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Food & Beverage

Stiff ASEAN liquor laws stun beer brands from Chang to Carlsberg

Multinationals pivot to untested nonalcoholic beer as growth markets falter

Protesters spill beer in Bangkok in February in opposition to new rules on online liquor sales. (Photo courtesy of Craft Beer Association of Thailand)

BANGKOK/TOKYO -- As Southeast Asian countries tighten regulations on alcohol consumption to fight underage drinking and drunken driving, the threat of even tougher rules means multinational beverage groups face a cold new reality in what had been one of their few remaining growth markets.

Thai Beverage, Thailand's largest beer maker, postponed its brewery unit's initial public offering on the Singapore Exchange in April. BeerCo's debut, on ice indefinitely, would have raised $2 billion.

ThaiBev, which generates about 90% of revenue through alcoholic drink sales, including its Chang lager beer and whiskey brands, apparently sought to use the proceeds from the IPO to bolster its expansion in the region. Its medium-term plan through 2025 called for developing such markets as Vietnam, Singapore and Malaysia. But announcing the IPO delay, the company only said, "the proposed spinoff listing will be reviewed at the appropriate time."

ThaiBev's change of plans came as the market in Southeast Asia turned south. Liquor sales volume in the region's six major countries fell 16% year-on-year in 2020, according to research firm Euromonitor. All six markets suffered a slide, hit by a double whammy of plunging restaurant demand amid the pandemic and stricter alcohol regulations.

Vietnam, Southeast Asia's biggest beer guzzler, was the first to impose harsher rules. Responding to a spike in accidents involving motorbikes in the rapidly motorizing nation, the government in January 2020 doubled the maximum fine for drunken motorbike driving to 8 million dong ($350), with a license suspension of up to two years.

In December, Thailand banned online sales of alcoholic beverages, citing the difficulty of verifying buyer age. With a key sales channel now gone, and after coronavirus constraint of prohibiting alcohol at bars and restaurants, frustrated craft beer brewers protested outside the Public Health Ministry, emptying out kegs of beer on the street.

Multinationals are also growing worried about the slowdown in Southeast Asia, one of the few growth markets in the world.

Their silver bullet for the time being is nonalcoholic drinks. Dutch giant Heineken made an early move in Vietnam, launching its Heineken 0.0 brew. San Miguel Brewery, the Philippines company 49% owned by Japan's Kirin Holdings, followed with the release of San Mig Free last year. Carlsberg Breweries, a Danish group that earns 30% of group sales in Asia, also introduced nonalcoholic beverages.

Even so, Heineken saw Asia-Pacific sales tumble 12% in 2020.

Nonalcoholic beer is not as widely recognized in Southeast Asia as in the West or Japan, and the outlook for these new products is unclear.

"It took quite long for [nonalcoholic beer] to take hold in Japan, so it's hard to expect much success in the short term," said a source in the industry. Meanwhile, heavy promotional spending could eat into profit.

Among Japanese brewers, Kirin is stepping up online sales of its flagship Ichiban Shibori beer in the Philippines and Malaysia. Suntory Holdings, which reported a decline in Southeast Asian sales for 2020, is trying to recreate the highball cocktail strategy that worked in Japan.

More challenges await beverage producers. Malaysia is expected to prohibit sales of hard liquor at such venues as convenience stores in Kuala Lumpur starting in October. Muslim-majority Indonesia, the region's biggest economy, is deliberating legislation to ban the production, sale and consumption of alcoholic drinks altogether.

ThaiBev's decision to shelve its beer unit IPO is also bad news for Singapore Exchange, which faces fierce competition for listings against Hong Kong.

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