Beer wars spill over in Thailand

Thailand's bubbling, US$1.8 billion beer market is expected to reach $1.9 billion this year, as Thai consumers -- who have been traditionally whisky-loving -- move towards the golden, frothy beverage. "People are looking for lighter, value-for-money beer," said a source at Spa Advertising, which handles the Leo Beer account. "The new, emerging drinkers prefer something more convenient, without mixers and ice; something that can be consumed anywhere, anytime and with anyone." Clearly segmented on the basis of price, the Thai beer industry can be divided into three main segments: premium, standard and economy. Accounting for almost 78 per cent of the total market, it is the economy category where the suds have the most golden sheen, which is growing the fastest and seeing maximum activity. Chang is the segment leader with 82 per cent market share, followed by Leo with 16 per cent, the rest accounted for by the local brewers such as Thai Beer and Sing 70. "Boon Rawd Brewery, with Singha, Leo and Thai Beer in its repertoire, has been considered a key player in the market, despite the fact that its overall market share is number two. Chang Beer is number one, but with very low marketing activity, both above- and below-the-line. Leo's overall market share is about 15 per cent and growing at double digit figures every month," said the source at Spa. The economy category could grow by almost 25 per cent this year, due to lower pricing and a shift from white spirits to beer by 'low-end' alcoholic beverage consumers, said Panya Pongtanya, general manager of Thai Asia-Pacific Brewery (TAPB). Singha, manufactured by the Boon Rawd Brewery, boasts a 100 per cent market share in the standard segment, with no competitor brands within this category. Boon Rawd also produces and distributes Leo and Thai Beer in the economy segment and Kloster in the premium segment. The standard category accounts for 12 per cent of the total beer market, whereas the premium category has about 10 per cent. The premium segment is dominated by Heineken, with 80 per cent market share, followed by Carlsberg with 16 per cent and other brands making up the remaining four per cent. However, with the recent exit of Carlsberg from the Thai market, its share is up for grabs. Though Carlsberg too is looking for ways to re-enter the Thai market, its former partner, Chang Beverages, recently brought forward another damages claim, asking for compensation for termination of the joint venture. Kloster, though produced locally, has a brand image and positioning of a European beer, and thus has been making inroads into this segment. Heineken, too, is aggressively trying to plug the Carlsberg gap. "We are taking advantage of this situation as much as possible and tapping the best of Carlsberg outlets," said Jeffery Kimble, commercial director of TAPB. Though the company did not comment on this issue, the market is buzzing with the news that Heineken will soon launch at least two new brands, including Tiger, in the upper-medium slot. A part of it may be to lure Carlsberg consumers, but the impending entry of San Miguel in the Thai market is also prompting Heineken, with annual sales of $161 million, and all others to beef up their defences. "We are watching San Miguel closely to see which segments will they eventually tap and what brands will they introduce," said Kimble. The Philippines-based San Miguel Corp (SMC) recently acquired the assets of Thai Amarit Brewery, accelerating the company's entry into the lucrative Thai beer market. The company has so far invested $50 million in its venture in Thailand, and is looking to tap the entire spectrum of the beer market. Beers to suit every pocket will be launched, said Ramon Ang, San Miguel's vice-chairman, president and chief executive officer. The complete line is expected to hit the local market within two years, but established local brewers appear largely unconcerned. "We at Chang welcome the newcomers into this competitive market," said a source at Chang Beverages, makers of Chang beer. "Chang -- which has gone from zero to a 70 per cent share of the beer market in only nine years -- is popular enough to stand up to additional competition." However, Kimble added a note of caution: "Next year will be tough for us. The new advertising regulations curbing beer commercial airing times on television will especially impact the ability of premium brands to market themselves. While 'economy' segment brands can grow behind price reductions, a premium brand like Heineken can only grow if there is a very high quality product that is well supported by effective marketing." The new advertising restrictions that Kimble alludes to aim to foster a sense of social responsibility, but have hit premium beer brands hard. The regulations ban television and radio ads for alcoholic ads between 5am and 10pm, and restrict their content to socially responsible messages. Within a month of implementation, adspend by the top five beer advertisers dwindled to $650,000 compared to $2.7 million one year earlier, according to Nielsen Media Research. Heineken responded by decreasing its TV budget by 20 per cent this year, and has said it will increase its use of billboards, press ads, events and sponsorships. For international brands, in addition, trying to ensure their ads are 'beneficial to society' has also caused difficulties. "An international brand like Heineken will find it quite challenging to develop commercials that promote Thai cultural values while staying on equity," said Kimble, in an earlier interview. By reducing the advertising window, furthermore, many beer brands have simply been left out in the cold. Media sources have estimated that between 60 to 80 per cent of beer ads are currently screened between 6pm and 10pm. "These will now have to compete with whisky brands and cognac and everyone else for airtime --essentially the slot between 10pm and 12am because it doesn't make sense to advertise in the middle of the night," one noted. "The bottomline is time --there's just not enough of it for beer companies to get the same kind of exposure that they have now," said another industry watcher. "And the competition for slots just after 10pm is very fierce." Recent ad tracking by Media's Adwatch appears to confirm these observations. Chang Beer, whose aggressive spend and innovative ideas put it consistently in the top three in past surveys, is conspicuously absent, as is Singha Beer. Kimble notes that the slowdown is probably just temporary, "as brands go back and re-shoot and create new advertising", he said. Attempts to take refuge in other media, such as outdoor and POS, may also be short lived, with regulation likely to focus on them next. With these concerns in mind, TAPB is also driving hard to put its brands in traditional distribution channels like mom-and-pop stores, etc. "We do well in the modern trade channels like the hypermarts and supermarkets as well as on premises (restaurants, bars, etc). We have to work towards building stronger distribution for traditional vendors," said Kimble. The economy brands, on the other hand, have strong distribution networks covering a vast number of traditional outlets and modern channels. Expansion into on-premise sales is also growing: "The strategy is to expand distribution coverage and improve brand image in order to make Leo beer match every drinking occasion and premises. Better distribution will bring more market share," said the spokesman from Spa Advertising. Availability and affordability is the name of the game in this business, and all the beer manufacturers in Thailand are striving to better themselves in these two key areas.