Heineken cannot afford to lose control in Asia-Pacific – analyst

Euromonitor International alcoholic drinks analyst, Zsuzsa Szilagyi said that the ThaiBev (and an associate’s) initial July 19 move for stakes in APB and parent Fraser & Neave (F&N) was driven by its shared attraction to a beer growth hotspot.

Beer sales volumes are forecast to grow five per cent (CAGR) in the Asia Pacific region as a whole, but only two per cent in ThaiBev’s home market of Thailand, according to Euromonitor data.

Singapore firm F&N’s board is expected to decide on Friday whether to accept Heineken’s US $4.05m offer​, ramping up the pressure on ThaiBev and third regional rival, Japan’s Kirin Holdings, which has hired Deutsche Bank as an advisor.

“Heineken was expected to try to gain full control of the partnership sooner or alter. ThaiBev’s move has probably only speeded up what was already on the company’s agenda over the longer term,” ​Szilagyi said.

She observed that Heineken was committed to doing a deal, and if knocked-back by APB shareholders had stated that it would protect its commercial interests.

“This means that the company might even end its partnership with F&N and try to establish its presence independently if the offer is turned down,” ​Szilagyi added.

With beer markets in Europe andNorth Americaforecast to remain sluggish, global brewers such as Heineken are keen to gain greater exposure in high-growth emerging markets.

Heineken acquired Mexico’s second-largest brewer FEMSA in 2010, and has made smaller acquisitions in the Middle East and Africa, but is a minor Asia Pacific player, dependent on joint ventures with UB Group inIndiaand APB in the rest of the region.

APB handles Heineken’s operations in Vietnam and China, and has boosted the presence of its Heineken and Tiger brands in the premium segment.

“ThaiBev has been trying to expand its presence in the beer category as it has been losing share in its key domestic market.”​ Szilagyi said.

The firm was under a degree of pressure, she added, since it used to be Thailand’s largest brewer, but lost this title to Boon Rawd Brewery in 2008, while its beer unit recorded a loss for the third straight year in 2011. 

ThaiBev was keen to tap large, dynamic Chinese and Indian markets, the analyst said, but had to either commit to either international beer growth or divest its beer operations to focus on core spirits categories.

Despite being a relatively small regional player, APB led beer markets in Indonesia and Singapore, and was well-established in Malaysia,Vietnam,Thailand and China, the analyst noted.

“Through the interest in APB, ThaiBev probably intends to expand with its Chang beer brand, which has been at the forefront of the company’s international development,” ​Szilagyi said.