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Thai Beverage Public Company Limited’s Year in Review: A Toast to Beer  

Thai Beverage Public Company Limited (SGX: Y92) released its annual report for its fiscal year 2016 (FY2016) last month.

For Thai Beverage, FY2016 contained just nine months – it stretched from 1 January 2016 to 30 September 2016. The usage of a nine-month fiscal ‘year’ was to facilitate a change in the company’s fiscal year-end from 31 December to 30 September.

In FY2016, Thai Beverage reported THB 139.1 billion in sales, a figure that was about 15% higher than the comparable period a year ago. Thai Beverage derives its revenue from four business segments: Spirits, Beer, Non-alcoholic beverages, and Food.

Let’s take a look back at the Beer business segment.

A bird’s eye view

2017-02-20 Thai Beverage Beer
Source: Thai Beverage’s earnings presentation

Thai Beverage’s Beer revenue soared 62.3% in FY2016. The segment recorded THB 44.4 billion in sales and accounted for 32% of Thai Beverage’s FY2016 revenue. It also recorded THB 2.8 billion in net profit, which is close to 15% of Thai Beverage’s total net profit from continuing sales.

In short, FY2016 was a blockbuster year for Thai Beverage’s Beer segment.

Cheers to beer

Thai Beverage’s annual report outlined the major marketing efforts for the firm’s Chang beer brand that had taken place in recent times:

“Chang Classic” was re-launched in an embossed emerald green bottle with a champagne gold label in August 2015 to celebrate the brand’s 20th anniversary. The revamp revolutionized “Chang” beer image, providing it with a classy, stylish, as well as modern brand identity.”

Judging from the impressive spike in sales, Thai Beverage hit it out of the park in its marketing for the Chang brand. The company noted:

“The success in new Chang beer as well as continuous and effective marketing efforts resulted in a 54.5% increase in beer sales volume.  Moreover, a decrease in raw material cost and a decrease in fixed cost per unit resulted in a jump of beer’s net profit by 280.8% to Baht 2,780 million.”

In short, Thai Beverage enjoyed a triple treat of higher sales volume, higher sales prices, and lower costs. The sharp rise in profit I mentioned earlier is a demonstration of the three forces.

It is a foamy top?

The next question in investors’ minds could be whether the growth in Thai Beverage’s Beer segment is sustainable. Thai Beverage appears to have built a loyal base of followers. The company commented in its latest annual report:

“Overall, these have enabled “Chang Classic” to gain larger loyal consumers and drinker base following the rejuvenation of the brand. Studies conducted by the beer product group on consumers’ attitudes before and after the relaunch found that consumer preference rose as a result of the relaunch, and brand equity also increased.”

Investors will have to see what the new fiscal year brings for Thai Beverage’s Beer segment.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.