Thailand: Singha to join race by launching cheap beer

Singha Corporation, the country's second-largest beer brewer, is considering launching a low-cost brand next year to cope with the expected intensified competition as a result of the ban on alcoholic-beverage advertisements, according to Bangkok Post, December 19.

"We'll be able to make low-cost beer under a new brand to be sold as low as five bottles for 100 baht next year. But at the end of the day, consumers will drink more beer [because it's cheap] and this will not be good for their health," said president Santi Bhirombhakdi.

The ban on ads for beer and spirits has been strongly opposed by local producers and importers, who view it as doing little to help curb alcohol consumption.

On the contrary, Mr Santi said, the market was projected to grow by 10 percent next year compared to 5 percent to 6 percent this year as brewers launch a price war to boost sales.

The 2007 outlook for the 89-billion-baht market remains uncertain pending the final decision on the ban, which the Public Health Ministry expects to come into force next year.

Mr Santi said the new government should fix what he calls an unfair tax structure on alcoholic beverages that has discriminated in favour of white liquor. He proposed that only one method be used to calculate the excise taxes based on alcohol content.

The Excise Department now calculates the taxes based on either the ex-factory price or alcohol content, whichever is higher. For beer, the department collects the tax based on the factory price because alcohol content in beer is relatively low at not more than 6 percent, compared to as high as 40 percent in cheaper white liquor.

But for certain white spirits, the department taxes only 70 satang for each 1 percent of alcohol per litre, as it treats them as products for low-income people.

Singha executives said tax rates, not ads, are largely responsible for the high alcohol consumption rate in the country.

The company proposes that the excise tax be raised to as high as seven baht for each 1 percent of alcohol content in one litre for beer from the current one baht. For other types of spirits, a flat rate between 2.40 and 3.00 baht for each 1 percent of alcohol content per one litre should be collected.

The new rates will not only reduce white-liquor consumption but also generate more income to state coffers because beer will be taxed more.

Chutchai Wiratyosin, Singha's marketing director, said that under the company's proposal, only Heineken beer would pay less tax, but that was fine because the whole industry would gain.

"If the excise tax for beer is up to seven baht as we suggest, I believe brewers will start brewing lighter beer, with 2-3 percent alcohol content, which is less harmful for health. And some consumers will stop drinking altogether because it will become more expensive," he said.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .