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Business

Thai drink makers panting for success abroad

Convenience stores in Bangkok offer a wide range of soft drinks.

BANGKOK -- Facing weak prospects at home, Thailand's beverage makers, which, up to now, have mostly focused on the domestic market, are looking to expand elsewhere in Southeast Asia.

From one of the country's largest beverage manufacturers to specialized makers of juice and tea products, companies are targeting the region's less developed economies, where they see more opportunities for growth. 

Taste of Thailand

SermSuk, a soft drink subsidiary of Thai Beverage, will begin exporting its est cola drinks to Malaysia by the end of the year. It also plans to step up local marketing to bolster sales of sports drinks and other products in Laos, Cambodia, Myanmar and Vietnam. The company hopes to raise exports to 20% of total sales by 2020 from 10% at present.

SermSuk will spend about 500 million baht ($14.4 million) to expand production lines at plants in Khon Kaen Province, in Thailand's northeast, and Surat Thani Province in the south, aiming to turn the plants into export bases.

Parent company Thai Beverage, itself a key subsidiary of conglomerate Thai Charoen Corp. Group and known for its Chang beer brand, has expressed interest in buying Vietnam Dairy Products(Vinamilk), Vietnam's largest state-owned dairy company. The acquisition, if it goes ahead, would follow Thai Beverage's 2012 purchase of Fraser and Neave for 12 billion Singapore dollars ($8.77 billion).

Another company, Malee Group, one of Thailand's biggest juice makers, set up a joint retailing venture in the Philippines with a local company last year. Now it is considering similar joint ventures in Indonesia and Myanmar. Malee forecasts that increased exports will boost its overall sales to 10 billion baht -- twice the 2015 figure -- by 2018.

The Philippines is also in the sights of rival Tipco Foods. The company hopes to lift its exports, mainly by expanding its sales channels, to 25% of total sales, up 8 percentage points from the current level, over the next five years.

Tea drinks maker Ichitan Group is yet another company with overseas growth ambitions, aiming to expand its offerings in Indonesia.

Local industry insiders believe Thai manufacturers have an edge over Western rivals. They have developed products in a competitive domestic market that resembles those of neighboring countries. Other Southeast Asians, like Thais, live in a tropical climate and prefer the sweeter soft drinks and juice products that Thai producers specialize in, the insiders say.

Sweeter future

Increasingly fierce competition in Thailand is pushing down prices and encouraging drink makers to look abroad.

Ichitan, for example, reported a 19% fall in sales in January-June, attributing the decline to a price war with rivals.

U.K. research company Euromonitor International estimates the soft drink market in six Southeast Asian countries -- Thailand, Singapore, Vietnam, the Philippines, Malaysia and Indonesia -- will grow to 53.5 billion liters by 2020, up 30% from 2015. Over the period, growth in Thailand is expected to slow, while that of Vietnam and Indonesia will probably grow at a significantly faster pace than the average of the six countries, according to the company.

With under-14-year-olds already making up less than 20% of its population the country ages, Thailand does not offer drink makers much hope for growth. In Vietnam and Indonesia, on the other hand, that age group makes up over 20% of the population and is seen as certain to grow.

Analysts say there is still room for growth in the Thai market, however, especially in segments such as herbal teas and sports drinks, as people grow increasingly health conscious.

Since last year, more companies have introduced herbal tea drinks, touting their low sugar content and health benefits. The market for sports drinks is also growing.

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