Thailand: Proposed tax hike threatens nascent no-alcohol beer segment in Thailand

No-alcohol beer, with an alcohol by volume (ABV) between 0% and 0.5%, is a nascent segment in Thailand, accounting for a fraction of overall beer volumes in 2022. However, the threat of a tax hike in 2023 looms overhead. This can disrupt the recovery of the nascent segment from the pandemic-induced volume decline of 16.3% compound annual growth rate (CAGR) during 2017–22*, according to GlobalData, a leading data and analytics company.

Bobby Verghese, Consumer Analyst at GlobalData, comments: “Several no-alcohol beer brands, such as Heineken 0.0, Hite Zero 0.0, Krombacher Weizen, and Bavaria Original have been introduced in Thailand in recent years. These products are positioned as better-for-you options with negligible alcohol content and a lower calorie count compared to regular beers. These brands target drinkers who are moderating their alcohol consumption or abstaining from it due to health concerns or lifestyle changes. Their marketing campaigns are thereby directed at young adults who have entered the legal drinking age, women, working-class urbanites, and active parents. ”

Tim Hill, Key Account Director at GlobalData Singapore, notes: “In late 2019, the Royal Thai Excise Department proposed to raise the tax on no-alcohol beers to prevent them from attracting novice drinkers. Though the tax hike was postponed due to the COVID-19 outbreak, the Excise Department revisited the idea, while mulling a tax hike on all alcoholic drinks in 2023. Presently, an excise tax of 22% is levied on the retail sales price of alcoholic beer, while low-/no-alcohol beers are subject to a 14% excise tax, on par with non-alcoholic beverages, such as carbonates. The Thai Public Health Ministry rationalized that due to the lower tax rate, no-alcohol beers were cheaper than regular beers, and thereby are being perceived as alternatives to non-alcoholic refreshments. The Excise Department thereby proposes to elevate the tariff on no-alcohol beers to a midway point between that of carbonates and regular beer.”

Verghese adds: “The authorities are also concerned about the potentially misleading marketing campaigns of no-alcohol beer. As no-alcohol beers are registered as food with the Thai Food and Drug Administration, the marketing restrictions are lenient. Contrarily, all marketing content featuring the brand names, logos, and images of alcoholic products, including regular beer, is strictly prohibited. Additionally, no-alcohol beers are not required to display any health or social warnings on their packaging labels, unlike regular beers. Also, despite the broad-based restrictions, there is a risk of brewers leveraging their no-alcohol beer brands as a surrogate for promoting their regular and strong beer brands.”

“Moreover, most no-alcohol beers are produced by removing alcohol post-brewing. Though these products are claimed to be 0% alcohol or alcohol-free beers, they may contain minute quantities of alcohol depending on the brewing process. For instance, Heineken 0.0 beer contains 0.03% ABV. The 0% labeling can thereby mislead young adults under the legal drinking age and those with religious, cultural, or social taboos against alcohol consumption. Additionally, such drinks may trigger a relapse among recovering alcoholics.”

Hill concludes: “Despite these drawbacks, most stakeholders agree that no-alcohol beer has the potential to help drinkers to reduce their alcohol consumption. No-alcohol beer can breathe new life into the monopolistic market that suffers from a dearth of product innovation. Additionally, no-alcohol beers can check the consumer shift to wines, spirits, ready-to-drink cocktails, and hard seltzers, which are perceived as healthier indulgences. However, a tax hike levy amid high inflation and the economic uncertainty, or the imposition of new marketing restrictions can clip the wings of the niche no-alcohol beer segment even before it takes off.”

29 May, 2023