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'Cola war' intensifies among three big players in Thailand
Publication Date : 08-01-2013
The "cola war" in Thailand is heating up as the three major brands - Coca-Cola, Pepsi-Cola and est - fight to gain significant shares in the 38-billion baht (US$1.24 billion) carbonated-drinks market. Strategies being used include the tying up of blocks of retail and eatery outlets via exclusivity contracts.
Competition has intensified since the bottling and distribution contract between PepsiCo and its local bottler Serm Suk ended last November. Serm Suk then launched its own cola brand, est, to join the battlefield.
The company's move was in line with the policy of Thai Beverage, the new major shareholder of Serm Suk, to expand its portfolio of non-alcoholic beverages, now including Oishi green tea and est carbonated drinks, among the network of more than 200,000 retail and eatery outlets claimed by the company.
In many traditional eateries, consumers now find it quite difficult to obtain Pepsi as access to the outlets has in effect been blocked by Serm Suk, which is taking advantage of its strong connection and exclusivity deal with its parent to sell its est cola at the outlets ThaiBev controls.
A senior staff member at Serm Suk told The Nation that some retail and eatery outlets now sell only est, while some are selling est and Coca-Cola.
Santichai Santawanpas, deputy director-general of the Internal Trade Department, said his agency needed to clarify whether this trading practice had been instituted at the insistence of Serm Suk or was being agreed to by retailers voluntarily, as the department had not received any complaints from traders or other soft-drink manufacturers about the loss of their trading channels.
The committee responsible for investigating unfair trade practice would be able to examine the matter if any complaints were received, he said.
It could merely be a question of normal marketing strategy or retailers demanding such a trading method, he said, since Pepsi may have been unable to supply products to outlets, so they needed to order solely from Serm Suk instead. Or Serm Suk could be offering trading privileges that retailers are happy to receive, he suggested.
However, if Pepsi or any other businesses feel that they have unfairly treated by Serm Suk, they can file a complaint to the department, which will set up a panel to investigate the case, Santichai said.
In cases where the Trade Competition Act is found to have been breached by a company forcing retailers or subcontractors to sell only its products, violators are subject to a maximum of three years in jail and/or a 6-million baht fine under Article 29 of the law.
Meanwhile, Serm Suk announced that est cola had enjoyed exceptionally strong sales of 1 million cases in just the first five days after its launch on November 2. This is the first time in the company's 59-year history in which 1 million cases of a new product have been sold into the market so quickly, it said.
The company had also driven est to be the "one-billion-baht cola" in just six weeks of its market debut, and has a goal to achieve first-year sales of 8 billion baht.
Meanwhile, Jagrut Kotecha, general manager for beverages at Pepsi-Cola (Thai) Trading, said that since its own official independent launch in November, Pepsi products had been in high demand in the Kingdom.
The company has a distribution strategy in place and has been accelerating production and distribution of products to ensure that Pepsi, Mirinda and 7Up are available in all channels, including local eateries and other restaurants.
"For local eateries, we have had a great response from our consumers thanks to our strong brand preference. Pepsi is the No 1 top-of-mind CSD [carbonated soft drink] brand and Thai consumers really love it, as its taste goes well with food," he said.
He said Pepsi had entered the local eatery channel by using 345-millilitre plastic bottles for single consumption, as well as 1-litre bottles, which is the multi-serving size for sharing with family, friends and colleagues.
During the past two months, its beverages in plastic bottles have gained very good feedback from Thai consumers, he said, adding: "We have also seen a significant rising trend in PET [polyethylene terephthalate] bottles worldwide, not least in Thailand. Based on recent research conducted by Nielsen, in Thailand non-returnable bottles dominate the market at 63.2 per cent, with 80 per cent of that being PET bottles, while [returnable] glass bottles are decreasing, especially in the past five years, from 62 per cent in 2007 to 36.8 per cent" as of October.
Kotecha also said Pepsi had been implementing marketing activities called "Paint the Town Blue" to enhance its brand visibility.
This includes a "model store" programme in which local eateries around the country were decorated with Pepsi's identity last year. The programme is being continued this year.
The company has also entered leading restaurants and nightclubs through exclusivity contracts. Its key partners include Wine I Love You, Chocolate Ville, Bai Mai Ra Reung, Lam Charoen, Slim, and Funky Villa.
"There are still untapped opportunities and as we grow and expand every day, we will keep on covering these opportunities and outlets to ensure Thai consumers' favourite product is available at an arm's length," he said.
Kotecha said the company believed the CSD market in Thailand would continue to grow this year, and it was gearing up to service that growth.
The constant engagement of CSD brands with consumers via partnerships, new promotions and marketing campaigns are among the factors boosting the sector, he said. In addition, the trend of consuming food outside in restaurants and cafes is becoming increasingly popular among young people, which also helps increase the growth of the industry.
Meanwhile, Archawat Chareonsilp, public affairs and communications director of Coca-Cola (Thailand), said: "We anticipate that 2013 will be a very competitive year for non-alcoholic-beverage players and a very exciting year for consumers. There will be very high competition among brands.
"Coca-Cola's strategy in this highly competitive environment is to stay focused on all the things that have helped us become the leader of the sparkling-beverage segment, as well as the non-alcoholic ready-to-drink beverage market.
"Specifically, we will be introducing many exciting innovations; we will keep strengthening our world-class distribution system, and we will keep building on our successful brand communications under the 'Open Happiness of Life' campaign," he said.