The local beer of Asia

Wed, Nov 12, 2008
The Business Times
BY CHEW XIANG

BEER lovers tend to be fiercely parochial, with each country seeing its local tipple as a source of pride. Asia Pacific Breweries, however, has turned that mindset on its head. With shrewd marketing allied with quality, it has managed to move its products in multiple overseas markets, while keeping hold of local custom.

For 2007, APB chalked up overseas revenues of $1.4 billion - up 20.9 per cent from 2006, according to figures from the Singapore International 100 rankings released last week. And in its most recent quarter to June 30, APB posted sales outside Singapore of $351.6 million, up from $313.2 million year on year.

The bulk, or almost $180 million, came from Indochina, compared to $121 million in Singapore, underscoring the region's importance to the company's results.

APB has been expanding rapidly into Indochina and South Asia. Indochina, which comprises Cambodia, Laos and Vietnam, has consistently been one of APB's best performing markets driving the highest growth rate.

'Regionalisation has been integral to the growth of APB for the past 18 years,' said a company spokesman. Before it began its regional push in 1990, APB registered profit before interest and tax (PBIT) of $101.2 million in 1989. Of this, 32 per cent was from overseas markets, according to the spokesman.

'PBIT, after regionalisation, grew to an impressive $255.2 million in 2007 with the overseas market contributing the greater part of the revenue pie; amounting to 81 per cent of the total yield.

'In FY 2007, the Indochina region contributed 48 per cent of the group's profit before interest and tax, making it APB's largest profit contributor. The region too reported an impressive year-on-year volume gain of 44 per cent and an organic PBIT growth of 23 per cent from FY2006 to FY2007.'

The company also recently acquired the full stake in its India subsidiary, Asia Pacific Breweries (Aurangabad), which is actively gaining market share in Maharashtra and beyond. Its beer brands, Cannon 10000 and Baron's Strong Brew, have enjoyed steady growth while Tiger was recently introduced as a local brew in April this year.

There's no denying the importance of Indochina to the Singapore brewer, which offers more than 40 beer brands - such as Heineken, Anchor, ABC Stout and internationally renowned Tiger - in 60 countries.

APB built its first brewery in Vietnam in 1993; by 1996 it had expanded into Cambodia by building a brewery there. More breweries in Vietnam followed, and Laos was next, with APB's greenfield brewery in that country commissioned in March this year.

Chris Kidd, the company's regional director for Indochina, told BT earlier this year that 'in the 1990s, Vietnam and Cambodia were virgin markets as there was no major global brewer there.

'Also, in view of the strong drinking culture and huge base of drinking-age consumers in these markets, it was opportune that we entered the markets in the early days to lay the foundation for growth.'

APB's spokesman added: 'We see potential for growth in the Asia-Pacific region with an estimated increase of 8.8 per cent year-on-year in global beer volume consumption from 2006 to 2007, as compared to an increase of 4.2 per cent in Europe and 2.8 per cent in America.

'The Indochina region is now APB's largest revenue and profit contributor driving 39.4 per cent of APB's revenue and 51.6 per cent of its PBIT for the six months to March 31, 2008. These positive results were powered by its early headstart in the Indochina region coupled with substantial brand investments and effective brand building in the years of operations,' said the spokesman.

It faced challenges, especially in the 1990s when APB embarked on its regionalisation plan, as the company was not a household name abroad. There was also a shortage of skilled labour and a language barrier.

Although beer budgets are set to deflate with the impending downturn, APB is confident that its multi-brand portfolio, combining local and international beers in distinct segments, will help it weather any crisis.

'Despite the more difficult economic conditions now, APB plans to keep investing and building on the strength of our multi-brand portfolio, which caters to diversified consumer preferences in different markets by having a combination of local, regional and international beer brands,' said its spokesman.

The company is now eyeing the Indian market as its next Indochina. 'The India beer market registered an estimated 10.8 million hectolitres in March 2007 and the total India beer market is expected to reach 300 million cases, about 23.3 million hectolitres, by 2012.'

This article was first published in The Business Times on November 10, 2008.