Carabao Group (CBG) plans to invest 20 billion baht in operations and marketing to juice up its energy drink presence in Britain and China, as the company strives to increase its export revenue to more than half of total turnover.
The strategic move is part of the Thai energy drink firm's strategy to spread its footprint globally, especially in high-margin countries where the product's price is four times higher than in Thailand.
The firm is also looking to further penetrate rapidly growing emerging markets, after facing a 1-2% contraction at home over the past several years, said founder and chief executive Sathien Setthasit.
Mr Sathien recently announced that he would resign from the brand he created 16 years ago in three years' time, allowing his three children to step into leadership positions at the company.
He is investing 14 billion baht out of his own pocket to set up operations and launch a marketing campaign in China in the next four years. This year alone, Mr Sathien plans to spend 6 billion baht building brand awareness in mainland China.
CBG projects revenue of 15 billion baht in 2018, up from 12 billion last year. Some 55% of turnover is projected to come from overseas operations this year, up from 45% last year.
Aim is No.3 in Europe
CBG, through its subsidiary Intercarabao, aims to become the third-largest energy drink brand in Britain and Europe this year, propelled by its recent deal with British retail giant Sainsbury and a planned deal with Lotus. The company sits at No.4 in Europe's energy drink market. Mr Sathien said the company's strategy of sponsoring top football teams in the region will be essential to expansion efforts.
Also key will be the British government's sugar tax, to be implemented this April, which will force major rivals (Red Bull, Monster and Relentless) to change their formulas or increase their prices by at least 10-15% a can.
Carabao's drink contains four grammes of sugar per 100 millilitres, less than the British government's cap of five grammes per 100 ml.
"We expect to sell 35-45 million Carabao cans in the UK in 2018, up from 9 million last year, which will make us the third-largest producer in the market," Mr Sathien said. "Sales are projected to increase to 60-65 million cans in 2019 and reach 100 million in 2020. We aim to be No.1 in the UK market in the next decade."
The energy drink maker aims to become one of the top three global players in the sector, and one of the main brands in the rapidly growing European market.
Carabao is working on a sponsorship plan for retailers around Europe, aiming to reinforce its sports marketing strategy, following the success of its "Carabao Cup 2018" campaign, for which it signed a three-year sponsorship deal for £18 million (564 million baht).
The campaign, which encourages participants to send in Carabao caps for a chance to win tickets to attend the English finals at Wembley, resulted in higher-than-expected sales in England and Europe.
The company aims to expand this strategy to China and the US, Mr Sathien said.
The campaign successfully branded the English Football League Cup as the Carabao Cup. Overall energy drink sales in Britain will top 1 billion cans this year, Mr Sathien said.
The UK is growing every year and is already the largest beverage market in Europe and the fourth largest in the world, with a market value of US$2.34 billion (73.2 billion baht).
Teenagers use Carabao as a soft drink 70% of the time and as a mixer 30%. Britain will provide a platform for the company to expand to other European countries, Mr Sathien said.
"England is a flagship destination for us," he said. "We aim to be No.3 this year and to expand into France and Germany."
Carabao is investing in building brand confidence and expanding its distribution channels. In England, the product is available at ASDA, Morrisons, WHSmith, Co-op, Poundland, Poundworld and One Stop BP. Carabao is also available in clubs and sports training facilities.
The company is currently negotiating sponsorship deals with professional football clubs in several leading European and South American leagues.
Carabao's negotiations with retailers and other partners in France, Germany and Switzerland are expected to be concluded this year, after which the company will expand into the European market.
If the market continues growing robustly, the company may consider establishing a European production base.
Boosting China presence
Carabao is also taking steps to penetrate China with a budget of 14 billion baht under a four-year plan to expand its distribution network coverage and build awareness through advertising and sports sponsorship activities.
At $8.5 billion, the Chinese beverage market is the second largest in the world. China is the world's largest country by population, but its citizens consume only 1-2 litres of energy drinks per year, compared with an average of six litres in developed countries.
Last year, the company set up offices in 30 cities in China and hired more than 1,000 employees. Carabao is seeking original equipment manufacturers to reduce costs but is currently shipping the product from Thailand.
More than 300 million energy drink cans will be sold in China this year, up from 130 million cans sold last year, with the company seeing the relatively low level of consumption as an opportunity to advance sales.
"Our sales will steadily move to 1 billion cans a year in China in the next few years," Mr Sathien said.
China is projected to account for 50% of the world's 50 billion energy drink cans sold in the next 2-3 years.
CBG is studying the feasibility of setting up a production base in China at a cost of 3-4 billion baht if the company achieves sales of 500 million cans next year, Mr Sathien said.
In line with these growth trends, the company will focus on expanding its product distribution to create a global brand.
The global energy drink market is expected to grow by 20% to $2 trillion. The energy drink market in Thailand is worth $36 billion, and is forecast to grow more than 10% annually in the coming years.
