Carlsberg Returns to Thailand After Heineken’s APB Deal

Heineken to Gain Control of Asian Brewer as F&N Votes for Deal
Cans of Heineken NV beer and Asia Pacific Breweries Ltd.'s Tiger beer in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Carlsberg A/S, the world’s fourth-biggest brewer, is returning to Thailand after a seven-year hiatus, following Heineken NV’s successful bid to expand in Southeast Asia.

Carlsberg is teaming up with Singha Corp. to distribute, market and sell its brands in the country, it said Sept. 28. Thailand, with a population of about 67 million, is one of the few Southeast Asian nations where the Copenhagen-based brewer has a negligible footprint. The joint venture with the maker of Leo beer gives Carlsberg a partner that controls almost 60 percent of the country’s beer market.

Heineken got approval to take control of Asia Pacific Breweries Ltd. on Sept. 28 after buying out its venture partner for S$5.6 billion ($4.6 billion), giving it full ownership of operations across Indonesia, Singapore and Thailand. It was the culmination of a two-month tussle with Thai billionaire Charoen Sirivadhanabhakdi, who offered to buy Singapore’s Fraser & Neave Ltd., the owner of a 40 percent stake in APB.

“When you’re looking for high growth, Thailand and China are two very crucial markets,” Gerard Rijk, an analyst at ING Groep NV in Amsterdam, said in a telephone interview.

Thailand and China, the biggest beer market by volume, will be the leading areas for growth, Rijk said. Carlsberg operates in China through a venture with Chongqing Brewery Co., of which it owns about 30 percent. Retail beer sales in Thailand may reach $3.52 billion, compared with $36 billion in China, according to market researcher Mintel International.

Thai Settlement

Heineken said last week it wants to benefit from expansion in the “international premium segment” in Asia, which encompasses higher-priced Carlsberg and Heineken brands.

The Danish brewer, which also sells brands including Tuborg and Kronenbourg 1664, has stumbled in Thailand before. A joint venture formed in 2000 with Chang Beverages Pte, owned by Charoen, failed to develop as planned and led to Carlsberg removing executives representing Charoen from the board of Carlsberg Asia in 2003.

Carlsberg said at the time it was “not happy with the value” of assets Chang wanted to add to the joint venture. The dispute ended in 2005 with Carlsberg paying $120 million to divide their assets and settle a legal dispute.

Charoen, 68, controls Singapore-traded Thai Beverage Pcl, one of the companies that spurred Heineken to offer to buy out its partner F&N from APB.

Singha and Leo

Companies owned by Charoen began buying shares in F&N and APB in July, threatening Heineken’s control over APB and sparking a bidding war. Heineken finally increased its bid to S$53 a share from S$50 to win backing for its APB bid. APB traded at S$34.69 on July 16 before the process began.

With Singha, Carlsberg gets a partner with 59 percent of the Thai beer market in 2011, compared with the 31 percent share of Charoen’s ThaiBev, according to data from Euromonitor International. Singha, founded by its parent company Boon Rawd Brewery Co. in 1933, already has three breweries as well as water and soft-drink production sites.

Singha and Carlsberg said the partnership will allow them to “strengthen the premium portfolio in Thailand.” The Thai brewer sells Singha beer as well as Leo, the biggest brand in the country, and both brands have been gaining market share compared with ThaiBev’s Chang since 2006.

Carlsberg, which also said it could expand Singha sales outside Thailand, will compete with Heineken, which had a 4.3 percent brand share in the country last year in the international premium segment.

Seeking Growth

“The deal gives Carlsberg a good foothold in the Thai market and fits with the company’s strategy to exploit growth options in the Asian markets,” Mikkel Petersen, senior equity adviser at Nordea Bank AB in Copenhagen, wrote today. “If Carlsberg plays its cards right in Asia, the shares may have additional growth potential.”

Heineken rose 0.8 percent to 46.77 euros at 11:24 a.m. in Amsterdam trading, extending this year’s gain to 31 percent. Carlsberg advanced 1.5 percent to 521.5 kroner in Copenhagen, bringing the year’s increase to 29 percent.

Competition could benefit both companies, Rijk said, as more brewers in the market make it easier to promote a growing genre of beer to consumers.

Heineken and Carlsberg, as well as beermakers such as SABMiller Plc and Anheuser-Busch InBev NV, are trying to offset sluggish growth in Europe with emerging-market sales.

Thailand’s Finance Ministry forecasts economic growth will reach 5.5 percent this year, while Europe continues to grapple with a financial crisis.

‘Key Platform’

Carlsberg reported net revenue of 63.6 billion kroner ($11 billion) in 2011, a 6 percent increase excluding acquisitions, disposals and currency fluctuations. Revenue at its Asia unit rose 15 percent on the same basis to 6.8 billion kroner, and it said it would invest in capacity expansion as it sees the region as a “key platform for growth.”

Carlsberg has trailed Kirin Holdings Co., Asahi Group Holdings Co. and Heineken in deals in emerging markets, according to data compiled by Bloomberg.

While the Singha partnership gives it access to a fast-growing region, it doesn’t fully control the business, increasing the risk, Rijk said.

“The Singha tie-up is a good move, but joint ventures could be less successful if not executed well,” Rijk said. “There’s a risk you lose attention from your partner on the ground, perhaps when a bigger competitor comes in.”

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