ANALYSIS: Thailand regains shopping thirst

Around Bangkok, long dormant half-finished building sites are becoming active again. Land is being cleared for new projects, and one project in the popular Thong Lor area actually saw 98 per cent of units snapped up in the first week.

"It's the first time since 1997 that we're seeing this again," says Barry Smit, managing director and executive creative director at FCB, which has just wrapped up TVC production for two real estate companies.

Elsewhere, back orders are piling up for cars as economic pundits rush to upgrade forecasts to reflect increasingly rosy scenarios. But even as advertisers woo customers with new energy, optimism is tempered as upbeat domestic forecasts are balanced against a weak global economy and continued worries about terrorism.

While GDP is forecast to hit four per cent this year, the possibility of war with Iraq could as easily derail the rebound. "It hasn't affected Thailand much yet - advertisers have already set their budgets for this year and they will use it up," says Bates chief executive officer Patee Sarasin. "But we might see a slowdown next year." Sarasin expects growth in adspend to slow to five to 10 per cent "if there's no war with Iraq or if there's a quick war. Otherwise, I think we will see even slower growth but spending will still be up because the competition is so stiff and people still need market share".

The year has been solid, but nowhere as strong as figures seem to suggest.

While Nielsen Media Research points to a robust 12.2 per cent adspend growth in the first nine months to 44.2 billion baht (US$1 billion), the data tells only half the story.

"The increase in real terms has been modest if you take media inflation into consideration," says Ogilvy & Mather Advertising managing director Punnee Chaiyakul. She estimates inflation on television - the most popular medium - at between seven and 10 per cent, going as high as 15 per cent in some cases. She also points out that the increase in adspend has been fuelled by a handful of categories, "with others remaining almost flat".

The strongest by far among these categories has been telecommunications, "up almost 100 per cent" up to September compared to the year-earlier period. TA Orange's big-budget arrival this year "meant that everyone became a player - the top four brands this year in advertising are in telecommunications", notes J. Walter Thompson director for Southeast Asia, Mark Webster.

Already fierce, competition got even more cutthroat as telcos unlocked their subscriber identity modules, allowing customers to pick up handsets from other providers - a move that caused the handset market to crash.

"There were no profits to be made anymore from handsets, and companies had to look at increasing new subscribers and usage," Webster says. "Budgets increased."

Intense telco competition promises to continue into the new year - TA Orange, the largest overall brand spender so far this year - intends to spend "the same amount of money next year".

"The prospects are quite good. Right now mobile phone penetration in Thailand is at 25 per cent and we're estimating 54 per cent by 2005," says Orange corporate affairs manager Duke Theerathada. "Even if there were to be turmoil in Iraq, mobile phones will grow - in fact it will become even more important for people to be in touch with their loved ones."

Meanwhile, spending in the auto category, and since the middle of this year, the real estate sector, are on the up and up as advertisers court Thais taking advantage of easy credit and low interest rates to spend on big-ticket items. Cars, particularly luxury marques, have had an especially strong year; sales of BMWs, for instance, were up 20 per cent in the January to September period.

"It used to be very expensive for people to buy luxury cars because of the 300 per cent import tax for cars (above a certain capacity)," says Sarasin. "Now, with 'zero per cent interest' promotions and a lot of factories making cars here, they are becoming affordable to mid-income people."

FCB's Smit noted that Honda has back orders stretching four months for its newly-launched CRV. "That hasn't happened for many years. Toyota even has a corporate ad up."

And with international players setting their sights on Asia as the only major market promising growth in an otherwise dismal global auto market, competition is predictably intense. Most recently Ford moved its regional headquarters to Bangkok, promising "to get more aggressive in increasing our marketshare".

As marketers for big-ticket items tally up better-than-expected growth rates, categories with traditional high frequency purchases - chiefly consumer goods - are looking at flat to modest rises as market stays relatively stable.

"Despite economic uncertainty, the Thai consumer is generally not switching to cheaper or lower quality products. The only change is that they are spending less on each purchase; they are buying smaller packs," says Jeff Hansberry, managing director at Procter & Gamble Thailand.

Reflecting this trend, rival Unilever introduced a 10g version of its Breeze Excel concentrate detergent. P&G itself halved the price of its 100ml Rejoice shampoo to 20 baht.

Fast food chains, meanwhile, are concentrating on introducing variety and atmosphere in order to increase the frequency of visits. Ogilvy's Punee notes that the density of outlets has increased significantly over past years. "If you live in (downtown) Lang Suan, you used to have two or three outlets (in the vicinity). Now you have closer to six."

McDonald's has introduced a menu "closer to home", with breakfast items like congee and omelet burgers, "going into the areas where the business has been forever", McThai communications manager, Penchan Pooniyom says.

Karaoke facilities are to be introduced shortly. KFC, meanwhile, is repackaging itself as a casual dine-in restaurant with a massive refurbishment programme, and Pizza Hut is bringing in hotel-style luxury chairs, candlelight and 'live' music. Pizza Hut marketing manager Suwanna Usanachitt notes that "the overall dining experience, including service and restaurant ambience", is among factors influencing customer choices".

Fast food companies are expected to be fairly low key in the last quarter of the year, when the main spending will come from a new corner - state enterprises as they prepare for a privatisation spree. The list of companies lining up to gain public favour is impressive: Asset Plus Securities notes 20 public and private sector listings for 2003, starting with TOT Corp, Thai Airways and Krung Thai Bank early next year.

What's emerging this year is the growing favour for non-traditional media - it's still small but interest is definitely there. "Clients see things like shelf vision and floor vision as more targeted," says Surachet Bumrongsuk, general manager of ZenithMedia, who also notes interest in Trivision, and street furniture, which could be as simple as "a lightbox on top of a trashcan".

"Some clients love it, and it opens up a whole new market which is cheaper," says Bates' Sarasin. Another popular choice is outdoor advertising, "an inexpensive way of keeping your name in front of people."

THAILAND TOP 10 LUXURY PRODUCTS - JANUARY-JUNE 2002 (baht 000's) 
 Products Total TV 
1 Saijo Denki Air Conditioner 127,005 99,008 
2 Sang Som Thai Whisky 63,329 56,873 
3 Sony FD Trinitron Wega Television 59,551 28,784 
4 Toyota Camry Car 59,071 26,972 
5 Toyota Hilux Tiger D-4D Pickups 58,358 41,943 
6 Sony Handycam Video Cameras 57,892 46,146 
7 Oil Of Olay Total Effects Moisturizer 55,536 53,976 
8 Pond's Facial Cleansing Foam 55,341 52,512 
9 Pond's White Beauty Facial Care Set 48,083 41,617 
10 Mitsubishi Lancer Cedia Car 47,680 18,468 
Source: Nielsen Media Research 
THAILAND TOP 10 PRODUCTS - JANUARY-JUNE 2002 (baht 000's) 
 Products Total TV 
1 Orange Mobile Phone System 330,028 165,100 
2 TV Direct Direct Sales 275,777 275,777 
3 Tourism Authority Of Thailand 254,955 174,379 
4 GSM Advance Mobile Phone System 238,798 158,520 
5 One-2-Call GSM Mobile Phone System 216,138 177,177 
6 DTAC Mobile Phone System 196,381 147,216 
7 Chang Beer 166,384 162,203 
8 Pantene Pro-V Hair Prep. Products Range 143,615 143,043 
9 Sunsilk Silky Straight Shampoo 142,961 126,944 
10 Saijo Denki Air Conditioner 127,005 99,008 
Source: Nielsen Media Research