Newly introduced alcohol marketing strategies:
Thai experience
ThaksaphonThamarangsi

Introduction
Thailand has been defined as one of the‘emerging markets’ for the alcohol industry. While domestic entrepreneurs are still the key operators, multinational alcohol entrepreneurs have expanded their area of profitability to this market in recent years. Generally, these beverage categories are greatly different in terms of production, distribution, marketing and consumption¹. For example, the attractiveness of traditional and indigenous beverages relates to price, whereas for cosmopolitan beverages it is rather the created image of life success and friendship. Thai consumers align themselves with the mega trend in the developing world in which consumers are shifting from indigenous and local beverages toward cosmopolitan and international brands. However, indigenous beverages still have a significant share of the market.

The World Health Organization (WHO) Global Alcohol Database tracks the increase in Thai adult per capita consumption from 0.26 litres in 1961 to 8.47 litres of pure alcohol in 2001². Most significantly, beer consumption had an eightfold growth between 1982 and 2001. Thai unrecorded consumption was estimated to be 2 litres of pure alcohol per capita in 2003³. A report from the alcohol industry states that Thailand had the world’s highest income elasticity of beer demand during the 1996 to 2001 period⁴. By contrast, wine consumption is exceptionally low and stable.

Economic progress; demographic changes; weak alcohol policy and public health infrastructure; modernized life style; and aggressive marketing practices including lower prices with high availability; all are positive factors for the growth of alcohol consumption. There was a strong association between adult per capita consumption and per capita gross domestic product (GDP) between 1961 and 2000⁵.

Thai alcohol market used to be dominated by very few companies⁶. The business of a single company accounted for more than 90% of the domestic spirits market in 1999 and 64% of the beer market in 2001⁷. Imported beverages used to have only a small foothold: for example, 3.9% of the total spirits and less than 0.1% of the beer market between 1998 and 2000. In the locally produced market, the “white spirit”, the cheapest uncoloured and unseasoned spirits (close toArrack) made from either rice or molass, shared almost three quarters of overall distilled beverage production volume in 2004⁸.

Thai alcohol market is in a transitional period, faced with higher competition among operators and the increasing role of modern trade system. Firstly, the confrontation among alcohol entrepreneurs has been increasingly vigorous, particularly after the repeal of production concession in 1999 and since the Asean Free Trade Agreement (AFTA) took effect in 2003. International operators and alcohol importers have had a bigger share in both market and alcohol policy process. As a result, Thai alcohol market has become more open. Secondly, modern trade systems, including department, discount and convenience stores, have gradually become the outlet of choice for many consumers, increasingly replacing the conventional alcohol business system, regional authorized agencies. The modern trade system has its own distribution system and can provide cheaper beverages for retail outlets and drinkers [KhookhangThurakit Newspaper 30/06/1997].

Alcohol policy in Thailand is quite comprehensive. It covers taxation measures, seller licence, regulations on time and place of sale, prohibition of broadcasting advertisement from 0500-2200 hours or the so-called partial ban introduced in 2003 and control of advertising content. Alcohol policy process in Thailand reflects the incompatibility of different interests. Many strong measures, such as taxation and control on physical availability, are criticized for neglecting public health values¹⁰, ¹¹. Furthermore, seriousness and reliability of policy implementation are a critical problem. In practice, some regulations have not been enforced since enacted.

This article analyses the marketing strategies, lately launched in Thailand through the classic Marketing Mixed theory, or known as the 4P principle (Product-Price-Place-Promotion), introduced by McCarthy¹².Where available, it also describes the impact of such strategies.

Product
Recently, the alcohol industry has focused on a few market sectors with substantial growth including beer, RTD beverages, and secondary (economy grade) whisky. A number of international brands have been introduced to the Thai market. Many foreign entrepreneurs have extended their production lines from the conventionally luxury to the lower market segments.

Free trade agreements promote the freer flow of alcoholic beverage products and investment. Under the AFTA, some entrepreneurs repackage imported beverages and whisky concentrate from‘out-zone’ Europe to ‘in-zone’ Asean countries and export the end product toThailand.This practice largely supports the mushrooming of secondary whisky, which is generally rated as more luxury than indigenous beverages. To fight back, domestic producers have launched English-named drinks, adding to their conventional Thai-named beverages.

The Thai government practically allowed the production of traditional fermented and distilled beverages by grassroots in 2001 and 2003, respectively. Since then, many traditional beverages have been selected and promoted as ‘the product of (each) sub-district’. This legalization promoted the availability of cheap and legal beverages at the community level. Although produced by authorized brewers, a substantial proportion of traditional beverages is free from tax¹³.

Apart from the diversification of alcoholic beverages, the alcohol industry tailored beverage types, sizes and drinking patterns to each consumer group. RTD and wine coolers have been symbolised as the female drink.

Alcoholic beverages and their packaging are well designed to fit with their target groups. Most RTDs have colourful packages, some are difficult to be separated from non-alcoholic beverages. A wine cooler brand launched its special edition product under the name of a famous rock band and used them as brand ambassadors. The small bottles (150 ml.) of White spirits were particularly popular among youth because of its cheapness and ease of carrying so enabling them to be hidden in their school uniforms [Than Setthakit Newspaper 14/01/2004].

An increase in the number of drinking sites around universities, with innovative drink styles such as the Alcoholic Frappe and serve-in-a-shot, were reported in Than Setthakit Newspaper (24/03/2005). Alcoholic Frappe, or cocktail-in-jug, has gained popularity among Thai youth due to its cheapness (around 2-3 USD/ jug), physical appeal, appropriateness to Thailand’s warm weather, sweet taste and high alcohol content. In recent years Alcoholic Frappe selling has become a franchise business with claimed margin at over 70% of the selling price¹⁴.The fashion of drinking the mixture of White spirits and red syrup (to lessen the strong taste of white spirit) among rural and economically worse-off youth is regarded as one of the cheapest way to get intoxicated.

Price
WHO¹⁵ reported that the relative beverage price in Thailand was low compared to regional and global averages. The relative price for beer in Thailand in 2002 was 3.43 USD compared with a mean of 11.3 for the South-East Asia andWestern Pacific WHO regions and 8.1 for global average. The relative price for spirits in Thailand was 22.21 USD,10.8% and 43.3% lower than the regional and global averages respectively. The cheapness of beer and secondary whisky is a major factor shifting Thai consumers toward European style beverages.

The change in price of alcoholic beverages in Thailand has been disproportionate to economic growth. This scenario leads to an increase in affordability for Thai consumers, and reflects the limitation of alcohol taxation measures to control consumption. After adjusting for inflation by using the consumer price index (CPI) as an indicator (using CPI at 1988=1), the price of Mekhong (750-ml bottle), popular domestic liquor went up by only 12.7% from 1986 to 2001 which is still much less than 381% of GDP per capita growth in the same period. The adjusted price of Singha beer (630ml bottle) had gradually dropped by 38.5%, from 44.1 to 22.7 Baht (at 1988 constant price), as shown in Figure 7⁵.The data outlined here indicates that the decline of real price of beverages was a factor encouraging consumption, particularly for beer. An alcohol giant admitted that the low price of its beer was the crucial determinant of increasing overall beer consumption [Prachachat Thurakit Newspaper 24/09/1998].

Thai drinkers enjoy cheaper imported and locally produced branded beverages due to the effect of trade agreements, leading to the expansion of alcohol market size. In Thai experience, AFTA effect has significantly reduced the retail price of imported beverages in both economy and premium grades, many of these branded drinks are drink-of-choice for young consumers⁹.The volume of imported whisky has significantly increased in the recent time, particularly after AFTA took effect¹⁶. The AFTA mechanism cut the custom duty by 12 times, compared with the conventional direct importation¹⁰, and it has enhanced the competitive capacity of importers¹⁷. An RTD beverage could be sold at half price after switching to domestic production [Phoojadkarn Newspaper 30/09/05]. Furthermore, custom duties for alcoholic beverages are subject to further reduction to 0% in 2010 for AFTA, and 2015 for the Thailand-Australia Free Trade Agreement.

Another significant business technique used, although officially denied, is the “Tied Selling” strategy. This is the practice of alcohol producers and distributors forcing the retail sellers to buy other merchandise alongside popular and profitable products. Conditions are applied so that a retail outlet has to buy a certain amount of beer to qualify to be able to purchase profit-making white spirits. This is particularly to introduce and increase the market share of a new product. From a health perspective this tactic led to a drop in overall beer price not only of the tied brands. This scenario inevitably boosted beer consumption. Moreover, the tied selling tactics also enhanced consumption of illegal spirits and partly triggered a wave of commercialisation among illegal producers¹⁸.

Place
The accessibility to alcohol for Thai consumers, including youth, seems to be no hurdle. The increase in number of alcohol outlets is evident particularly during the economic progress period.¹⁸ The growth of modern trade system, particularly the emerging of chained convenient stores in residential areas, significantly enhances alcohol availability. In 2004, there was an average of one authorised alcohol dealer for every 110 people and, on average Thai drinkers took only 7.5 minutes to purchase alcohol¹⁹. From the same study 3% had to make significant journeys and 15.9% of drinkers decided to stop drinking if their regular outlet was closed.

Thailand has had a licensing system controlling the production, distribution and sale of alcoholic beverages since 1786¹¹. In this system, licencees have to conform to the additional regulations, including the regulation on time of sale and prohibition of selling to youth. Conventionally, the policy of the Ministry of Finance has been to expand retail selling to as many residential areas as possible¹⁸.This stance was affirmed by a recent reduction in outlet licensing fees, and the One-Stop Service campaign to ease the licence application process. However, a considerable number of alcohol outlets, including street alcohol vendors, still do their business without a licence. A 1997 survey of Lopburi province showed that only 80% of retail sellers were licensed¹⁸.

Thai government restricts selling time to the periods between 11am and 2pm and between 5pm and 12pm. However, the coverage and consistency of implementation is questionable. A survey of the northern region shows that 96.6% of outlets did not conform to time of sale regulations²⁰.

For off-premise licensing, the only geographical prohibition applies to areas ‘within’ and ‘next to’ educational and religious areas. This rule does not apply to other nearby areas including areas opposite and those that do not share a fence with educational institutes. This rule is commonly seen as too superficial to decrease accessibility for students to drink alcohol. In addition, to control youth drinking through the Entertainment Venue Act was seen as unfeasible, as most of drinking places around universities are registered as restaurants, not entertainment venues [Khaosod Newspaper 15/05/2004].

In recent years, there has been the boom of modern style street alcohol vendors, who sell beverages in mobile units and kiosks. These drinking sites have become famous among Thai youth and time and place of sale regulations, as well as the minimum purchasing age, are relatively difficult to enforce.

Promotion
Intense competition among alcohol entrepreneurs has forced entrepreneurs to employ many aggressive advertising strategies, including direct advertising on a beverage’s quality; the Beer Girl system; regulation circumventing and breaching, providing gift away and lucky draw, and promoting through innovative channels.

If the amount spent on alcohol advertising is seen as an indicator for level of exposure to alcohol promotions, it is significant that the advertising budget has risen by 7.41 times during the years 1989 to 2003. Conventionally, the content of alcohol advertising, beer in particular, used to be about images of brand and producer. But there has been an observation among Communication Art academics on the change in advertising content toward direct advertising¹³, ie making statements about the quality and prestige of products.

After the partial ban took effect in 2003, the alcohol industry has found ways to circumvent the regulations by using indirect advertising in the controlled media and increasing promotions in unregulated, below-theline media. The high frequency of logos and names of alcohol beverages broadcast during prohibited times, as well as the promotion of surrogate products, has been the subject of a newspaper report. The budgets for mobile advertisements such as ads-on-vehicle, and on-drinking-site promotions increased by 583% and 148% respectively from 2003 to 2004 [Krungthep Thurakit Newspaper 7/09/2005. The 2003 partial ban regulation is limited in its scope and does not cover sponsorships and many advertising channels, such as internet and viral marketing. The alcohol industry has advertised its product on many popular websites, including websites about entertainment and sports which are attractive to youth.An alcohol company revealed that advertising through mobile phones to promote a lucky draw campaign was successful [Prachachat Thurakit Newspaper 8/11/2004].

Promotion of surrogate products, or logo-sharing and name-sharing products, include broadcast and billboard advertising, as well as sponsorship of non-alcoholic products, such as a dancing competition for over 13 years old by a soda brand (see figure 18). A study shows that 99.9% of junior high school students knew that a billboard advertising (see figure 19) was to promote beer, without the name and bottle being seen²¹.

The Beer Girl system is believed to have been introduced by a foreign alcohol operator, and has become a necessity for most alcohol entrepreneurs. The main income for Beer Girls comes from commissions on sales, such as 3 Baht per bottle, and tips [Matichon Newspaper 25/02/2002]. A beer company manager admitted that Beer Girls can create brand awareness, stimulate purchases, and is more important than broadcast advertising [PostToday Newspaper 12/12/2003]. A restaurant estimated that Beer Girls increase their income by 20 to 30% [Matichon Newspaper 25/02/2002].

Promotion of Corporate Social Responsibility (CSR) has been the recent trend among alcohol operators, including social donations and sponsorships to sport persons, events and broadcast. From a survey, 80.5% of teenagers wanted to pay back to a beer company that sponsored the free broadcast of 2006 soccer world cup²², as displayed in figure 13. Another study shows that Thai students have high brand loyalty to the beer company that sponsors the national soccer team while many primary students positively perceive this beer company and brand as a philanthropic cause that they should contribute towards.²³

Conclusion
Analysing through the Market Mix model, both domestic and foreign alcohol entrepreneurs have employed many groundbreaking marketing strategies to increase their market share and overall market size. Many of these newly introduced strategies specifically target youth. Some approaches are highly relevant to the Thai context, while some can be seen in other countries.

In short, these strategies lead to the high availability of cheap beverages, create youth-friendly beverages and drinking patterns and brand loyalty. They also shape the social climate on alcohol consumption and alcohol operators including the normalisation of alcohol consumption in Thai society. Certainly, youth, commonly defined as the future of alcohol industry, are the most vulnerable group for these threatening scenarios. Most of these strategies negatively affect the effectiveness of alcohol policy. Thus, these strategies are well designed to gain both short and long term benefit for the alcohol industry.

The adequacy and ability of existing regulations to address these newly introduced strategies is largely questionable. Therefore, the regular review and the strengthening of Thai alcohol policy are urgently needed in order to promote policy relevancy to a dynamic situation and to enhance the alcohol policy utility to protect the health of Thai people.

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