of the selected restaurants during the first year of
the launch.
By 2008, IBHL had established offices in six countries and began active promotion of Chang
beer and Mekhong liquor sales to countries like the USA, the UK, Australia, and several
others. Expansion efforts also included whiskies and other premium spirits made in Scotland
by IBHL’s subsidiary Inver House Distillers Limited (Inver House). While ThaiBev’s primary
operations were in Thailand, the company also had various interests outside the country,
such as in Hong Kong, Singapore, the UK, Malaysia, Cambodia, the USA, and China. By
mid-year of 2010, sales revenue from ThaiBev’s international business represented 3
percent of the company’s total sales (FinanceAsia.com, 2010).
As part of its international expansion plans, ThaiBev built its global corporate image mainly
through the use of global sponsorship activities. In its early efforts to create awareness for
the products, ThaiBev positioned the Chang beer brand as a premium imported beer in
international markets and sponsored the Everton football club of the English Premier League
in 2004. Since then, the Chang logo of two elephants had been printed on every Everton
football club jersey. Moreover, several community programs under the Chang-Everton
partnership have been launched in the UK, as well as in Thailand. In 2009 (Pinijparakarn,
2010), ThaiBev signed a five-year agreement with the Professional Golfers Association Tour
in a deal worth Bht150 million. The tour’s events were broadcasted in nearly 200 countries
and reached over 450 million households.
ThaiBev alcoholic business
In 2009, ThaiBev had an estimated 60 percent market share in the domestic spirits market
and a 40 percent share in the domestic beer market. In the first quarter of 2010, ThaiBev
spirits and beer accounted for nearly 92 percent of the company’s total revenue earned
during that period (Table IV). ThaiBev’s spirits products included brown, white and herbal
spirits and brandy with brands in economy, standard, and premium segments. ThaiBev
enjoyed the leading position in Thailand’s spirits market, as competitors were either local
producers with small production bases or imported spirits that were sold at high prices to
target niche markets. ThaiBev entered the local premium brandy market in February 2010,
launching its Very Special Old Pale (VSOP) class called Meridian. A rollout budget of more
than Bht1 billion was allocated to capture more than 50 percent of the local brandy market
within five years (The Nation, 2010a).
ThaiBev’s Chang beer was Thailand’s beer market leader from 1996 to 2005, with its share
peaking at 70 percent from 2002 to 2003. The brand lost significant market share due to
fierce competition from lower-price beers aimed at the mass lower-income group, such as
the introduction of the economy low-priced Leo brand by archrival Boon Rawd in 2000. To
regain market share, ThaiBev engaged in new brand launches as part of the company’s
multi-brand strategy to expand its product portfolio from economy to standard and premium
segments. In 2004, ThaiBev introduced its Archa lager in Thailand as a smoother beer
targeting a ‘‘new generation of low alcohol content’’ beer drinkers. In 2006 and as part of
ThaiBev’s premiumisation strategy, the company introduced higher margin brands Chang
Light and Change Draught beers to attract consumers in the fast-growing low-alcohol beer
segment.
In 2008, ThaiBev launched its Federbrau brand in Thailand as a premium beer to compete in
terms of positioning and pricing with the premium market leader, Heineken. In September
2009, the firm re-launched its Chang beer brands to revitalize the market and challenge the
dominance of beer brands from Boon Rawd. The re-launch of Chang was supported with an
investment of Bht100 million committed to a marketing campaign ‘‘Khon Thai Hua Jai Deaw
Gun’’ (‘‘Thais have the same heart’’), aimed at helping ThaiBev regain its leadership to
capture at least a 50 percent market share in the beer market over the next two years
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Table IV ThaiBev quarter 01 2010 consolidated financial highlights (in million baht)
Group Spirits Beer Non-alcoholic beverages Food
Q1
2009
Q1
2010
Change
(%)
Q1
2009
Q1
2010
Change
(%)
Q1
2009
Q1
2010
Change
(%)
Q1
2009
Q1
2010
Change
(%)
Q1
2009
Q1
2010
Change
(%)
Sales revenue 27,648 30,015 8.6 17,957 18,970 5.6 7,924 8,585 8.3 1,110 1,580 42.3 778 904 16.2
COGS (19,475) (21,502) (11,705) (12,624) (6,589) (7,246) (729) (1,096) (454) (557)
Percent of sales revenue 70.4 71.6 65.2 66.5 83.2 84.4 65.7 69.4 58.4 61.6
SG&A (3,573) (4,776) (1,822) (2,277) (1,404) (1,828) (252) (397) (291) (290)
Percent of sales revenue 12.9 15.9 10.1 12.0 17.7 21.3 22.7 25.1 37.4 32.1
EBITDA 5,724 4,912 214.2 5,036 4,704 26.6 392 (79) 2120.2 220 184 216.4 76 103 35.5
Net profit 3,033 2,511 217.2 3,058 2,780 29.1 (161) (415) 157.8 103 91 211.7 33 55 66.7
Less: minority interests (17) (22)
Company net profit 3,016 2,489 217.5
Margina
EBITDA 20.7 16.4 28.0 24.8 4.9 20.9 19.8 11.6 9.8 11.4
Net profit 11 8.4 17.0 14.7 22.0 24.8 9.3 5.8 4.2 6.1
Notes: Sales revenue – increase in the number of branches, COGS (%) – increase in food costs due to a greater variety of foods, SG&A (%) – sales growth is higher than the increase in
SG&A, EBITDA – increase in gross profit, Net Profit – increase in EBITDA; amargins are percent of sales revenue
Source: ThaiBev Company website
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(Chinmaneevong, 2009). There was greater penetration of off-trade channels, such as
restaurants, pubs and bars, where the growth of beer was expected to increase not only in
terms of volume, but also in value. Also, 30 Chang beer gardens throughout Bangkok were
established as a means to help build the brand’s image.
ThaiBev food group
To broaden its core business and to enhance the revenue contribution from its non-alcoholic
businesses, ThaiBev bought a 43.9 percent stake of the Oishi Group Plc. (a public listed firm
on the SET) on September 2008 for US$93.8 million (Just-Drinks.com, 2008). Following a
tender offer to shareholders made on 10 October to 18 November 2008, ThaiBev had
become the owner of 89.9 percent of the shares[7]. The Oishi Group manufactured and
distributed semi-finished food, finished food, bread, ramen and beverages and was
Thailand’s largest operator of Japanese food and bakery restaurants. In 2010, the Oishi
Group had two market leader brands. The Group’s Oishi restaurants secured about 40-50
percent of Thailand’s Japanese restaurant market, which was considered the fastest
growing in-dining segment, and its Oishi green tea captured 63 percent of the RTD green tea
market[3]. Despite having majority ownership, ThaiBev chose to have the Oishi Group
managed as an autonomous unit rather than to make any significant changes to the group’s
operations.
ThaiBev non-alcoholic beverages
The non-alcoholic beverages unit of ThaiBev was considered a fairly recent addition to the
company’s product portfolio, having been formally established in 2009 with ten staff. The
major task of the unit was to increase ThaiBev’s revenue contribution from non-alcoholic
products from less than 10 percent to about a two-digit share in three to five years. In 2010,
more than Bht500 million had been allocated to ThaiBev’s existing non-alcoholic beverages
including Chang bottled water and soda, Wrangyer energy drink, and Power Plus
energy-replacement beverages, as well as new products that would be added to the line.
The company had already developed up to four non-alcoholic beverages every year, each
with its own competitive advantage[3]. ThaiBev’s non-alcoholic beverage business group
carried out both domestic and international manufacturing and distributing activities.
Chang soda and drinking water
Chang soda water was produced, distributed, and marketed by ThaiBev for several
decades. Being manufactured in world class factories of ThaiBev, Chang soda water was
available in two varieties:
1. the returnable glass bottles; and
2. the one-way glass bottles in order to meet the needs of consumers both at-home and
on-premises.
In March 2010, ThaiBev launched Chang bottled drinking water, which was a new addition to
the company’s non-alcoholic beverage portfolio. ThaiBev was determined to achieve in the
first year a sales target of Bht1.8 billion, which was equivalent to capturing a 10 percent
market share of Thailand’s bottled water market (The Nation, 2010b). To meet its sales
objectives, ThaiBev allocated a Bht100 million budget towards a comprehensive marketing
campaign that positioned Chang drinking water as the ‘‘Total Drinking Water Solution’’[3].
The brand was differentiated as offering hygienically clean quality drinking water that came
from specially selected clean and safe underground sources. Any contaminants were
filtered out through a natural process, then the water was processed in a world-class factory
that deployed advanced purifying procedures, including UV filter, ozone filter, and reverse
osmosis. The production facility was certified by the US NSF agency. Moreover, Chang
drinking water was available in a variety of sizes and packages to serve the different needs
of customers. For the first quarter ended 31 March 2010, Chang soda and Chang drinking
water generated volume of 6.4 and 18.5 million liters, an increase of 101.9 and 53.3 percent,
respectively, from the same period the previous year (ThaiBev, 2010).
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To further broaden Chang’s customer base, Bht100 million was allocated through ThaiBev’s
subsidiary, Thai Drink Co. to expand home delivery service areas to cover all Bangkok districts
and vicinity with the aim to distribute more than 20 million liters of drinking water within the
second half of 2010 (ThaiBev News, n.d.). The fleet of trucks was doubled to more than 100 for
distribution that would cover a comprehensive range of channels, covering both traditional and
modern trade with 70 trucks provided delivery services to households and offices.
Wrangyer energy drink
In order to expand the range of its non-alcoholic beverages, in March 2008, ThaiBev
acquired for Bht420 million, the energy drink and RTD assets from Wrangyer Beverage Co.
Ltd, the producer and distributor of the Wrangyer energy drink and the Black Up[8] RTD
coffee. The acquired assets included the tangible and intangible operation assets used in
the production of Wrangyer energy drinks, the trademarks and formulas used in ‘‘Black Up’’
RTD coffee, as well as the un-planted land for construction of a coffee factory in the future
(The Nation 2008). Wrangyer Beverage Company initially launched the Wrangyer energy
drink in 2005 and enjoyed a 10 percent market share. However, by 2008, the brand’s share
fell to about 2 percent.
In 2009, the Wrangyer brand doubled its market share with revenue rising to Bht480
million[9]. Sales were expected to reach Bt750 million, or about 5 percent of the market, in
2010 and to 10 percent by 2015. This growth was to be achieved by repositioning the
Wrangyer brand, penetrating ThaiBev’s strong distribution network, and taking share from
competitors. The Wrangyer brand was overhauled in terms of its packaging and labeling for
a fresher look. Moreover, in mid-2010, the export version of Wrangyer was rebranded to
‘‘Ranger’’. The deployment of mobile units facilitated the distribution of Wrangyer/Ranger
through 60 percent of ThaiBev’s total distribution network (Rungrapaisarn, 2010).
Power plus sport drink
ThaiBev’s entry to the energy drink segment occurred organically in 2009, with the
development and introduction of a new brand, Power Plus. The drink was launched in three
flavors: blue cider, fruit blast and orange fusion, and was primarily sold through 7-Eleven
stores at a competitively low retail price of Bht10. Because of its popularity, Power Plus
penetrated the market quickly and expanded to other convenience store outlets and
supermarkets (FoodBizDaily.com, 2009b).
The initial marketing cost for the Power Plus campaign was between Bht49.5 and Bht69.3
million. As part of the Power Plus marketing strategy, targeted consumers were characterized
as younger, trendy and sporty. To boost the Power Plus brand image, ThaiBev became a
sponsor of M-Sport aerobic contests and a main sponsor of the 25th SEA Games in Vientiane,
Laos, the most important sports event in Southeast Asia. ThaiBev expected its tactful
advertising blitz to help Power Plus take a 10 percent market share in 2010 and by 2012, to
make Power Plus the number two selling sports drink in Southeast Asia.
Looking forward
A look at the forecasts of the whole packaged beverage market suggested that the near
future growth rate would be relatively low compared to the growth rates of some of the
beverage categories and specific beverage segments. Forecasted beverage growth rates
also varied among different regions, various specific markets within those regions, and
different specific target consumers within those markets. These differences were attributed
to diverse beverage regulations, local sourcing and production capabilities, competitive
factors, consumer sophistication, and consumer tastes and preferences. In spite of the
seemingly overwhelming opportunities, beverage companies, irrespective of their
abundance of resources, could not afford to take financial and reputational risks to go by
‘‘trial-and-error’’ with new product development, new product launches and market entries.
These tasks had to be done with careful analyses along with prudent strategic and tactical
planning. Thus, identifying lucrative product, market, and even sourcing and production
opportunities would be a tedious task.
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For Marut Buranasetkul, there were important strategic issues to be considered in order for
ThaiBev to achieve its ultimate goals of becoming a major regional and global player. For
many beverage market analysts, Thailand still remained a highly attractive market, as could
be evidenced by the fast and high rate of product proliferation and product diffusion into
untapped consumer segments done by both local and foreign beverage companies. Yet,
was the anticipated growth and trends in beverage consumption in Thailand sufficient to aid
ThaiBev in reaching its ambitious goals of increasing its non-alcoholic beverage group’s
revenue contribution to a double digit? What new non-alcoholic beverages and/or new
markets should be pursued in order for ThaiBev to achieve its targeted growth? What, where,
and how could ThaiBev capitalize and exploit its capabilities to seize the growth
opportunities for long-run success?
Notes
1. 2010 average exchange rates: US$1 – Bht31.7; S$1 – Bht23.2.
2. ‘‘Hybridization’’ describes a beverage phenomenon of mixing traditional beverage elements in
nonconventional ways, such as that found in caffeinated beers, nutrition enhanced carbonated soft
drinks, and enriched stilled water.
3. www.datamonitor.com/
4. The term ‘‘soft’’ is in opposition to ‘‘hard’’, i.e. drinks with high alcoholic content by volume.
Generally, ‘‘soft’’ also implies that the drink does not contain milk or other dairy products. Hot
chocolate, hot tea, hot coffee, tap water, juice, spritzer and milkshakes also do not fall into this
category.
5. The United Nations Population Division provides country population statistics and recognizes 51
countries comprising the Asia region.
6. The term Khunying refers to a conferred non-inheritable lifetime title for a married non-royal woman
and roughly translates as ‘‘Dame’’ or ‘‘Lady’’.
7. During this same time, ThaiBev had divested its industrial alcohol company, Thai Alcohol, for US$49
million, of which some of the proceeds were used to pay for the deal.
8. The Black Up brand was pruned from ThaiBev in early 2010.
9. UBS Investment Research, 8 April 2010.
Keywords:
Corporate diversification,
Product portfolio analysis,
Beverage industry,
International business
expansion,
Thailand,
Emerging markets,
Food and drink products,
Diversification
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Exhibit 1. Product descriptions of functional drinks
Energy drinks
Energy drinks are beverages formulated to provide a quick burst of high energy to the
consumer. The ingredients vary and usually include, for example, methylxanthines, caffeine,
natural flavors, some herbal components or specific vitamins such as vitamins B. They may
also contain taurine, guarana, maltodextrin, ginseng, carnitine, inositol, glucuronolactone,
creatine and ginkgobiloba. The primary active component is generally caffeine and most
energy drinks include artificial sugar.
Sports drinks
Sports drinks are beverages that help rehydrate and replenish electrolytes, sugar, and other
nutrients, which are depleted after strenuous exercise, training or competition. They are
formulated based on the science of nutrition and sports medicine and often provide
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rehydration, boost sports performance and aid muscle recovery. Main ingredients often
include electrolytes, carbohydrates, and proteins in the form of amino acids and peptides.
Nutraceutical drinks
Nutraceutical – nutrition and pharmaceutical combined – is a terminology used to represent
a food or beverage product that provides health and medical benefits, including the
prevention and treatment of disease. Nutraceutical drinks are usually claimed to provide
extra health benefits such as prevention of chronic diseases, health improvement, aging
delay, and increasing life expectancy.
About the authors
Amonrat Thoumrungroje earned a PhD in International Business at Washington State
University, USA, in 2004. Currently she is an Assistant Professor at the Department of
International Business Management, Assumption University, Thailand.
Olimpia C. Racela earned a DBA in Marketing from Thammasat University, Thailand, in 2005.
Currently, she is an Assistant Professor of Marketing at the Mahasarakham Business School,
Mahasarakham University, Thailand. Olimpia C. Racela is the corresponding author and can
be contacted at: [email protected]
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