Thaibev buys big buck­ets of KFC stores

Singapore Business Review - - FIRST -

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

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