Thaibev buys big buckets of KFC stores
Beer and chicken go well together gastronomically, but apparently also financially with leading beer maker Thai Beverage (Thaibev) announcing it could acquire 240 branches of the popular fried chicken fastfood chain KFC in Thailand. Analysts reckon the $463m deal is a diversification strategy for Thaibev, the largest beverage company in Thailand and brewer of the popular Chang beer, given lower beer consumption amidst the one-year mourning for the late King Bhumibol.
Thaibev’s results for the third quarter of 2017 showed its beer segment’s sales volume dipped by 8.7%, although the company did manage to maintain its 40% market share despite stronger competition.
“Whilst the proposed transaction took us by surprise, we believe this is part of the group’s strategy to diversify outside of alcoholic beverages,” said Andy Sim, analyst at DBS. “We also noted that its current head of food segment, Nongnuch Buranasetkul, was previously from Yum Restaurants International (Thailand) prior to joining the Thaibev group,” he added.
Yum Restaurants owns the KFC brand, which is currently the top quick service restaurant brand in Thailand by brand share and number of outlets, along with Pizza Hut and Taco Bell.
“The acquisition of the KFC stores represents more than just an opportunity to enlarge Thaibev’s food business,” said Buranasetkul, senior vice president – food business (Thailand) at Thaibev announcing the deal.“kfc’s extensive network in Thailand will give the Group direct access to multiple customer touch points across the country, enabling us to understand trends and stay at the forefront of the industry. This is essential for sustainable growth over the long term.”
The KFC branches, which are reportedly profitable and will be managed by an industry veteran that has direct experience in handling the brand, will not only expand Thaibev’s food business but also help drive up beer and other beverage sales.
“With the group’s potential acquisition of over 240 existing KFC stores in Thailand for approximately S$463m, the group can leverage on KFC’S network to distribute its portfolio of beverage, which could also bode well for [Thaibev’s Beer segment] given the room for growth in the food service space,” said Jodie Foo, analyst at OCBC. Thaibev registered 3Q17 core net profit of $205m (+15% y-o-y) on the back of $1.4bn revenue. Management expects earnings per share to increase from the acquisition, even if fully debt funded, and the deal to be completed by the end of December 2017.
KFC’S extensive network in Thailand will give the Group direct access to multiple customer touch points across the country, enabling us to understand trends and stay at the forefront of the industry. This is essential for sustainable growth over the long term.
Thaibev will acquire 240 branches of KFC in Thailand