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Published on September 8, 2007

Suntory is spending Bt1 billion acquiring 50 per cent of Tipco F&B, the food and beverage product manufacturing arm of Tipco Foods (Thailand), in the hope of using the country as a launch pad for the soft-drink market in Asean.

Under the purchase agreement signed last Tuesday, Suntory, Japan's second largest manufacturer of non-alcoholic beverages, will pay Bt33.30 per share for 30 million out of a total 60 million shares in Tipco F&B.

It expects the acquisition will enable Tipco F&B to at least double its sales growth from the current 20-30 per cent from next year-end, said Viwat Limsakdakul, managing director of Tipco Foods.

Suntory said Tipco F&B will aim for sales of 13 billion yen (Bt3.7 billion) in 2010.

Suntory will use Tipco F&B's new plant in Ayutthaya to produce and sell its oolong tea and other soft drinks except coffee in Thailand from autumn 2009.

It will also manufacture selected products for sale in Asean, which will allow it to benefit from tax privileges under Afta and save transportation costs. The agreement will also accelerate its ability to launch new products on these markets.

Asean offers a population of 540 million with no major player in the market yet, Viwat said.

Tipco will gain manufacturing known-how and research-and-development facilities from Suntory as well as the chance to penetrate the Japanese market.

In the early stages they will focus on the Thai and Asean markets. The two partners will discuss whether to introduce Suntory's existing non-alcoholic products here or create new products with new brands. However, Suntory's main aseptic PET package is expected to be the primary container.

Viwat said they would not use the corporate name for those products but create separate brands.

Suntory was established in 1921 and became well known as an alcoholic-beverage manufacturer in Japan, but during the past 20 years it has shifted its focus to non-alcoholic and health beverages, not only in Japan but also overseas.

Privately held Suntory Group has 177 affiliated companies operating a spectrum of businesses including fast-food chains, restaurants and flower shops. It earned Bt23 billion last year on total sales of Bt404 billion, with 57 per cent from non-alcoholic beverages, 36 per cent from alcoholic beverages and the rest from other businesses.

It has already entered the alcoholic-beverage market here but has ceased marketing activities while still making products available though some channels. Suntory still has an image among Thai consumers as an alcoholic-beverage manufacturer.

Hong Sik Park, Suntory's chief executive for international beverage and food, said Suntory expected Tipco to build awareness as a health-beverage manufacturer.

Viwat said the parties expect to launch the first product within 12 months. They may start with vitamin drinks and tea, which are the main products of Suntory.

Tipco F&B was established 30 years ago. It generated sales of Bt3.7 billion last year and Bt2.07 billion during the second half of this year, up 30 per cent year on year.

Suntory wants to expand outside Japan, where volume sales of soft drinks were flat last year, compared to an 8-per-cent rise in Southeast Asia.

It has already established a presence in China, obtaining the biggest beer market share in Shanghai and neighbouring areas, but China and Taiwan are currently the only Asian countries outside of Japan where it sells soft drinks.

To help its Asean drive, Suntory said yesterday it would sell its canned Boss coffee via PepsiCo Inc's sales network in Malaysia and Singapore by November, according to Dow Jones Newswires. Suntory currently bottles and distributes PepsiCo products in Japan.

It will expand sales to Vietnam and other countries from 2009 and use a local producer in Malaysia, though it declined to say which company.

Nitida Aswanipont

 The Nation