PROSPECTUS THAI BEVERAGE PUBLIC COMPANY LIMITED ...

Part 2 Issuing CompanyThai Beverage Public Company LimitedThe Distilling ProcessSpirits production involves several raw materials and production stages. The main rawmaterial in the Company’s spirits is molasses. Molasses is a by-product of the manufacture of rawsugar from sugar cane. As is the case with all distilled spirits, the Company’s spirits are crystal clearwhen first distilled. Amber and dark brown spirits obtain their color from the extractives from the oakbarrel during aging and from caramel, a natural coloring agent.The first step in the Company’s process is fermentation. Fermentation is the process by whichthe sugar in molasses and/or rice is converted into ethyl alcohol by the action of yeast. The Companydevelops its yeast cultures in the Company’s laboratory and propagates the yeast in a yeastpropagation tank. The yeast, molasses diluted by water, steamed rice that has been sprayed with mold(to create sugar) and incubated for four days, and water are added into a fermenter and the mixture isallowed to ferment for approximately 72 hours. The liquid that is left at the end of the fermentationprocess is known as “fermented mash.”The second step in the process is distillation in the distilling column and a pot still, which is alarge copper or stainless steel kettle. The process of distilling involves boiling the “fermented mash”and condensing its vapor to produce the spirits or alcohol, which is removed to a spirits receiver. Thespent sludge remaining in the pot still is then removed to a spent sludge tank to be processed throughthe Company’s slops evaporation and incineration plant or biogas system. The Company’s whitespirits are then diluted with demineralized water to the desirable alcohol content in a white spiritsblending tank and sent to be packaged and bottled after filtering.For brown spirits, high quality alcohol is diluted with demineralized water to the desirablealcohol content and then aged in oak barrels for three to eight years depending on the types of spirits.The aged alcohol is then further diluted with demineralized water. In addition, liquor concentratealcohol and caramel are added. The brown spirits is passed through filters and then bottled andpackaged. The Chinese herb spirits, such as Chiang-Chun are produced by blending alcohol, whitespirits, sugar, caramel and Chinese herbs, and then further diluting the mixture with demineralizedwater to the desirable alcohol content.The Company’s spirits concentrate production department, which is led by Mrs. PrachuabsukKanchanalakshana and Mr. Dechapongsa Kanchanalakshana, is responsible for the production processand mixing of the Company’s brown spirits and ensuring that the liquor concentrate is available insufficient quantities to meet the sale and distribution requirements of brown spirits. Mrs. PrachuabsukKanchanalakshana and Mr. Dechapongsa Kanchanalakshana have agreed, under their employmentcontracts, to share and transfer their knowledge on liquor concentration and the mixture process to theCompany’s designated employees. The Company’s employees in the spirits concentrate productiondepartment work in units and share knowledge and expertise on a regular basis and are able to replaceeach other within the unit. Although no individual employee has access to, or knowledge of, the entireproduction formula and process, except for Mrs. Prachuabsuk Kanchanalakshana and Mr.Dechapongsa Kanchanalakshana, each unit has the knowledge and capability to perform its specifictask and, together with the other units, can complete the production process without interruption.3.1.5 Raw Materials and Packaging Materials for Beer, Drinking Water and Soda Water andSpiritsRaw MaterialsPrior to its reorganization in May 2004, the purchasing of raw materials was decentralized. Asa result of the reorganization, the Company’s Subsidiaries, Pan International Co., acts as thecentralized purchasing and servicing company for the entire group. Pan International Co. isresponsible for purchasing all the raw materials and packaging materials, except for the Company’sPart 2 Page 55