Deregulation Brings Thai Beer Wars to a Head
Bangkok used to be a one-beer town, which suited Boon Rawd Brewery, maker of Singha beer, just fine. But when the industry began to be deregulated six years ago, Boon Rawd had a battle on its hands.
Government regulation had handed Boon Rawd, which was launched by a Thai nobleman in 1934, a virtual monopoly. Not so long ago, you could work up a considerable thirst just trying to track down a bottle of Singha’s poorly marketed rival, Amarit.
Today, while Singha is still the undisputed champion of the billion-dollar-a-year industry, top challenger Carlsberg has kept Boon Rawd hopping and recent arrival Heineken seeks to skim the foam off the top of the market.
Local drinkers are signaling their approval of the new competition by downing ever increasing amounts of suds. Total Thai beer sales for 1995 were estimated by Boon Rawd to be 635 million liters, up from 505 million in 1994 and more than doubling the 288 million of four years earlier.
Santi Bhirom Bhakdi, an executive director of family owned Boon Rawd, said his company lays claim to 81% to 85% of the market, a slight drop from the days when nine out of 10 bottles of beer bore its label.
“Actually we are not concerned much about the market share.” Santi said. “The base is bigger so consumption is much larger.” Singha’s average annual sales growth the past four years has been just under 20%, according to company figures.
Beer-makers can thank nearly a decade of strong economic growth for their good fortune. The price of beer has not increased for 10 years, while personal incomes have probably shot up 35% or 40%, Santi said, adding that whiskey, the favorite local tipple, has been getting more expensive at the same time.
He predicted beer consumption will double over the next 6 to 7 years.
The good times really began flowing in 1989, when new deregulation measures included approval of licenses for two new breweries.
Carlsberg, whose local brewery is owned mostly by a very rich and influential Thai whiskey magnate, Charoen Siriwattanapakdi, has provided the stiffest challenge to Singha. The old champ’s pride was wounded late last year when Carlsberg sponsored the biennial Southeast Asia Games, held in the northern Thai city of Chiang Mai.
Carlsberg entered the market in June 1993 as a joint venture between Denmark-based Carlsberg International and Siriwattanapakdi. Its battle to wrest market share from Singha has been anything but a friendly rivalry.
Boon Rawd forbade agents of its formidable nationwide distribution network from handling Carlsberg. Carlsberg, which used Charoen’s equally extensive Surathip whiskey distribution network, allegedly forced Surathip agents and sub-agents to sell Carlsberg under threat of losing their lucrative liquor rights. Stories of dirty tricks abounded.
Aside from marketing and distribution, alcohol content plays a key role in the Thai market. Singha, a lager with a 5% alcohol content, is noticeably stronger than the average American beer.
“If you go to the countries where the beer is very expensive due to the excise tax, the tendency of the beer is to be stronger, because people like to have some kind of feeling when they drink,” said Boon Rawd’s Santi. In Thailand, the tax on a liter of beer is the equivalent of $1.12. Sales of Boon Rawd’s light beer, Singha Gold, have been “disappointing,” Santi said.
Exploiting the point, Carlsberg early this year introduced its Beer Chang (Elephant Beer), with a 7% alcohol content and loss-leader pricing, meant to appeal to lower-income drinkers looking for a quick high at a low cost.
At the high end of the market, locally brewed Heineken, licensed by its Dutch owners, went on sale in July. Singapore’s Asia Pacific Breweries has a 35% share in the venture and provides most of the technical know-how.
“Our Heineken brand is aiming at the top-end market, which does not yet exist in Thailand,” said Asia Pacific regional director Alex Kiljan van Heuven. “Singha has over 60 years of history in Thailand. Our strategy is not to fight directly with Singha, but to create our own segment for clients who prefer premium beer.”
With an eye on the regional market, the three contenders plan major expansions in capacity. Carlsberg has matched Singha in arranging for some of its necessary barley supplies to be grown in the north of Thailand.
Boon Rawd, meanwhile, has expanded overseas with investments in the beer industries in Germany and China, and hints strongly that it will bid to take the fight to Carlsberg owner Charoen’s home ground in three years, when new whiskey distilling licenses are supposed to be up for grabs.
