PROSPECTUS THAI BEVERAGE PUBLIC COMPANY LIMITED ...

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Part 2 Issuing CompanyThai Beverage Public Company LimitedIBHL with more than 20 years of experience in the spirits industry to build a team capable ofdeveloping and implementing the Company’s international expansion strategy. The Company is in theprocess of filling the remaining vacancies for a team of international alcohol beverage professionals invarious regions around the world. In October 2006, the Principal Shareholders transferred to IBHL theshares of companies that own five distilleries in Scotland and one distribution company in HongKong. These transfers and acquisitions are the initial steps in the Company’s strategy to increase thesales in international markets and diversify the Company’s production outside Thailand. TheCompany believes that China represents under-developed market with attractive growth potential andthe Company will continue to consider further investments in this or other markets in the future. TheCompany currently sells beer and spirits to more than 18 countries, primarily in Southeast Asia.The following table sets forth the Company’s aggregate sales in foreign countries by productand the percentage of the Company’s revenue from sales in foreign countries of each period asindicated:Unit: Baht million except for percentageYear Ended December 31,Six-Month PeriodEnded June 30,2005 2006 2007 2008ProductsSalesVolume %SalesVolume %SalesVolume %SalesVolume %Beer 183.8 5.2 201.9 7.0 228.0 5.9 190.5 9.3Spirits 2,890.3 82.8 2,678.4 93.0 3,333.4 85.8 1,514.3 73.7Industrial alcohol 418.0 12.0 - - 322.9 8.3 350.1 17.0Non-alcoholicbeverages- - - - - - 0.3 0.0Total 3,492.1 100.0 2,880.3 100.0 3,884.3 100.0 2,055.2 100.0The Company’s beer and spirits sales in foreign countries were Baht 3,561.4 million and Baht1,704.9 million for the year ended December 31, 2007, and the six-month period ended June 30, 2008,respectively, representing 91.7% and 83.0% of the Company’s total sales in foreign countries,respectively. In 2007, the top three countries for the Company’s beer and spirits sales were the UnitedKingdom, the United States and France.The following table sets forth the Company’s total beer and spirits sales in foreign countriesby country for the periods indicated:Unit: Baht millionYear Ended December 31,Six-Month PeriodEnded June 30,Countries 2005 2006 2007 2008The United Kingdom 946.2 856.8 1,444.7 463.2The United States...... 238.8 234.1 270.5 124.6France ....................... 325.7 373.7 258.4 160.2Australia ................... 171.0 138.5 214.0 112.7Other (1) ...................... 1,392.2 1,277.2 1,373.8 844.1Total sales in foreigncountries ................... 3,074.1 2,880.3 3,561.4 1,704.9(1) Including Hong Kong, Japan, the Netherlands, Singapore, Belgium, Bhutan, Finland, Ireland, Switzerland, Sweden,Korea, New Zealand, Vietnam, Norway, Germany and others.The ASEAN Free Trade Agreement, or AFTA, was signed by 10 countries includingThailand, Brunei, Indonesia, Malaysia, Philippines, Singapore, Laos, Myanmar, Cambodia andVietnam. AFTA has not significantly affected the Company’s international sales due to the limitednumber of countries that have reduced their custom duties in response to AFTA. Thailand, VietnamPart 2 Page 47
Part 2 Issuing CompanyThai Beverage Public Company Limitedand the Philippines have reduced their custom duties to 5% of the CIF value of the goods importedand Singapore has reduced its custom duty to zero. In addition, under the conditions for eligibility tothe reduced rate of custom of AFTA, at least 40.0% of the finished goods produced in countries thatsigned AFTA must contain local content. Most of the Company’s products use local content above thespecified requirements.The current focus of the Company’s export sales of beer and spirits is to place its productsinto Thai restaurants and modern-trade channels, such as retail stores. Typically, the Company sells itsproducts to beer and spirits distributors outside Thailand on an order-by-order basis. The Companydoes not enter into sole distribution agreements for particular countries. As of June 30, 2008, theCompany had more than 40 distributors of its beer and spirits products located in over 75 countries.The Company intends to establish trading and distribution companies in various countries that theCompany sells its products to increase sales volume and to promote brands in these countries.CompetitionBeer. The Company competes for market share with other brewers, primarily Boon RawdBrewery Co., through brand preference, distribution, product availability, pricing, packaging, andcustomer service. The Company introduced Chang Beer in 1995, and in 2007, the Company’s beerportfolio had a market share of 46.7% of the aggregate beer market in Thailand.Boon Rawd Brewery Co. launched its Leo brand in 1998, which was targeted at the samesegment as Chang Beer, but was a low-priced alternative to its flagship Singha brand. In 2004, Leobrand captured more market share due to changes in consumer preference towards lower alcoholcontent beer and, as a result, the volume of beer the Company sold in 2004 decreased compared tothat in 2003. The Company subsequently launched its Archa Beer brand in July 2004 to competedirectly against Leo and maintained its Chang Beer as the market leader in the economy segment.Competition in the economy segment of the beer market between the Company and Boon RawdBrewery Co. has stimulated volume growth in the market. Such competition leads to the emergence ofnew brands, more competitive marketing strategy and greater packaging diversity.The entry into the beer market by new competitors or the expansion of the existingcompetitors’ product variety could reduce the Company’s market share, or affect the Company’ssuccess in expanding its existing and future products into higher-priced segments of the market.However, the Company believes that there are significant entry barriers to domestic market. Suchbarriers include the significant investment required to build a brewery, limited access to establisheddistribution channels and limited access to television and radio advertising due to the Government’sregulations.Spirits. Similar to beer market, spirits producers compete for market share with other spiritsbrands, primarily imported brands, through brand preference, distribution, product availability,pricing, product packaging and customer service.The Company’s primary competitors in the white spirits and Chinese herb spirits segment areillegal producers and local “homemade” producers of community white spirits. Community spirits arewhite spirits with alcohol content between 15 and 40 degrees, usually produced from rice, flour, fruit,or other agricultural products. The Company generally does not regard these community spiritsproducers as a threat to the Company’s market share due to their limited size and distribution ability,inconsistent quality and lack of brand awareness in their respective market.Furthermore, the Company may have to compete with new spirits producers such asHao Dong and Hao Fai white spirits, which are produced by Thai Ginebra Trading Co. The Companyprimary competitors in the brown spirits segment are low-priced imported spirits brands, including100 Pipers (produced by Pernod Ricard) and Benmore (produced by Diageo Plc.). These rival brandsare primarily blended Scotch whiskies or admix whiskies. Such spirits are blended from aged maltPart 2 Page 48
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(Translation)PROSPECTUSTHAI BEVERAG
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Thai Beverage Public Company Limite
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