Thailand: Beverage expansion

The beer industry in Thailand is set for a shake up as Ajethai, the producer of Big Cola, moves into the market, providing a new challenge for existing local brewing giants Singha and Chang.

Ajethai, which is owned by Peruvian beverage company Aje, is currently conducting a feasibility study of the Thai beer market with a view to building a $100m factory and introducing four beers to the market in the coming three to four years. The industry is currently valued at BT200bn ($6.5bn), with Singha’s brands, including Singha and Leo, accounting for 60% of the market and Thai Beverage’s Chang holding a 34% share.

Aje Group launched its beer business in Peru in 2007 and later expanded to Mexico and Colombia. While it accounts for a small percentage of worldwide shares, the company is optimistic about its ability to begin brewing in new markets, including Thailand.

“There is still room for us to enter the beer market. With the experience of our Big Cola here, we expect we can do the same for beer,” Hernan Cordova, Ajethai’s managing director, told The Bangkok Times in early October.

Indeed, the introduction of Big Cola in Thailand in 2007, with the construction of a BT3bn ($97m) manufacturing plant in the Amata Nakhon Industrial Estate, proved to be a massive success for the company. In the following three years the firm spent BT2bn ($65m) adding a new production line to the factory and in 2010 spent BT5bn ($161m) to boost production, with an end result of six lines.

“With the new investment, we were able to double the production capacity for cola products to 1.5m cases – or 72m bottles – a month. It will serve the increasing market demand for Big Cola in Thailand,” Chanin Thiencharoen, the marketing manager for Ajethai, told local paper The Nation in 2010.

In spite of its relatively recent entrance to the Thai market, Big Cola has performed well, with sales growing at around 30% a year, representing 15-20% of the local soft drink market. In early September the company announced plans to build a second plant in the north of the country by the end of 2013, increasing its production capacity from the current 343m litres to 448m litres.

Following these successes, it is only natural that the company should want to continue expanding its production into other areas of the Thai beverage market. With the new brewery, the company hopes to bring Franca, a lager and the company’s best-selling beer, and three additional brands – Club, Tres Cruces and Caral – to the market. “In Thailand, we expect to start our beer business in 2015. Even though the beer market here is very competitive, it has room to grow, as Thai consumers are ready to try new tastes,” Cordova said.

Major developments are also occurring elsewhere, with Singha announcing plans to construct a new brewery with an initial capacity of 80m-100m litres per annum in Myanmar. “We are interested in neighbouring countries with high beer consumption. These would be Myanmar, Vietnam and Cambodia,” Singha’s regional marketing director, Piti Bhirombhakdi, told The Nation.

He said he expected Myanmar to become a bigger player in the regional beer market, and that competition could be reduced with the establishment of a Thai brewery in the country. “With its location near southern China, we can set up a beer factory in Myanmar and use it to support both the Myanmar and China markets,” he said.

Other international companies in the industry are seeing potential to expand into Thailand. Danish brewer Carlsberg recently announced a joint venture with Singha, which will oversee the marketing, distribution and sales of Carlsberg’s brands in Thailand. Singha’s brands will also be distributed abroad with the help of Carlsberg’s global network.

The Carlsberg-Singha deal came on the back of global giant Heineken’s $6.4bn purchase of Singapore-based Asia Pacific Breweries, the maker of Tiger beer. The moves of these major brewers into Asian markets show that even these major firms see great potential for their brands to branch out of traditional – and in many cases more developed and competitive – markets in Europe and North America.

“Carlsberg is visible in Thailand today but is still at a small scale compared with a partner holding a 60% market share,” Carlsberg’s CEO, Jørgen Buhl Rasmussen, told Reuters in September.

Given anticipated increasing demand for beer and the growing appeal of international brands, it is no surprise that a number of companies from around the globe are making moves to expand into the Thai beer market. With new factories increasing domestic production capacity and international companies forming partnerships with Thai firms, it seems the industry will continue presenting numerous opportunities to domestic and foreign brewers alike.