Agri-Food Trade Service

Consumer Trends
Non-Alcoholic Drinks in Thailand

December 2010

International Markets Bureau
MARKET INDICATOR REPORT | DECEMBER 2010

Global Analysis
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INSIDE THIS ISSUE

• Executive Summary
• Market Data
• Market Trends
• Flavoured Milk and Non-cow's Milk
• Juice Drinks
• Ready-to-Drink (RTD) Tea
• Bottled Water
• Product Claims
• New Products
• Key Resources

EXECUTIVE SUMMARY

Thailand is one of the most dynamic retail food and drink markets in the Asia-Pacific region. Around 70% of food spending is through the retail channel, and 30% through the foodservice channel. Hypermarkets and convenience stores dominate the Thai market, and are often owned by large multinational firms. These multinational firms are good entry points for exporters wishing to penetrate the market. Thais are generally accustomed to seeing foreign foods on the market. Some new products may only contain English labeling, as many convenience products are targeted toward the growing tourist population. In 2008, there were 14.6 million tourists, creating revenues of US$14.9 billion for Thailand.

Bangkok is the economic hub of Thailand, and home to around 15% of the population and 90% of the fast-moving consumer goods sales. The increase in urban areas is leading to higher demand for hypermarkets/supermarkets, and lower demand for local wet markets*. The demand for imported high-value processed food and high quality ingredients continues to grow, but low-value processed goods are increasingly being produced locally.

Canada's top agricultural exports to Thailand include wheat, soybeans, crustaceans, oilcake and non-alcoholic beverages. Thailand is Canada's third largest export market for non-alcoholic beverages (not including hot drinks, non-fortified juices and plain milk).

Growth of alcoholic drinks in Thailand is lagging, but non-alcoholic drinks are picking up the slack. Carbonates are the most popular non-alcoholic beverage in Thailand, however growth in this category is slowing, allowing other non-alcoholic drink categories to grow. Global health and wellness trends will soon be key drivers of the non-alcoholic drinks market, as will increasingly westernized tastes. Cow's milk, which is not traditional in the Thai diet, has been a growing market in recent years. Other milk beverages, such as flavoured cow's milk beverages, soy milk, rice milk, and goat's milk, are expected to increase their market presence in the next few years. Increases in instant coffee consumption will ultimately lead to increased coffee whitener and milk consumption, as well.

The main growth markets that will be addressed in this report include juice drinks (less than 25% juice), flavoured milk beverages, non-cow's milk, ready-to-drink (RTD) teas, and bottled water.

MARKET DATA

The table below shows the total market for non-alcoholic beverages in Thailand. Canada currently exports CAD $8.9 million worth of products under the categories of flavoured milk and non-cow's milk beverages and non-carbonated soft drinks (not including bottled water) to Thailand. The soft drink market includes the following market sub-sectors: carbonates, juices, bottled water, functional drinks, ready-to-drink tea/coffee, concentrates and Asian specialty drinks. Before 2008, Canada exported products under the harmonized system code that included carbonated drinks and flavoured waters.

Soy milk is already popular among locals, who purchase fresh soy milk from outdoor markets. Soy milk sold in supermarkets is also becoming more popular, showing value growth rates of 70.3% from 2004 to 2009. Volume growth in the soy milk market was 48.6% during the same period. Powdered milk is expected to grow 24.6% in volume from 2009 to 2014, and non-dairy creamers (not shown) are expected to grow 13.2% in volume for the same period.

Source: Euromonitor, 2010.

Note: Asian juice drinks are included in the juice drinks (up to 24% juice) category, and Asian RTD tea is included in the RTD tea category

Functional drink sales grew 25.8% from 2004 to 2009, and are expected to continue to grow by 31.8% from 2009 to 2014. Functional drinks consist of energy drinks and sports drinks. Ready-to-drink tea and coffee, which together amounted to greater sales values than bottled water, are expected to grow 50.9% and 23.2% respectively, from 2009-1014. Volume-wise, carbonates are the top-selling category, followed closely by bottled water. Bottled water sales are expected to surpass carbonates by 2011, as consumers look for healthier alternatives to sugary drinks. The category with the highest growth volume-wise, is 100% juice drinks, with a 58.6% growth rate expected for 2009-2014.

The graph below shows the growth for the total non-alcoholic beverage market (drinking milk, hot drinks and soft drinks). The total market has grown 38% from 2004 to 2009, at a healthy compound annual growth rate (CAGR) of 6.7%. The market is expected to grow 46.4% from 2009 to 2014, with a CAGR of 7.9%. Alcoholic drinks are only expected to achieve a CAGR of 3.1% from 2009 to 2014. Consumption of non-alcoholic drinks has far outpaced that of alcoholic drinks, as they are often seen as a healthier, and less expensive choice.

Market Size of Non-alcoholic Beverages in Thailand - Historic/ Forecast-Retail/off-trade Value RSP - US$ Billions - Current Prices

Soft drink sales are split almost in half between the off-trade (retail) and on-trade (foodservice) channels. More carbonates and bottled water are sold in the on-trade channel, while significantly more ready-to-drink tea/coffee, juices, and functional drinks are sold in the off-trade channel. Around 87% of hot drinks are sold in the off-trade channel, and this number is expected to increase to 90% by 2014.

The health and wellness beverage segment in Thailand consists mostly of naturally healthy teas, juices, milk, and water. However, some emerging health and wellness beverage markets show some promise for the future, including fortified/functional juice drinks (up to 24% juice), and reduced sugar carbonates. The fortified juice drink market has grown from US$17 million in 2004 to US$76.1 million in 2009, while the reduced sugar carbonates sector has grown a total of US$10 million during the same period, to reach US$49.5 million in 2009. Juice drinks grew 148% in value from 2004 to 2009, to become the highest-grossing sub-sector of the total juice market. This segment is also expected to grow 73.7% in value from 2009 to 2014 and 117% volume-wise during the same period.

MARKET TRENDS

The food market in Thailand is becoming increasingly sophisticated, as urban consumers move away from traditional wet markets to supermarkets, shopping malls and convenience stores. Most of the consumer goods in Thailand are sold in the Bangkok area. Increasing tourism and more affluent consumers have led to higher demand for imported food and drink. The easiest strategy to enter the Thai market is through multinational supermarkets/hypermarkets, which often import products directly without the use of intermediaries. The top grocery retailers in 2010 were CP All, with a 10.4% hold of the market, Tesco (9.2%), SHV Makro (5.1%), Casino (4.7%) and Carrefour (2.1%).

The distribution channels with the most promise for future expansion are hypermarkets and convenience stores. The influence of smaller supermarkets and small independent retailers is being hampered by growth in the hypermarket sector. There are only a handful of supermarket chains with influence in the market, and growth in this channel has met its saturation point. Hypermarket chains are even encroaching on convenience store territory, as hypermarket multinationals, such as Tesco and Casino, have recently launched express (convenience store) versions of their larger stores. Many of the country's convenience stores are centered around the Bangkok area, however future expansion is expected in smaller urban centers.

The next few pages will outline sub-sectors that are expected to maintain high market growth rates in the future, and may be of interest to Canadian companies. Although carbonated drinks are the most popular type of non-alcoholic drinks in Thailand, this category is dominated by the two multinational players, Coca Cola and Pepsi. Production and bottling of these drinks is done locally by Haad Thip and Thai Pure Drinks. Energy drinks and sports drinks are also tightly controlled by two companies, Osotspa Co. and Tc Pharmaceutical Industry Co, the owners of the 'M', Sponsor and Red Bull brands. Off-trade consumption of tea remains relatively low, with the exception of ready-to-drink teas. Instant coffee is a growing market, but is not likely to be supplied by Canadian producers. Future prospects remain in cold drinks, rather than hot drinks, for Canadian companies.

FLAVOURED MILK AND NON-COW'S MILK

The drinking milk sector in Thailand is relatively small compared to other Asian countries. Thais currently consume around 12-13 litres per capita of milk each year, while Malaysians consume around 18 litres per year, and Americans consume 100 litres per year. However, the total milk market has grown by almost 50% since 2004 and is expected to grow 44% from 2009 to 2014. Goat milk is expected to be the category with the highest growth rates in the near future, followed by soy milk.

Drinking milk products in Thailand are quite different than those North American, as around 67% of all plain milk drinks were produced under ultra-high temperature processing (UHT). Milk that is UHT can have a shelf life of up to 6 months, does not require refrigeration until opened, and is cheaper to transport because it is often boxed or packaged in plastic containers that allow for the display of colourful images and marketing materials. UHT milk and soy beverages are perfect for overseas transportation and great for limiting the amount of refrigerated areas needed in supermarkets and independent retail stores. UHT milk is expected to grow at a lower rate than pasteurized milk, however, the market size of UHT milk is expected to remain higher for the foreseeable future.

Soy milk has been growing in popularity in Thailand, as it is often priced lower than cow's milk and provides a good source of protein. The melamine scandal affecting products with finished ingredients imported from China in 2008 helped to boost the popularity of cow's milk alternatives. The Government of Thailand recently allowed a price increase of pasteurized and UHT milk, due to the rising costs of raw milk in 2007 and 2008. This price increase will widen the gap in price between pasteurized and UHT cow's milk, and soy milk.

Other types of non-cow's milk have become popular in Thailand. Over the past three years, Mintel has recorded 27 new products entering the market, such as corn milk, brown rice milk, cereal milk, malt oat milk, almond milk and cereal coconut milk.

Flavoured, functional milk and soy beverages will become more popular in the coming years. Companies such as Vitamilk and Lactosoy have recently introduced new soy milk variants with reduced/no added sugar, added calcium, black sesame flavour, and a vegan formula. Some flavours for cow's milk include mint, black sesame and whole grain. Most of the new product innovations seen in 2008 and 2009 were flavours or added vitamins for UHT milks.

There are two main brands in the soy beverage market, Ajinomoto Co., which held 28.7% of the market in 2008, and Vitasoy International Holdings Limited, which held 7.8% of the market. Some top brands in the drinking milk market include, Foremost, Vitamilk, Ovaltine, Nestle Milo, Meiji, Thai-Danish, and Anlene.

Canada currently exports powdered milk to Thailand, but only in the less than 1.5% fat category (skim milk) and only for baking purposes. Although still a relatively small market, powdered milk is expected to grow in both value and volume at a considerable rate from 2009 to 2014. Coffee whiteners, are also becoming more popular, with the market being dominated by Nestle and its Coffee Mate brand.

Around 73% of the packaged soy milk in Thailand is sold in supermarket/hypermarkets, the rest is sold in independent retailers (13.8%), specialist retailers (8.6%) and convenience stores (3.8%). Milk, including fresh, UHT, powdered milk and concentrated milk, is sold mostly at independent retailers (44.4%). Other distributors include specialist retailers (36.4%), convenience stores (11.1%), supermarket/hypermarkets (5.8%) and vending machines (1.0%).

Generally, non genetically modified (GM) soy milk will fare better in the Thai market. Soy milk that is produced with GM soybeans must be labelled.

JUICE DRINKS

Juice is mostly sold in the off-trade channel, while juice and smoothies sold in the on-trade channel are usually made on-site by food retailer outlets. The fastest growing juice sector in both value and volume is the juice drink sector (up to 24% juice), growing 117% in volume sales from 2009 to 2014. Functional/fortified juice drinks are also growing in popularity, due to the many Vitamin C fortified drinks being introduced to the market. Asian juice drinks are lagging behind in this sector, as international brands such as Minute Maid and Tropicana gain market share.

Juice boxes are generally reserved for 100% juices, and plastic bottles and larger plastic containers are reserved for juice drinks and nectars. Octagonal shaped plastic juice bottles are very popular for on-the-go juice drinks sold in convenience outlets and small supermarkets.

Juices and juice drinks are expected to continue to gain market presence due to health and wellness trends. Surprisingly, juice drinks will fare better in the market than nectars, as essential vitamins and minerals are often added to juice drinks with lower fruit juice content. However, nectars are expected to surpass 100% juice sales in both volume and value in the near future. During the recession, nectars reaped the benefits of their lower price, and increased brand awareness among consumers.

The fastest-growing companies in the Thai juice market are subsidiaries of Coca-Cola and Pepsi. Thai-based companies, such as San Miguel Brewery, which recently entered the non-alcoholic beverage market, are also gaining market share. Companies wishing to enter this market, are best to act quickly before subsidiaries of Coca-Cola and Pepsi, as well as the large Thai breweries, take control of the market.

Orange is the leading flavour in the 100% juice market. The leading companies have been following consumer preferences very closely with products such as Tipco 100% orange juice, and Nestle 100% Orange. The orange craze seems to follow in the nectar and juice drink category as the top flavour. Brands in the nectar and juice drink categories, such as Tropicana Twister and Minute Maid Splash, are very popular in the Thai market.

There is currently no market for frozen juice concentrates, or any other types of frozen juices in Thailand. Juice drinks that are fortified with vitamins and minerals, or have other functional benefits, will fare well in this sector. Carbonated functional juice drinks may achieve market acceptance, as consumers crave more variety.

Most of the juice sold in Thailand is through independent retailers and supermarkets/hypermarkets. The on-trade channel is relatively small, as consumers usually purchase juice to drink at home or at work/school. Convenience stores, vending machines, specialist retailers and service stations dominate the impulse juice market.

Source: Datamonitor, 2010.

READY-TO-DRINK (RTD) TEA

In 2004, 86% of the ready-to-drink tea market was dominated by Asian-based drink brands. By 2014, only 73% of the market is expected to be dominated by Asian brands. Much of the decline in Asian brands can be attributed to the growth of the Lipton iced tea brand, which held over 28% of the market in 2009. However, Oishi still held 43% of the market in 2009 and, due to increased advertising and new product innovations, the company is expected to gain market share in the near future.

Due to tough contenders such as Unilever and the Oishi Group, the best export strategy would be to enter the higher-priced, functional and specialty RTD tea sector, or to offer a new and exciting flavour combination. Currently, the most popular RTD flavours include sweetened green tea, lemon green tea, sweetened black tea, honey green tea and unsweetened green tea.

Generally, RTD teas are targeted towards teenagers and young adults. This targeting can be seen in the type of packaging used, such as smaller-sized 350 ml plastic bottles and 250 ml cartons for impulse, on-the-go consumption.

Health and wellness RTD tea is expected to grow with products that are low in sugar and calories. Functional drinks are becoming very appealing to health-conscious consumers, such as drinks infused with calcium, natural grains, dietary fibre, and minerals. The RTD tea sector is showing signs of becoming much like the non-carbonated energy drink market. Functional product claims, coupled with new product packaging and targeted advertising campaigns, has brought success to products such as Lipton Nine and Super Fruit with Berries, and Oishi peach, and mixed berry teas.

Most RTD tea is sold in the off-trade channel, as consumers generally drink these teas on-the-go or at home. However, the two main RTD companies, Oishi and Unilever, have recently focused their efforts on the foodservice sector, causing the on-trade channel for RTD teas to achieve higher growth rates.

Source: Datamonitor, 2010.

BOTTLED WATER

Bottled water is a very popular drink choice in Thailand and, although sales values are below these of carbonates, sales volume of bottled water is expected to exceed carbonates by 2011. As consumers become more concerned with the effects of their sugar and caffeine-laden diets, many will choose bottled water more often than any other non-alcoholic beverage category. Projections shows bottled water coming a close second to juices for both the highest volume and value growth in the cold non-alcoholic beverage market from 2009 to 2014. Instant coffee is the fastest growing category of the total non-alcoholic beverage market, in both value and volume sales.

Bottled water in Thailand remains relatively simple. There is a very small market for carbonated bottled water, but flavoured bottled water and functional bottled water brands have not yet achieved mass penetration in the market. This creates a great opportunity for foreign flavoured and functional bottled water producers, as functional beverages, such as vitamin enhanced juices, no sugar added colas, and calcium enhanced, or flavoured dairy/non-dairy beverages, are increasing in popularity.

Unlike the other non-alcoholic beverage sectors in Thailand, the market for bottled water is not dominated by any particular international or national company. Even private labels, which are not usually popular among non-alcoholic beverages, held a total 2.6% share of the market in 2009. The top contenders in the bottled water market include The Boon Rawd Brewery, Nestle, Serm Suk and Thai Pure Drinks.

Imported bottled water does face difficulties in the Thai market, as they are usually priced higher than domestic brands. Instead of competing on price, Canadian companies can use unique packaging, unique flavouring and functional benefits to gain advantage in the market. For functional waters to be successful, a marketing campaign must teach consumers of the product's benefits and how the product will fit into their lifestyles. Canadian companies can also target tourists in the on-trade channel, who are willing and able to pay more for bottled water.

Bottled water sales in the on-trade channel are slightly higher than juices and RTD teas. However, supermarkets/hypermarkets still dominate 32.4% of bottled water sales.

Source: Datamonitor, 2010.

PRODUCT CLAIMS

The following graph shows the top 10 product claims for new non-alcoholic beverages entering the market in Thailand. A total of 1,393 products entered the market from January 2005 to October 2010. New products may include new variations or formulas of existing products, or new product launches.

Number of New Non-Alcoholic Drinks Entering the Thai Market from January 2005 to October 2010—By Product Claim

NEW PRODUCTS

The following is a selection of new products entering the Thai market from 2008 to 2010 from the Mintel new product database.

Chocolate Soy Milk

Company: Organic Valley
507 West Main St., La Farge, Wisconsin (WI), 54639, USA
Brand: Organic Valley
Store Name: Villa Market
Store Type: Gourmet Store
Date Published: August 2010
Pack Size: 1.89 litre
Price in local currency: THB219.00
Major Currencies: US$6.80 or €5.26
Storage: Chilled
Product Description: Organic Valley Chocolate Soy Drink is vitamin and calcium fortified, a good source of fibre, and is free from lactose, cholesterol, dairy and gluten. This kosher and United States Department of Agriculture (USDA) certified organic product provides 4.25 g of soy protein per serving and retails in a 1.89 L pack. Also available in this range are the following varieties: Original and Vanilla.
Ingredients: Filtered water, organic naturally milled evaporated cane juice, organic whole soybeans, organic cocoa (Dutch process), calcium carbonate, salt, vitamin A palmitate, carrageenan, organic vanilla flavour, riboflavin (B2), vitamin D2, vitamin B12

Mandarin Orange Mixed Tangerine Orange Juice

Company: Malee Sampran
Nakorn Pathom, 73110, Thailand
Brand: Malee Juize-Mix
Date Published: September 2008
Pack Size: 300 ml or 10.14 fl. oz (US) Price in local currency: THB15.00 Major Currencies: US$0.44 Storage: Shelf stable
Product Description: Malee Juize-Mix Mandarin Orange Mixed Tangerine Orange Juice is high in Vitamin C. This product is available in a 300 ml can.
Ingredients: Fructose syrup 18.5%, mandarin, tangerine 10%, vitamin C (0.02%), natural identical flavour added, artificial colour added

Lemon Blue Tea

Company: New Leaf
Orangeburg, New York (NY), 10962, USA
Brand: New Leaf
Store Name: Tops
Store Type: Supermarket
Date Published: July 2010
Pack Size: 500 ml
Price in local currency: THB99.00
Major Currencies: US$3.07
Storage: Shelf stable
Product Description: New Leaf Lemon Blue Tea is 100% natural, contains no preservatives and has been sweetened with pure cane sugar. This kosher certified product retails in a 500 ml recyclable bottle. Also available in this range is a Sweet Black Tea variety.
Ingredients: Filtered water, organic cane sugar, premium brewed oolong tea blend, citric acid, panax ginseng extract, ginkgo biloba extract, natural flavours

Healthi Bonez UHT Low Fat Milk with Black Sesame and Cereal

Company: Friesland Campina 89/2, Moo 8, Soiwatsuansom, Poochaosamingprai Road, Tambon Samrong Tai, Samut Prakan, 10130, Thailand
Brand: Foremost Calcimex
Date Published: September 2009
Pack Size: 4x180 ml
Price in local currency: THB35.00
Major Currencies: US$1.03
Storage: Shelf stable
Product Description: New to the Foremost Calcimex range is Healthi Bonez UHT Low Fat Milk in Black Sesame and Cereal flavours. Rich in Vitamin K, Vitamin D and calcium, this halal-certified product retails in a four-pack of 180 ml cartons.
Ingredients: Non-fat milk (65%), cow milk (25%), sugar (3.00%), black sesame extract (2.25%), cereal extract (0.25%) (barley, wheat germ, brown rice), natural identical flavour

KEY RESOURCES

• Datamonitor. "Dairy Food in Thailand to 2013" (Feb 2010).
• Datamonitor. "Soft Drinks in Thailand to 2013" (Jan 2010).
• Economist Intelligence Unit. "Industry Report: Consumer Goods and Retail" (May 2009).
• Euromonitor International. "Drinking Milk in Thailand." (2010).
• Euromonitor International. "Soft Drinks in Thailand." (2010).
• Euromonitor International. "Fruit/Vegetable Juices in Thailand." (2010).
• Euromonitor International. "RTD Tea in Thailand." (2010).
• Euromonitor International. "Bottled Water in Thailand." (2010).
• Global Trade Atlas. Annual Series Data. (2010)
• Mintel GNPD. Non-alcoholic beverages and milk beverages in Thailand (Sept 2010).
• Planet Retail. "Top 5 Retailers" and "Buying Groups" (2010).
• Statistics Canada CATS database. Canadian Export Data (2010).
• USDA Foreign Agricultural Service. "Thailand Exporter Guide– Annual." Prepared by: Sirikeratikul, Sukanya. (Oct 29, 2009).
• USDA Foreign Agricultural Service. "Food and Agricultural Import Regulations and Standards– Narrative in Thailand." Prepared by: Sirikeratikul, Sukanya and Sakchai Preechajarn. (Oct 29, 2009).

*Wet Market: Traditional outdoor market stalls

The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada assumes no liability for any actions taken based on the information contained herein.

Consumer Trends: Non-Alcoholic Drinks in Thailand
© Her Majesty the Queen in Right of Canada, 2010
ISSN 1920-6615 Market Indicator Report
AAFC No. 11303E

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