BANGKOK – Thailand’s craft beer makers are a rebellious lot, and for good reason. The legal system is widely viewed as stacked against them in favor of the country’s duopolistic beer giants – Boonrawd Brewery and ThaiBev.
Boonrawd (Singha, Leo, U-Beer brands) and ThaiBev (Chang, Archa) have traditionally claimed around 95% of the local beer market, leaving about 5% for premium beers, imports and local craft beers, which account for between 0.5-1% of the total market.
Thailand’s total beer market sold close to 2 billion liters and was worth 180 billion baht (US$5.8 billion) in 2018, according to the most recent market data.
While craft beers account for a tiny portion of overall sales, they represent one of the few growth sectors, ringing up sales growth of between 40-50% in 2018, according to research by the Thailand Development Research Institute (TDRI), a Bangkok-based think tank.
Craft beer promoters see the industry as a potential wellspring of economic opportunity for homebrewing entrepreneurs, now more than ever as the kingdom seeks new growth drivers with the pandemic-induced collapse of the crucial tourism industry.
Yet the legal scales have steadily tipped against craft beer brewers during the Covid-19 pandemic, including through a law passed in December 2020 that banned online advertising and sales of alcohol.
The bans, while applied to both big and small brewers, have had a much bigger impact on craft beer suppliers who have only been operating for a few years and have yet to establish their brands and distribution networks. There are an estimated 50-80 craft beer brewers in Thailand; it’s unclear how many have gone under during the pandemic.
Boonrawd has produced and promoted Singha Beer as the “national beer” since 1933. ThaiBev launched competing brew Chang in 1999 with the huge market advantage of having the most extensive distribution network nationwide thanks to its near-monopoly over the Thai “spirits” industry through its Mekong and SangSom brand rums.
Anti-competitive complaints brought against the politically influential ThaiBev have consistently failed. Both Boon Rawd and ThaiBev are two of Thailand’s biggest advertisers across all media and via the sponsorship of various high-profile events.
The new bans on online booze advertising and sales were handed down by the government’s ad-hoc Center for Covid-19 Situation Administration (CCSA) – the doctors-led committee that has dominated Thai policymaking since the pandemic hit last year.
The bans have arguably upended the last level playing field for craft beer makers and suppliers enjoyed against their Goliath rivals, especially during the pandemic when sales have shifted online as imbibers were forced to drink at home when bars and restaurants were closed or at least prohibited from serving alcohol.
Opposition to the big brewer-friendly legislative framework is mounting, however, including in parliament.
“The Number 1 worst group running the country is the military, and the Number 2 is the doctors,” said Taopiphop Limjittrajorn, an elected parliamentarian with the opposition Move Forward Party.
Taopiphop, a craft beer brewer himself, is pushing for legislation to amend a law regulating the issuance of brewery permits that favors big over small beermakers.
That’s largely through a legal requirement that industrial brewers must maintain a 10-million-liter capacity per annum, well beyond the capacity of small-scale craft beer makers, and 100,000 liters per year for brew pubs, which are only allowed to sell on premise.
“What my bill is about is deregulating the brewing and distillery permits,” Taopiphop told Asia Times. “We want no limits on the production requirements, no minimal production requirements to get a permit.”
The draft legislation has won support from both opposition and government MPs, who see the amendment as a possible income and employment generator for small and medium- sized enterprises (SMEs) in their rural constituencies at a time when unemployment and poverty have surged in the countryside due to Covid-19.
Taopiphop claims that the main opposition is not coming from the Cabinet, nor even the big brewers Boonrawd and ThaiBev, who would likewise stand to gain somewhat from any liberalization of the beer market.
“The opposition is coming more from the Ministry of Health and the doctors,” Taopiphop said. “They have power. They are now on the committee overlooking Covid. They are controlling alcohol and they have banned online advertising and alcohol sales. They are trying to suppress everyone in the industry.”
Thailand’s anti-booze and Buddhistic lobbies have proven political clout. In 2005, ThaiBev’s plan to list on the Stock Exchange of Thailand (SET) sparked street protests led by Thai politician-cum-monk Chamlong Srimuang and bolstered by more than 100 religious and social organizations.
Bowing to the pressure, ThaiBev opted to list instead on the Singapore Stock Exchange (SGX) in 2006. In February this year, ThaiBev announced plans to spin off its brewery unit to launch a new initial public offering (IPO) on the SGX, which should raise another $2 billion offshore and not on Thai capital markets.
ThaiBev, owned by Charoen Sirivadhanabhakdi, Thailand’s wealthiest tycoon, worth an estimated $16 billion, is expanding his beer business overseas. His company bought a majority share in Vietnam Sabeco – the country’s leading beer producer of Saigon Beer – for $4.8 billion in 2018, making it the instant market leader in that country.
Thailand, a predominantly Buddhist country, has mixed emotions on alcohol consumption. On one hand, the kingdom ranks third in Asia for beer-guzzling per capita, trailing only South Korea and Vietnam.
On the other, it has some of the highest tax rates on alcohol in the region, not to mention oddball laws that forbid the sale of alcohol at stores except from 11:00 am to 2:00 pm and 5:00 pm to 9:30 pm.
Much of the booze-curbing legislation originates from the Thai Health Promotion Foundation, which was established in 2003 to foster healthy lifestyles among the population. Symbolically and richly, it is funded with a budget derived from excise taxes on cigarettes and alcohol.
While consumption of both products has declined per capita, sin taxes have grown over the years and now provide the foundation with a healthy budget of about $125 million a year, funds deployed to lobby against the alcohol industry including aspirant SME craft brewers.
“I think if you don’t restrict the Thai Health [Promotion Foundation’s] power, we will always have problems,” said Visooth Lohitnavy, CEO of Granmonte Co Ltd, one of the few Thai wineries-vineyard owners to have survived over the past two decades.
“The various governments just play along with whoever makes the loudest noise and the people who make the loudest noise are the people with money, which is the Thai Health Promotion Foundation,” said Visooth, who is also president of the Thai Wineries Association.
The wine association has seen its membership dwindle from about a dozen two decades ago to a handful now. Local wines face the same hefty excise tax on their products that imported products pay and ironically have more difficulties avoiding them.
Local wineries and craft brewers have survived in Thailand’s stifling regulatory environment by either bending the laws or finding loopholes. Occasionally, though, the government helps small producers to survive.
In October 2019, for instance, the Industry Ministry amended the Factory Act, making it easier for SMEs that use machinery with up to 50 horsepower to get licenses to operate.
This amendment, part of a regulatory guillotine program the current government has half-heartedly pushed and implemented, also paved the way for small brew pubs where beer is made on-premise to legitimize their operations.
The amendment has allowed Chit Beer Pub founder and owner Wichit Saikhla, 49, to come in from the cold.
Wichit, the godfather of homebrewing in Thailand, has been making his own craft beer on Koh Kret island in Nonthaburi province outside of Bangkok for the past eight years. Until now, those operations were mostly illegal.
An army colonel who teaches engineering at a military academy by day, Wichit finally received licenses to set up two small breweries in Nonthaburi just across the Chao Phraya River from his Chit Beer Pub and another at the Pattaya beach resort.
The 2019 legal amendment was not aimed at craft beer brewers per se but has incidentally lifted one of the many barriers to small brewery operators seeking to set up factories with up to 100,000 liters capacity per year.
“There is now no restraint on getting a small brewery license in Thailand,” Wichit said. “It took me five years to get my first license, but if I want to open a new brewery now, it would take me only nine months. I can set a brewery up anywhere in Thailand.”
It would also require a few million baht to invest in the brewery machinery, but costs have come down considerably in recent years as China-made brewery machinery has become available.
“It used to cost 20 million baht, if you bought it from Germany, but now you can buy it for 2 million baht from China,” Wichit said.
Under Thailand’s Industry Department regulations, brewery licenses are split into two categories: 1) industrial breweries with a minimum capacity of 10 million liters a year and, 2) Brew Pub breweries with a minimum 100,000-liter capacity a year.
Wichit says beer brewers should think more locally in the future. “We have to start a movement – One Province, One Beer (OPOB),” said Wichit, spoofing the populist campaign of former Thai prime minister Thaksin Shinawatra, who started the One Tambon One Product (OTOP) scheme to promote village (tambon) products.
Wichit, who has taught homebrewing to more than 6,000 students in recent years, rents out tank space at his two licensed breweries to about 50 small-scale craft beer makers to reach his 100,000-liter annual capacity requirement.
Other craft beer brewers, such as Mike Roberts, founder and managing director of Outlaw Beverages Co Ltd, have found the brew pub business model as overly restrictive.
Roberts and his Thai wife opened the Outlaw Brew Pub in the northeastern city of Loei in 2015, from where they sold their home-brewed craft beer primarily to an appreciative local market and tourists.
Given remote Loei’s limited market, Roberts began promoting his Outlaw beer brand via social media and bottling his beer to distribute locally to “underground” craft beer bars in Bangkok and other cities. His beers are now available in 500 outlets nationwide, including Big C, Lotus and other chain supermarkets.
“We were pretty well-known at the Excise Department because we were busted a couple of times,” Roberts said. “We paid the fine and carried on.” (Hence, the “Outlaw” brand name).
After building up local, if not illicit, brand awareness in Thailand, Roberts decided to make the leap into contract brewing, choosing Phnom Penh, Cambodia, as his first production site. Outlaw has since started contract brewing in Vietnam as well.
Outlaw is not the only Thai craft beer brewed abroad due to regulatory issues in Thailand. Allemand, Khao San and Taopiphob Ale craft brands are also contract brewed in Ho Chi Minh City or Phnom Penh.
Because Cambodia and Vietnam are signatories to the ASEAN Free Trade Agreement (AFTA), beer imports to Thailand from these countries arrive duty-free, although they are subject to the same steep Thai excise tax as all alcohol.
Small craft brewers are slowly but surely doing more contract brewing in Thailand itself. Thai Spirit Industry Company, the maker of Full Moon wine cooler brand, recently opened an industrial-scale brewery (10-million liter capacity) to expand its product lines and rent out contract brewing space to craft brewers. There are other local breweries in the works.
“It helps a little bit, but it doesn’t address the bigger issues,” says legislator Taopiphop, noting that craft beer brewers pride themselves on independence and originality. “Sometimes we just want to brew 200 liters a batch. We don’t really need to brew 100,000 liters each time.”
Without a more liberal market, Thailand may soon find itself inundated with craft beers brewed in the less-regulated markets of Cambodia and Vietnam via AFTA’s mandated duty-free access.
“Vietnam is such a different scene,” said Roberts. “They have a lot of craft beer brewers that have grown organically to the point that they are now exporting their beers to Thailand.
“In Vietnam, they have nurtured the craft beer industry and brewers have built their brands around first the local market and now are exporting their beers around the world,” he said.