ThaiBev leads decline in Singapore stock index

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thai bev changOn August 15, shares of ThaiBev dropped by around 7 per cent to a 10-day low after the company reported a 2 per cent drop in second-quarter profit, according to Reuters. This was the worst performance on the benchmark Straits Times Index, which dropped by 0.7 per cent.

“The share price decline is due to disappointment in earnings and concerns that Thailand’s consumer spending may further slowdown,” said analysts at Bangkok-based KT ZMICO Securities, as reported by Reuters.

ThaiBev is one of the largest beverage companies in Southeast Asia, with breweries and distilleries in Thailand, Scotland, Poland, Ireland, China and France. It is listed on the Singapore Stock Exchange as Thai Beverage Plc and has a market capitalisation in excess of $4 billion.

The company produces a variety of spirits, such as Chang Beer, the top-selling beer in Thailand, and Sang Som rum, the country’s most popular liquor. The company’s subsidiaries also produce several different brands of Scottish whiskey.

The Singapore Business Review (SBR) recently published a report urging ThaiBev to calm its fears of a weaker Thai consumer market.

“There may be occasions when volumes decline slightly but the earnings power of the spirits business is never impaired,” said the SBR. ThaiBev has no cause to worry, the report continued, because it is an effective monopoly, accounting for 80 per cent of the Thai spirits market. Therefore ThaiBev has tremendous pricing power and, the report suggested, can use it to overcome a drop in volume by raising prices.

The SBR may have a point, but only to a certain extent. In periods of weaker consumer spending many people switch to cheaper brands. Therefore by raising prices Thai Bev could simply encourage this trend, and give a boost to its cheaper competitors. Moreover, once people get used to a different kind of alcohol, they can develop product and brand loyalty and this could negatively impact Thai Bev’s bottom line in the long term. The company might be wise to do the exact opposite of what the SBR seems to suggest, and lower its prices to encourage sales.

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Reading Time: 2 minutes

On August 15, shares of ThaiBev dropped by around 7 per cent to a 10-day low after the company reported a 2 per cent drop in second-quarter profit, according to Reuters. This was the worst performance on the benchmark Straits Times Index, which dropped by 0.7 per cent.

Reading Time: 2 minutes

thai bev changOn August 15, shares of ThaiBev dropped by around 7 per cent to a 10-day low after the company reported a 2 per cent drop in second-quarter profit, according to Reuters. This was the worst performance on the benchmark Straits Times Index, which dropped by 0.7 per cent.

“The share price decline is due to disappointment in earnings and concerns that Thailand’s consumer spending may further slowdown,” said analysts at Bangkok-based KT ZMICO Securities, as reported by Reuters.

ThaiBev is one of the largest beverage companies in Southeast Asia, with breweries and distilleries in Thailand, Scotland, Poland, Ireland, China and France. It is listed on the Singapore Stock Exchange as Thai Beverage Plc and has a market capitalisation in excess of $4 billion.

The company produces a variety of spirits, such as Chang Beer, the top-selling beer in Thailand, and Sang Som rum, the country’s most popular liquor. The company’s subsidiaries also produce several different brands of Scottish whiskey.

The Singapore Business Review (SBR) recently published a report urging ThaiBev to calm its fears of a weaker Thai consumer market.

“There may be occasions when volumes decline slightly but the earnings power of the spirits business is never impaired,” said the SBR. ThaiBev has no cause to worry, the report continued, because it is an effective monopoly, accounting for 80 per cent of the Thai spirits market. Therefore ThaiBev has tremendous pricing power and, the report suggested, can use it to overcome a drop in volume by raising prices.

The SBR may have a point, but only to a certain extent. In periods of weaker consumer spending many people switch to cheaper brands. Therefore by raising prices Thai Bev could simply encourage this trend, and give a boost to its cheaper competitors. Moreover, once people get used to a different kind of alcohol, they can develop product and brand loyalty and this could negatively impact Thai Bev’s bottom line in the long term. The company might be wise to do the exact opposite of what the SBR seems to suggest, and lower its prices to encourage sales.

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