May 13, 2013

Myanmar ready to sweeten terms for foreign brewers

The Myanmar government is prepared to relax limits on foreign ownership of breweries on a case-by-case basis, as it seeks to improve the appeal of the country to foreign investors, says a senior beer industry executive.

The Myanmar Investment Commission (MIC) offered four licences in January for international breweries to operate domestically.

Under the Foreign Investment Law, which the MIC oversees, each foreign brewer must enter a joint venture with a domestic company and can own a 51% majority stake in the Myanmar operation. Two of the four licences have been issued so far.

Thai Beverage (ThaiBev) won approval in February to produce its flagship Chang brand in breweries in Yangon, Mandalay and Shan State. The Danish brewer Carlsberg, the fourth largest in the world, won approval in the same month for a strategic partnership with Myanmar Golden Star breweries.

The MIC will now allow these companies to apply for full ownership, Myint Zaw, the senior chief operating officer Myanmar Brewery Limited (MBL), told Asia Focus. The next two companies that obtain will be able to negotiate for full ownership after partnering with a local company.

Myanmar’s largest breweries are still tightly controlled by the government’s economic holding entities. The country’s three biggest producing breweries “are stuck”, Myint Zaw said last Thursday on the sidelines of a marketing conference in Yangon.

“We are really not clear about the direction the government wants us to go in,” he said, adding that there were no indications from the MIC as to whether foreign investors would eventually be allowed to partner with government-held breweries.

MBL is currently Myanmar’s largest brewery, with annual capacity of one million hectolitres. It is a joint venture between Singapore-based Fraser & Neave (F&N) and Union of Myanmar Economic Holdings Limited (UMEHL), with UMEHL owning 45%. It produces the Tiger, Myanmar, ABC Stout, Myanmar Double Strong, Baron’s Strong and Andaman Gold brands of beer.

Thai tycoon Charoen Sirivadhanabhakdi, the owner of ThaiBev who also acquired F&N this year, therefore owns 55% of MBL and 51% of the new ThaiBev operations in Myanmar.

The Myanmar Economic Corporation (MEC) owns 100% of the shares of Dagon Brewery Company, the country’s second-largest brewery. Mandalay Brewery, the country’s third-largest, is wholly owned and operated by Myanmar Economic Holdings Limited (MEHL).

Beer is big business in Myanmar, due to tight trade regulations and a thirsty consumer base: an incentive for the government to remain involved in breweries. The state entities that hold shares in the breweries were set up by the former military junta and are still linked to senior military figures.

“The government does not allow the import of beer,” Myint Zaw said. “MBL has been so successful because we have to adapt to local tastes.”

MBL’s targeted demographic is adult males aged 18 to 64, a pool of 15.2 million consumers that comprise 27% of Myanmar’s population. The 32-49 age group accounts for a third of MBL’s beer drinkers.

“We look at where they gather comfortably, drink comfortably, and why that’s happening,” Myint Zaw said about the company’s marketing strategy.

MBL was the first company in Myanmar to register for and receive ISO certification in 2002, and the first brewery to receive ISO in 2004. Little information is available about the wholly government-owned Dagon and Mandalay Breweries.

Philippine-based San Miguel had also applied for a licence earlier this year along with ThaiBev and Carlsberg, but its application was rejected by the MIC, Myint Zaw said.

Source: The Bangkok Post