High household debt takes the fizz out of beer market

Corporate May 25, 2015 01:00

By KWANCHAI RUNGFAPAISARN
THE NA

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THE BEER market is projected to surge by only 3-4 per cent to about Bt180 billion this year.



The high household debt has hurt the sales of non-essential items, particularly beer, as consumers suffer a loss of purchasing power.

Chutchai Wiratyosin, marketing director of Singha Corp, the brewer of Singha and Leo beers, said last week that the beer market was flat in the last two quarters, but the company’s sales grew 3 per cent last quarter.

Singha Corp is still the market leader with a 72-per-cent share, followed by Thai Beverage with 24 per cent and Heineken with 4 per cent.

Singha Corp targets Bt200 billion in sales this year, up from Bt120 billion last year, but beer will sink significantly to about 60 per cent of its sales from 80 per cent.

Bhurit Bhirombhakdi, a director of Singha Corp, said the group has spent about Bt5 billion on expanding its beer and bottled water plant in Nakhon Pathom’s Bang Len district to serve the company’s more proactive penetration into the CLMV (Cambodia, Laos, Myanmar and Vietnam) and other markets of the Asean Economic Community.

When the project is completed this year, beer capacity will zoom up by 50 per cent.

The company is preparing to install PET blowing machines at nine bottled water plants around the country. It will also build a central warehouse in Bangbuathong with a huge investment budget.

“The move will help the company reduce transportation costs and increase manufacturing efficiency,” he said.

Vichate Tantiwanich, senior vice president for corporate affairs at Thai Beverage Plc (ThaiBev), the brewer of Chang beer, said food is one of the good indicators for the purchasing power of people.

ThaiBev posted an increase of about 10 per cent year on year in first-quarter sales, which showed that the company has been receiving a better response from consumers after building up its beverage portfolio with new brands such as Jub Jai herbal tea and 100 Plus carbonated isotonic sports drink for general consumers.

“We have seen a good increase in the sales of spirits and beers. For our beer products in particular, we have seen a significant increase in their profitability over the past four to five years,” he said.

“For our non-alcoholic beverages, we have yet to witness any profit as they’re in the ‘market penetration’ period. We also have seen a small profit in our food business,” he said.

Based on the company’s sales, people are enjoying greater purchasing power.

“If the government’s economic-stimulus packages are successful and can put money into the hands of individual consumers, we believe that our sales will get better this year,” he said.

The company’s share in the Asean beverage market is about 10 per cent. Based on its vision to boost exports to 50 per cent of sales by 2020, the company plans to accelerate its export activities, starting with Asean. It has already streamed into many neighbouring markets, including Malaysia, Singapore, Myanmar and Vietnam.

It is quite difficult to anticipate the economic impact from the slowdown of the global economy, particularly to Europe, he said.

Many products and services in Asia, such as foods, beverages, apparel and even accommodations, are much cheaper than in Europe.

“As purchasing power has been dropping in Europe, consumers have turned to buying products from Asia.

“So, I cannot guess right now if purchasing power will shift to Asia or slow down. However, I don’t believe that purchasing power in Thailand and the rest of Asia will absolutely disappear.

“The implementation of the Asean Economic Community will help integrating purchasing power from one member country to another,” he added.