ThaiBev's beer business swings into the red as higher costs bite
New bottles are extremely costly.
Thai Beverage decided last quarter to relaunch its Chang Beer brand in a bid to boost its market share, but the initiative has so far only managed to erode the group's profits and margins.
The group culled four sub-brands in August and relaunched it as just one product, changing the bottle's colour from amber to green. The relaunch has substantially increased the group's packaging costs and caused Thai Bev's beer business to book a THB 23bn loss during the quarter.
"There was a change of the bottle's colour to green, from amber, and this increased the cost of packaging and hence impacted on margins. This was because it had to use
completely new bottles, while previously there was a mix of old (returnables) and new bottles (for amber ones)," said analysts at DBS.
DBS reckons that it could take up to a year for the trend to stabilise before the cost of packaging reverts to normal.
"While 3Q15 operating results registered a drop, this was a factor of higher operating expenses due to the overhaul and relaunch of Chang Beer. In our view, this is to position the brand for the longer term, particularly the change in bottle colour to green, from amber, making it more contemporary," said DBS.