Thailand: Price war brewing as beer sales go flat

Facing a drop in consumption, Singha and Thai Beverage are taking off the gloves. The country's Bt89-billion beer market will see intensifying competition during the rest of the year as brewers scramble to maintain sales during a period when consumption is expected to decline, The Nation released July 27.

Consumption is expected to slow the most among low-income earners, the group least protected from economic difficulties.

To maintain sales, Thai Beverage Plc, the maker of Chang beer, is reportedly launching a fierce marketing campaign for its inexpensive Archa beer, which targets the low end of the market. Archa beer sold to wholesalers and retailers in a bundle with liquors produced by the company. Starting last month, four or five large bottles of Archa have been selling for Bt100.

Somchai Suttikulpanich, senior deputy managing director of Thai Beverage Marketing Co Ltd, denied a tactical pooling system was being used to push sales of Archa beer to its dealers. It is up to individual dealers for the most part to decide how they want to purchase the company's products, Somchai said.

"We sell our beers to dealers as we normally do," he said. "It depends on our individual dealers in different locations to use or create any marketing tactics or promotional campaigns to boost sales and achieve sales target set by the company," he added.

Thai Beverage produces more than 10 million hl of Chang and Archa beers a year at its plants in Wang Noi and Bang Ban in Ayutthaya and in Kamphaeng Phet.

Piti Bhirombhakdi, advertising manager of Singha Corporation, said purchasing power was declining in all segments but the trend would worsen among low-income earners over the next few months.

"Political and economic difficulties, including the rise in oil prices, have led to lower purchasing power for people in all segments," Piti said. "However, the impact on low-income earners will become more severe in the next one to two months as the higher cost of living sinks in."

Piti said that a decline in the purchasing power of low-income people would have a massive impact on the beer market as lower-priced beer accounts for almost 70 per cent of sales. The main brands in this segment are Leo, Thai and Chang.

"We saw 6-8 per cent growth in overall beer consumption in the first six months of this year compared to the same period last year. However, we don't expect any growth in beer consumption in the next three months," Piti said.

Sales in the fourth quarter are unpredictable, as the political situation remains hard to forecast.

Singha controls 46 per cent of the market with its Singha, Leo and Thai brands. Despite the 6-8 per cent growth in the first half, the full-year figure could be flat, Piti said, indicating that consumption could fall significantly.

The market will be flat or grow merely 1 or 2 per cent if the political situation remains unsettled and insecure, he said. Full-year consumption is likely to grow 4 to 6 per cent to Bt91 billion-Bt92 billion, he said. Last year the market expanded 8 per cent.

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