OBG talks to Thapana Sirivadhanabhakdi, President & CEO, Thai Beverage Public Company (ThaiBev)

Interview: Thapana Sirivadhanabhakdi

How did the recent floods affect the supply chain of beverage producers in Thailand?

THAPANA SIRIVADHANABHAKDI: The massive floods affected everyone, in one way or another. As a result, the private sector jumped in and jointly contributed to the relief and recovery efforts, working alongside non-governmental organisations and the local government. Our business operation was no exception. The floods had interrupted and damaged part of our Oishi green tea beverage production facility and operations. The business is now gradually recovering and is expected to see a full recovery by August 2012.

As for future flood preventive measures, we are exploring options to diversify our operational risks. To make up for the losses, we have worked to leverage our well-connected distribution chains to capitalise on the opportunity raised by the floods to keep shops stocked when other distributors could not.

What is the expected demand for beverages and how will they be distributed?

THAPANA: The green tea market today is worth about BT8bn($255.2m) and the carbonated soft drinks segment about BT35bn ($1.12bn). We are optimistic the Thai non-alcoholic beverage market will continue to grow. As part of our moves to strengthen our nonalcoholic distribution capability, in October 2011 we acquired Serm Suk, the local bottler for Pepsi and the best-selling cola brand in the Thai market. This acquisition is expected to strengthen our distribution capability, especially for our Oishi beverage products. Serm Suk has a very well-developed direct distribution system that serves many small shops and eateries. ThaiBev's strategy is to distribute our successful Oishi products through Serm Suk's network.

In terms of alcoholic beverages, Thai consumers have traditionally preferred stronger taste and higher alcohol content by volume, but Thai brewers are increasingly launching brands to meet international preferences as they expand overseas. ThaiBev foresees continuing growth contribution momentum from overseas operations as we seek to become a global brand and competitive in the international market.

In what way will the rise in minimum wages affect the beverage industry’s cost structure?

THAPANA: There are pros and cons to the rise in minimum wage, but overall we support the increase because we have always looked at our staff as a valuable asset. There are, of course, concerns of cost-push inflation due to knock-on effects of wage claims across the board, but this will also stimulate domestic demand.

There are means to boost productivity and streamline the human resources (HR) process. For instance, in our diverse group, we run a single HR department so we are able to allocate resources in the most efficient manner. But there is only so far we can cut labour, particularly on the distribution side, because we are delivering products to many small shops. For instance, we often cannot use forklifts to deliver shipments because many of the shops we serve need the goods brought to the second floor, where the storage area is. There is only so much machinery can do; we will always need people to complete certain tasks.

How have tighter credit conditions impacted Thai producers and how have they learned to work around those restrictions?

THAPANA: To a certain extent, Asian corporations have continued to be able to access capital despite the impact of tightened credit conditions. Asian conglomerates have learned from the Asian financial crisis and are relatively cash rich by global standards. We have seen more mergers and acquisitions in the global brewers’ market in recent years and we will see more in AsiaPacific in the coming years.

Moving forward, we need to address non-tariff barriers. We are approaching the integration of the ASEAN Economic Community into a single market in 2015, and this should create more opportunities for market growth.