Thailand: Energy drink maker Carabao to mount full-on challenge to country’s dominating beer brands

Thai energy drink maker Carabao Group is preparing to mount a full-on challenge to the country's two dominant beer brands, Singha and Chang, as changing consumer tastes and the easing of brewing restrictions create an opportunity to break into the market, the Nikkei Asia reported on October 31.

"Carabao will be known as Thailand's third largest beer company," Sathien Setthasit, the company's CEO, said in an interview with Nikkei.

The company aims to capture 10% of the domestic market in 2024 and increase that to 20% within three to five years.

Carabao will invest up to 6 billion baht ($167 million) to install brewing equipment at group company's factory in central Thailand's Chai Nat. It plans to first secure a production capacity of 200 million liters per year, which will be increased to 400 million litres depending on market reaction.

The company, whose flagship Carabao Dang beverage is the second most popular energy drink in Thailand, aims to reach 40 billion baht in annual beer sales in the next three to five years.

In the battle of the labels, Carabao's water buffalo logo will take on Chang's elephants and Singha's mystical golden lion.

Carabao has been eyeing a full-scale entry into the beer market for more than 20 years. It is not a complete newcomer -- an affiliated company manages a restaurant that serves small-batch beers brewed in-house. The group has an alcohol segment that sells whiskey and other spirits.

"Beer makes up the largest portion of the Thai beverage market, so there's no getting around it if you want to grow," Sathien said.

Thailand's beer market is forecast to expand to $10.4 billion in 2027, a 23% increase over 2022, according to estimates by data provider Statista. Despite a shift away from alcohol owing to an aging and increasingly health conscious population, growth is expected to continue thanks in part to rising numbers of foreign tourists.

The market has long been dominated by two conglomerates, Boon Rawd Brewery and TCC Group. Boon Rawd, which makes Singha, was established in 1933, while TCC, brewer of Chang, entered the market in 1995. Price competition from TCC spurred Boon Rawd to respond with the introduction of a lower-priced brand called Leo.

As of 2020, Boon Rawd had a 57% share of the Thai beer market, followed by TCC subsidiary Thai Beverage with 34%, according to market research company Euromonitor.

Their dominance had been assured by restrictions on brewing. The government had set limits on capital and annual production volume, making it difficult for new entrants, in a nod to cultural resistance to the consumption of alcohol in Buddhist Thailand.

Calls to abolish the government's restrictions from the Move Forward political party -- which criticized them as protecting conglomerates -- and craft beer businesses led to their partial easing in November 2022.

ThaiBev reported sales of 272.3 billion baht for the year ended September 2022. Carabao Group trailed with 19.4 billion baht in 2022. Boon Rawd does not disclose sales.

Although Carabao, as a mid-sized conglomerate, would not have been hampered by the restrictions, it was unable to find a way into the mass market. But with the advent of craft beer following deregulation, "consumers are now looking for new, diverse tastes," Sathien said.

In November, it will release a low-priced beer called Carabao, carrying the same name as the energy drink, and a mid-priced brand Tawandang, named after the restaurant the company runs.

The low-priced beer will be sold at 60 baht for a large bottle, about the same as for its two competitors. Tawandang will offer three types of craft beer, including an India pale ale.

In a presentation in early October, ThaiBev CEO Thapana Sirivadhanabhakdi welcomed fresh competition as "a wonderful thing for consumers."

A Boon Rawd executive echoed those words, saying that new entrants were "a good stimulus to reinvigorate the market."

While regulations on breweries have been loosened, the market's first major new player in roughly three decades still faces barriers to entry. Alcohol-related advertising has been banned, so new market entrants have limited options to improve their name recognition, Sathien said.

Thai Beverage and Boon Rawd have adapted to this restriction by heavily advertising carbonated water and soft drinks with the same logos as their respective beers.

"Both companies actively pursue alternative promotions and sponsorships," said Kazuki Ikegami at the Thai arm of Japan's Mitsubishi UFJ Research and Consulting. "That's a factor in how they've maintained market share."

01 November, 2023