The Thailand Alchol Market - An opportunity or not?

Thailand still a market of opportunity for beverage alcohol – Market Intel\

Some interesting updates regarding alcohol in Thailand (by Global Drinks Intel). To expand on this, from my perspective, the big standouts of the Thai alcohol market are:

1/. Within beer, ThaiBev (Chang) and Boonrawd (Leo, Singha) dominate with 90%+ share. The International regulars like Heineken or indeed the newer craft beers, etc. have to settle for the remainder amongst them.

The local beer market is said to be heating up though with the energy drinks giant Carabao launching a new range of beers. Carabao boasts a strong route to market so will likely be looking to take take a few points of share from the existing big boys.

2/. Within local spirits, Thaibev dominates more than anyone would expect with:

• 100% of the Lao Kao (local white spirit) segment;
• Nearly 100% of the blended spirit (local whisky style) segment with brands like Hong Thong, Blend 285, …

3/. Greater competition exists within International Spirits where Diageo Moet Hennessy, Pernod Ricard, Bacardi, etc. all compete within a relatively small segment;

• Whisk(e)y dominates and only a few brands have secured a strong brand acceptance: Johnnie Walker has dominated for decades; Chivas Regal has tried but remained quite steady, Jameson Irish Whisky is doing well and other brands like Dewars, Glenfiddich, etc. trying hard from a small base.
• White spirits (Gin, vodka, etc.) have their ups and downs and there are ongoing discussions about the cocktail culture but in the scheme of the total market the changes are numerically quite small.

A staggering fact though is that International spirits represent about only 3% of total spirits. A number which surprises many foreigners to Thailand.

4/. Wine is quite interesting with category growth and decent profitability if you operate in the right price segment:

• Local / fruit wine: these wines benefit from preferential taxation and you’ll see brands starting at around 399 THB per bottle (c. €10) with brands like Mont Clair (by Siam Winery).
• Still (International) wines: you may see some around the 399 THB price point but margins are very tight; bigger brands like Jacob’s Creek (Pernod Ricard) secure good business above 600 THB. A number of countries benefit from FTAs with Thailand thus paying no customs tax to import (Australia, New Zealand, Chile, …) immediately you’re likely to find better deals on wines from these countries vs. the Old World countries of origin like France and Italy (where they pay 60%). All countries still pay a relatively high excise tax in addition, but not paying customs helps with the earlier parts of the value chain.

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Within a market where alcohol advertising is against the law, having a strong route to market is the key. If you can’t advertise using traditional methods, making sure your products are listed and in front of consumers is crucial across the following channels:

• The Modern Off Trade including convenience stores like 7/11 or supermarkets like Big C
• On premise bars and restaurants
• (Often forgotten) Traditional Trade (small independent retail stores) making up sometimes 80% of the market, depending on the category (typically more the local / cheaper priced segments)

Few companies offer a full RTM capability. Of course, Thaibev and Boonrawd have networks across all channels and Diageo and Pernod Ricard do quite well in the Modern Off Trade and On Trade but other smaller distributions must focus on specific segments and cities.

I do believe that the Thai market is an exciting place to operate and the future is bright for those that can innovate to succeed and find the profitable market niches.

So what would I do? This clearly depends on your starting point but some standout opportunities to me would be:

1. Look at local production to lower costs and reduce taxation.
2. Look more at wine. I still think there are some pricing sweet spot opportunities to be had.
3. Look at how to improve your route to market either by improving your distribution model or local partnerships.

If you’d like to know more, please drop me a line.