ThaiBev braces for sharp growth slowdown after three beer brands flop

Q3 results will fall short of expectations.

It seems shareholders will not be popping bottles when Thai Beverage unveils its third-quarter results.

This is because ThaiBev's upcoming results will be impacted by the rebranding of its beer business, which involves the consolidation of three lesser-known beer sub-brands into its one main brand product, Chang Classic.

According to CIMB, the rebranding exercise will lead to higher adspend, coupled with higher packaging costs as ThaiBev shifts from amber bottles to more attractive green bottles.

"We understand that Thai Beverage had in Aug 15 consolidated four Chang sub-brands into one, and launched a new packaging for its flagship Chang Classic. Due to the new packaging launch, Aug beer sales to its trade channels had been held back so as to clear inventory. A spike in advertising and promotion activities in Aug/Sep is also to be expected. This means beer EBITDA would be poor in 3Q15," said CIMB.

However, the earnings blip is expected to be just a temporary setback, as the rebranding exercise will allow ThaiBev to better compete with market leader Boon Rawd.

“We believe that the new packaging design and a further step-down in alcohol content are reflective of the company’s latest bid to recapture market share among younger drinkers. Management aspires to grow its current market share towards the 45-50% range,” said the report.