Thai Bev still eyeing mergers, acquisitions

Mergers and acquisitions will continue to play a key role in how Thai Beverage expands, especially if the targets come with strong beverage brands, the company said yesterday.

Chief executive Thapana Sirivadhanabhakdi, speaking at a media briefing at the InterContinental Singapore, said the Singapore-listed group's plan is to be wholly focused on beverages that can be sold across the region.

Mr Thapana, who is a son of company founder Charoen Sirivadhanabhakdi, said the company looks for strong brands with strong distribution networks in assessing potential acquisitions.

"We are always keeping our eyes open (for acquisition opportunities). Based on our track record, we have already strongly showed how we grow in size," he said during a briefing on ThaiBev's first-quarter results.

The group already comprises strong elements - Serm Suk, Thai Beverage, Fraser and Neave (F&N), F&N Holdings Berhad and F&N Dairies Thailand.

"Each entity is playing its role effectively... There is synergy between the expertise of each business unit," said Mr Thapana, who added that collaboration between the different units is more important than how they are combined.

ThaiBev's last big acquisition came in 2013 when Mr Charoen, the majority stakeholder, took control of F&N in a takeover.

In 2011, it acquired a 100 per cent stake in Thai bottler Serm Suk, paying PepsiCo US$513 million (S$686 million) for its 42 per cent holding.

And in 2008, it took over Thai green tea and sushi maker Oishi Group for US$214 million.

ThaiBev and F&N have about 14 per cent of the beverage market share in South-east Asia by value, and 9 per cent by volume.

ThaiBev, best known for Chang Beer and Mekhong whisky, intends to take bigger slices of the pie. A six-year road map announced in November said it would increase revenue contribution from non-alcoholic beverages to over 50 per cent by 2020.

The plan also aims to lift revenue contribution from sales outside Thailand to over 50 per cent of total turnover in the same period. The ASEAN Economic Community project would "hopefully accelerate this, with free flow of trade across markets", said Mr Thapana.

It is an ambitious goal. Revenue from non-alcoholic beverages made up only about 8.7 per cent of sales in the first quarter of this year. Revenue from outside Thailand in the ThaiBev portfolio amounted to about 4 per cent of ThaiBev's total turnover.

"For non-alcoholic beverages, we are still in the investment mode. We need to strengthen our sales and distribution and invest behind the brand. We are still pushing for sales and volumes to come in," said Mr Thapana. The launch of F&N's 100Plus brand in Thailand in February has been promising so far and has excited Thailand's carbonated drinks market, he said. The market is dominated by ThaiNamthip, bottler of Coca-Cola, and Serm Suk.

Another instance of cross-selling is Oishi's green tea drinks, which are being distributed in Singapore and Malaysia by F&N.

The company's entities typically discuss how to grow brand potential so they can become truly regional, Mr Thapana said.

In order to introduce 100Plus in Thailand, for example, ThaiBev and Serm Suk refrained from building up their own isotonic brand, Power Plus. "We are selling it but not investing in it right now. We focus on which brands to build and to invest in," said Mr Thapana.

"When it comes to carbonated drinks, F&N is strong in fun flavours - orange, cherry. For colas, it is introducing My Cola but we don't want to invest as much in it - participation of the brand in the market is not that significant, and we are focused on investing in Est, which will come in very strong in the cola segment."

Serm Suk's Est has already been introduced in Malaysia. ThaiBev will strengthen its beer business in its home market, Thailand. It has been in discussions with regional players to invest or work with them. "We are exploring all options," Mr Thapana said.

The group announced strong first-quarter earnings with net profit up 10 per cent to 6.6 billion baht (S$264 million).

Sales grew across all key segments, with volumes growing 10.2 per cent in its spirits business due to increased stockpiling by agents ahead of a 2 per cent sports tax in March.

wrennie@sph.com.sg

This article was first published on May 23, 2015.
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