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CASTLE MALTING NEWS in partnership with www.e-malt.com
27 September, 2022



Brewing news Vietnam: ThaiBev well-positioned to reclaim its lead in Southeast Asia through Sabeco

Thai Beverage Group will not be letting go of its "crown jewel," Vietnam's Sabeco Brewery, especially as beer consumption is recovering in the booming economy, the Nikkei Asia reported on September 27.

The Thai liquor giant on September 27 sought to quash rumors that have plagued it since its 2017 acquisition of beermaker Sabeco. At the company's annual press conference, executives said ThaiBev was well-positioned to reclaim its lead in Southeast Asia through Sabeco, which controls 40% of Vietnam's beer market.

"It's our crown jewel, a rare asset among all brewing assets in the region," said Thapana Sirivadhanabhakdi, CEO of ThaiBev Group.

Vietnam is Southeast Asia's largest beer market, valued at $26 billion in 2021 and ranked third in Asia after China and Japan. ThaiBev acquired a 54% stake in Sabeco for $4.8 billion in 2017 from the Vietnamese government which was in a privatization drive.

The acquisition made ThaiBev the region's largest beermaker by volume, but saddled it with high costs and low profitability in the first few years as Sabeco struggled with poor cost management and productivity as it tried to shake off state control.

Executives on September 27 said ThaiBev has bided its time by investing in managing costs and digitizing Sabeco's production facilities. Vietnam's State Capital Investment Corp. still holds 36% of Sabeco. Other foreign investors hold the remaining 10%.

ThaiBev was not looking to purchase SCIC's shares, said Michael Chye Hin Fah, CEO of brewery arm BeerCo.

"If you ask me personally, I definitely want to see the Vietnamese government let go to the local Vietnamese investors," said Thapana. "If there is more liquidity in the market that will definitely help to improve [the] overall valuation for Sabeco."

Singapore-based BeerCo produces and sells brands such as Thai lager Chang, premium German-style beer Federbrau, and the Archa its budget range. Vietnamese brands Bia Saigon and 333, obtained through the Sabeco acquisition, are also under BeerCo.

The company will not rush to list BeerCo in Singapore until market conditions stabilize, executives confirmed. ThaiBev announced plans in February 2021 to sell 20% of its beermaking operations through an initial public offering to raise $2 billion. The plan was put on ice only after two months.

"We're not prepared to sell it at a discount," said Koh Poh Tiong, board chairman at BeerCo and Sabeco.

ThaiBev's stock price on the Singapore Exchange rose 1.61% after the midday press conference, but is still down 4.55% this year. Group revenue increased 8.2% to 207.9 billion baht ($5.5 billion) year-on-year in the nine months ended June. Its EBITDA increased 6.7% to 39.1 billion baht over the period.

Inflation and the baht's depreciation could make it more expensive to import malt and aluminum, warned Thapana. Labor costs would increase from October, he said, when Thailand is set to raise minimum wage by at least 5% to 328 baht per day.

As with many beverage makers, ThaiBev also faces problems like flooding and water shortage. The company uses 15 to 20 million cubic meters of water annually at its production sites in Thailand alone, as of 2020. Thailand's water consumption tariffs could increase costs by 70 million baht to 140 million baht.

ThaiBev used the annual press conference to launch its sustainability strategy, aiming for net-zero emissions and to fully replenish groundwater used in its operations by 2040.

A third of ThaiBev's fleet would be replaced with electric vehicles in the next two years, said Tongjai Thanachanan, the company's head of sustainable business development.

ThaiBev and BeerCo are parts of larger conglomerate TCC Group, founded by Charoen Sirivadhanabhakdi. Charoen was listed as the second-richest person in Thailand with net assets worth $10.8 billion as of Tuesday, according to Forbes.

Thapana is Charoen's third child and eldest son.





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