![#](https://e-malt.com/Images/left_top_corner16x200.gif) | E-Malt.com News article: Thailand: Beer production in Thailand continues to decline![Brewery news](https://e-malt.com/Images/BeerBullet2.gif)
Beer production in Thailand continued its rate of decline at -5%, the Singapore Business Review reported on May 10.
Thailand is still not in the mood for drinking as its Office of Industrial Economics (OIE) said that beer production continued to be on a declining trend in March, signalling weak market demand. The rate of decline has continued from -19.5% YoY in February to -5.1% YoY in March.
In turn, this could hit the sales of the country's beer and spirits giant Thai Beverage. "Recovery in alcohol consumption in Thailand has been slower than expected," said RHB Research analyst Juliana Cai. "As such, we think that sales and margin in the upcoming 2Q2018 results would continue to be soft."
RHB Research's Thai analyst also observed that there was an increased number of craft beer producers in Bangkok city. "More breweries are trying to launch premium products to tap into the high-end market. We believe the increased variety of beer selection from both imported premium beers and crafted beer also contributed to the slower recovery in ThaiBev's beer segment," Cai added.
However, the analyst is more positive of a sales recovery in the third quarter, with the World Cup as a catalyst to encourage agents to stock up in the months of May and June.
"Nonetheless, the beer segment’s full-year earnings are likely to pale in comparison to 2017, as we think the group would spend more on advertising and promotions (A&P) to drive up beer consumption," Cai said. "This should improve in 2019 as A&P expenditure normalises in line with consumption."
Beer segment aside, the spirits segment is likely to be more resilient given the nature of white spirits, which are more frequently consumed in households in the upcountry region to enhance strength or energy. "We believe this could help offset softer demand in brown spirits that are more often consumed on trade, and are considered more discretionary. With the introduction of new products like wine coolers and the consolidation of Grand Royal Group, we expect this segment to hold up well this year," Cai added.
Meanwhile, all is well outside of alcohol beverages. Cai noted that non-alcohol beverages continue to show strong traction amongst consumers. "The improved market share allows the group to reduce overall A&P spending and improve profitability. The acquisition of over 240 KFC franchise outlets is expected to raise the food division’s profitability significantly. In addition, its associate, Fraser & Neave (F&N) also charted stronger 2Q2018 earnings," she concluded.
11 May, 2018
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