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26-02-2013, 11:11 PM
(26-02-2013, 10:53 PM)smalkmus Wrote: Hi Value Buddies
I work in the FMCG industry myself and used to work in the beer trade. All I can say is this, it's a business that gives you money (especially more so in this part of the world). I still have some of my regional contacts in Indochina and they told me that Thai Beverage is going to enter Myanmar big time. At the same time, Thailand has quite a bit of footprints around Indochina due to proximity as well as the cash factor. I won't be surprised if Thai Beverage surge on the basis of such sentiments. Saying that, they might face competition from APB (and now Heineken), but I suspect APB will be facing internal restructuring issues and will take a couple of years to get on their feet and do the right thing.
On a fundamental level, I am not so sure about buying Thai Bev shares now as I felt that the ratios seem to be over valued right now. I will prefer to wait and see how they get their act together. And not forgetting they themselves need some time to sort themselves out after the purchase of FNN as well.
Vested
In the case of Thai Bev, Chang Beer is the one that has been dragging them down in Thailand due to the high excise tax and competition. However, Spirit remains the crown jewel of the company as the company is able to pass on the excise tax to the consumer.
The following is an interesting article about them
Liquor industry: One family control
Published: 28/06/2011 at 02:58 PM
http://www.bangkokpost.com/learning/lear...ly-control
The Sirivadhanabhakdi family is better known as the family that owns Thai Beverage that produces Chang Beer.
For a detailed history of Thailand's liquor monopoly and the whole story of how the Sirivadhanabhakdi family gained control of this monopoly, see chapter in the book Thai Capital after the 1997 Crisis by Chulalongkorn professor Dr. Pasuk Phongpaichit and historian Dr. Chris Baker
ALCOHOL: Liquor industry monopoly decried, Strict regulations limit competition by Wichit Chantanusornsiri
The liquor industry's dominance by a single wealthy family is at the root of its slow development, says Pongpanu Svetarundra, director-general of the Excise Department.
The Finance Ministry liberalised the industry in 2000, abolishing the distillation concession system and replacing it with licences granted to spirit producers.
It also sold all 12 of its state-owned white-spirit distillers to the private sector in a bid to upgrade ingredients from poor-quality ones such as molasses, the use of which was widespread in the past.
However, Mr Pongpanu called it disappointing that no market improvements have yet been realised and blamed it on the fact that 90% of spirit products come from one source - the Sirivadhanabhakdi family.
"No benefits have been gleaned from the liquor industry's 2000 liberalisation, as the entire industry is dominated by one large group of companies, thereby stifling competition," he said.
There are more than 4,000 local liquor producers nationwide, but none can compete with the liquor tycoon Charoen Sirivadhanabhakdi due to the Industrial Works Department's strict liquor regulations.
Community liquor producers are limited to maximum 5-horsepower machinery and no more than seven workers.
"These conditions are not practical, resulting in many illegal operations. The rules should be amended," said Mr Pongpanu.
He also suggested setting up a liquor body to help set industry standards, especially ingredient quality.
Thailand ranks fifth in the world in terms of liquor consumption due to low production costs and prices for white spirits, the most popular alcoholic beverage in rural areas.
Mr Pongpanu said the government has been unable to stop people from drinking, so it should protect them by promoting better-quality ingredients and revising the liquor tax.
"Low-quality spirits would then become more costly, and people would turn away from them and opt for higher-quality products instead. The liquor tax rate is now based on volume, which costs producers less than if calculated by value," he said.
He added the excise tax on liquor does not meet World Trade Organisation (WTO) standards of "national treatment", which requires equal treatment of foreign and local products.
"The duty on imported liquor is still higher than on locally produced beverages. Imports are taxed at 400 baht a litre, while local spirits are levied only 120 baht a litre," said Mr Pongpanu.
He said Japan and South Korea used to protect their liquor industries by levying a similar low rate, resulting in them losing disputes brought before the WTO.
Thailand is at risk of a similar situation, especially after losing a dispute with US-based cigarette maker Philip Morris, Mr Pongpanu added.
