As part of our diversification strategy, our non-alcoholic business has also gained momentum to become a driver of sales growth. The non-alcoholic drinks segment is an extremely attractive market that shows great growth potential. Given our strong existing branding in the alcoholic beverages market and our robust distribution infrastructure, we are well-positioned to capture the growth in this market and emerge as Asia’s leading beverage producer (Thapana Sirivadhanabhakdi, President and CEO, Thai Beverage Public Company Limited, Business Times (Singapore), 15 May 2010 (Ramchandani, 2010)).
During the third week of August 2010, Marut Buranasetkul, Senior Vice President of Corporate Service and Deputy Managing Director of Thai Beverage Marketing, the sales and marketing arm of Thai Beverage Public Company Limited (ThaiBev), was reviewing the product portfolio of ThaiBev’s non-alcoholic beverage products and brands. ThaiBev had been into the second year of it is aggressive diversification strategy. The company had recently re-launched its Wrangyer brand energy drink, a move toward making ThaiBev a global comprehensive and integrated beverage company. Yet, the company’s books showed that non-alcoholic beverage revenue was contributing around 5 percent of the ThaiBev’s total revenue (The Nation, 2009). Moreover, although ThaiBev had been performing considerably well in the region, its international sales revenue represented only 3 percent of the company’s total sales (FinanceAsia.com, 2010).
Since incorporating in 2003, ThaiBev had become Thailand’s largest and best-known beverage conglomerate and was among Southeast Asia’s major alcoholic beverage producers. With a relatively high degree of vertical integration, ThaiBev comprised operations in breweries and distilleries, bottling and packaging, distribution, and marketing for a portfolio of products including beers, spirits, soft drinks, and foods. Its foreign investments included operations in several countries throughout Asia, Europe, and North America and its brands were sold in over 20 countries.
By the end of the first quarter of 2010, ThaiBev’s revenue rose 8.6 percent to Bht30 billion (US$946.4 million[1]) from the previous year revenue of Bht27.6 billion due to an increase in sales from the group’s beer, spirits, non-alcoholic beverages and food businesses. However, owing to lower contribution margins from both of its alcoholic and non-alcoholic beverage businesses, coupled with its higher costs, its new profit fell 17.5 percent in the first quarter. This resulted in a decline of a three-month profit from Bht3.02 billion to Bht2.49 billion at the end of 31 March compared to the same period in 2009.
Revenue from ThaiBev’s spirits business rose 5.6 percent to Bht18.97 billion, while contributions from the non-alcoholic beverages business rose 42.3 percent to Bht1.58 billion. Costs of sales and services rose 10.4 percent to Bht21.5 billion from Bht19.5 billion (Holmes, 2010). These substantial changes in ThaiBev’s revenue structure prompted Marut and ThaiBev’s top management team to identify beverage markets with more headroom for further growth opportunities, both locally and internationally.