Mar 3, 2013

Carlsberg, ThaiBev eye Myanmar's growing beer market

While tea shops remain Myanmar’s venue of choice for leisure, international brewers are hoping that the country’s consumers will soon be reaching for beer mugs instead as they expand their Southeast Asian presence.

In early February, Carlsberg announced a joint venture with Myanmar Golden Star to construct a brewery in Bago: about 80 kilometres (50 miles) outside of Yangon. Carlsberg will be a 51 percent shareholder of the newly formed Myanmar Carlsberg Co Ltd.

According to Myanmar Carlsberg chairman U Thant Zin Tun, primary construction, levelling of the foundation and laying a new road has begun at the site for a 1 million hectrolitre facility. He said full construction will begin within three months, with a scheduled completion date of June or July 2014.

“We expect that the Myanmar beer market will grow strongly in coming years as the economy expands,” said Roy Bagattini, head of Carlsberg Asia.

The planned Myanmar brewery will be Carlsberg’s ninth in the ASEAN region. The company operates two in Laos, one in Cambodia, four in Vietnam and one in Malaysia. The existing facilities have a production capacity of 1.25 billion litres.

The deal ended a rough year for the world’s fourth largest brewery. On February 18, the group posted 2012 figures that fell short for industry analysts’ expectations, signalling stalled growth that sent stock prices diving.

Performance was hampered in Western Europe by an unseasonably cold and damp summer, along with challenging consumer habits and economic performance, the company’s financial report said.

In Russia, Carlsberg’s second largest market where it took full control of leading brewery Baltika in November 2012, increased government restrictions on where beer can be bought and advertising limited growth of sales to 2pc in a flat market.

“The Group delivered a good performance in 2012, despite a challenging Western European beer market,” said Carslberg’s chief executive officer Jorgen Buhl Rasmussen.

“In Asia, we continue to deliver impressive growth and strengthen our market positions,” he said, citing particularly strong volume growth in ASEAN member-states Cambodia, Vietnam, Laos and Malaysia.

He added that in 2013, “We will look to capitalise on the attractive growth opportunities available.”

Carlsberg says the average beer consumption per capita in Myanmar is 4 litres, while the average consumption per capita in Southeast Asia is 30 litres. Mr Rasmussen said that he expects growth in Myanmar to be around 6-7pc over the next few years.

Carlsberg is not the only beer company eyeing Myanmar. ThaiBev became a new player in the opening sector following the announcement on February 18 that TCC Assets, controlled by Thai billionaire Charoen Sirivadhanabhakdi, had bought over 90pc of Singaporean conglomerate Fraser and Neave (F&N).

Through the acquisition of F&N, ThaiBev gained a 55pc stake in Myanmar Brewery, producers of the popular Myanmar Beer and ABC Stout. The other 45pc is owned by Union of Myanmar Economic Holdings Limited (UMEHL), one of two military economic holding companies still under sanctions by the United States.

“F&N’s 55pc stake in Myanmar Brewery offers entry into one of the region’s most intriguing emerging markets, with the potential for massive expansion over the next decade,” said Michael Schaefer, head of Beverages and Foodservice Research at Euromonitor International.

The takeover came after a six month legal battle that saw ThaiBev manoeuvre both Indonesia-led Overseas Union Enterprise (OUE) and Japanese based Kirin.

Mr Charoen, 69, is worth an estimated US$6.2 billion according to Forbes Magazine, making him the third wealthiest citizen in Thailand.

ThaiBev did not respond to inquiries from The Myanmar Times on its plans for Myanmar Breweries or the Myanmar market, saying it had received an unusually high number of media requests in the aftermath of the F&N deal.

But Kelvin Chan, head of Country Research at Euromonitor International, said that the deal brings production of ThaiBev beers to Myanmar: including the flagship Chang range of beers as well as Archa and Federbrau.

“We can expect ThaiBev to inject their own beer brands into Myanmar Breweries. This will give ThaiBev a head start over competitors that have yet to set a firm foot in Myanmar.”

Beer is still prohibitively expensive for many in Myanmar, where per capita GDP is one of the lowest in the region at just $860, says the Asian Development Bank (ADB). But the bank also believes Myanmar could grow at up to 8pc a year, tripling per capita income by 2030.

Beer companies are hoping this predicted growth will lead to the increased spending power of an expanding middle class of consumers.

“With foreign investments flowing in, consumers will naturally have more disposable income – which will contribute to beer sales in Myanmar,” said Mr Chan.

Additionally, Myanmar has few of the same restrictions on the hours and locations of beer sales that have hurt sales in main markets.

Though the country does impose advertising restrictions across print and broadcast media for alcoholic beverages, creative solutions – such as Myanmar Beer’s creation of a casual clothing line – have provided producers with a loophole.

Myanmar’s poor border regulation, however, is still of concern to beer companies. Carlsberg’s U Thant Zin Tun said he was worried over the fiscal impact of untaxed beer brought in from neighbouring countries.

Illegal imports are not only bad for brewers, but also for the country’s finances. In August 2012, a government official told The Myanmar Times that Myanmar loses about $27 million a year in taxation to illegal beer imports.

Main entry points include Myawaddy-Mae Sot, Kawthoung-Ranong and Tachileik-Mae Sai along the Thai border and Muse-Shweli on the Chinese border in Kachin State.

Source: Myanmar Times