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The consumer market trend of alcoholic beverages in Thailand.

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The consumer market trend of Alcoholic beverages in Thailand.

I. EXECUTIVE SUMMARY

Overall sales growing slimmer as consumer’s spending drops

Over the review period, total sales in alcoholic beverages industry are reaching the point of deficit as many unfavourable factors cut consumer’s confidence in spending their budget on the Alcoholic beverages. Over 2004, volume sales of alcoholic drink are expected to grow by only a small percentage. In current value term, percentage growth rate illustrates a negative sign since on-trade sales, which yield a higher value, are decreasing.

The most important incident that later influences sale performance on almost every industry in Thailand is the sharp rise of energy price, which is record-breaking. The price shift drives the estimate inflation rate from 2.8% to 4.4% within three months. As a result, prices of the commodities, including Alcoholic beverages, are inclining in contrast with Thai’s disposable income. This directly affects volume sales of Alcoholic beverages in 2005. In such segment with a wide price range as spirit and wine, the consumption moves toward less expensive products such as ad-mix whiskey or new world wines. Furthermore, Thai alcoholic drinkers tend to refrain from consuming their drinks in the on-trade establishment. It is very common that Alcoholic beverages sold through such outlets are priced two or three times as much as off-trade prices.

 

Beer performs best at the expense of spirit

During 2000-2005, sales of beer overcome other Alcoholic beverages in terms of volume sales and growth. Growth of beer sales in Thailand is generated at the expanse of spirit, namely Sura Khao, mixed spirits, and ad-mix whisky. Thai Beverage PCL, the beer giant of Thailand, was successful in launching an economy lager, Chang. At the same time, the company raised Chang’s image to be new interesting products for people of limited income while Sura Khao, mixed spirits, and ad-mix whiskey were perceived to be drinks for old rags. As a result, sales of these spirits drop quickly, and economy lager has become very popular among low-income labours.

Unlike other Alcoholic beverages, volume sales of beer do not decline in the review period since the market is stimulated by the existing manufacturers as well as the newcomers. Moreover, the low-income drinkers, who are the majority of the beer drinkers in Thailand, consume the product at home or at work on a daily basis. Hence, sales of economy lager are not impacted by on-trade channel’s poor performance limited by high MSP markups.

 

Stagnation in wine sales expected

Regular customers of wine are middle- to upper-income people and between 30 and 60 year old. This also results from a strong image of the product, causing it difficult for the brand owners to encourage the purchase among young drinkers, who are considered potential alcoholic drink customers in the future years. Hence, wine sales only benefit from the existing consumers, who rather consume the products on occasion. Anyway, value sales of wine are inclining at a faster rate than volume sales, indicating that the consumers gain more knowledge in wine and move their preference toward more expensive products.

 

Growth of FABs limited by advertisement regulations

As the original nature of FABs is the drink for young female, who are always ready to switch their love from old to new products, life cycle of each brand is very short since the product is highly fashionable. The manufacturers and importers must quickly response to their changing needs. One of the most important key success factors in launching new products is advertisement. However, when government issues the regulation in limiting mass media advertising of Alcoholic beverages during 0600 a.m. to 1000p.m., sales of FABs do not grow because the customers are not aware of the new products. Secondly, the target customers of FABs do not drink the products on a regular basis. Rather, they tend to have a couple of drinks while getting together with friends. As a result, the manufacturers cannot boost the volume sales. Finally, the image of the drink for young female is very strong, making it difficult for the operators to expand the customer base to other customer group.

Today, there are only 2-3 FABs brand owners active in the market, and sales of FABs are declining constantly both in volume and value terms.

 

Lager sales and sluggish economy hinder spirit sale performance

Comparing to other alcoholic drink segments, spirit imposes the worst growing record in 2005. Sales of spirit have declined by two-digit percentage in the same period when sales of lager boost. In such significant segments as Sura Khao, mixed spirits, and ad-mix whiskey, consumption of the products is moving toward economy lager driven by heavy advertising and attractive pricing. However, sales in other major spirit segments namely single malt Scotch whisky, other blended Scotch whisky, and brandy & cognac decrease by different reasons. In such premium segment, disposable income of the customers and their confidence in spending their budget on Alcoholic beverages diminish due to slow economy and sharp increase of the energy prices. Therefore, many manufacturers are forced to maintain or even lower their price to encourage consumption and stay competitive.

In contrast, it should be noted that, from 2005 onwards, average price of spirit is significantly increased by the new excise tax. This new tax scheme calculation is based on the alcohol content in the drinks, and it is found that the new scheme favours imported products as they are exempted from this new excise tax.

 

Future performance expected to improve

After the stagnation during the review period, sales of spirit are expected to improve after the market adjusts itself to the new competitive environment and will become stable by a small growing percentage. Moreover, purchase of products is moving toward less expensive products as the purchasing power of the customers is lower and the number of manufacturers is increasing.

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