Lao Brewery Co's plans to flood Thailand with its popular Beer Lao next year have been put on hold until 2011, a senior executive said Thursday.
Lao Brewery, one of little Laos' biggest companies, has invested 25 million dollars in an expansion project in southern Laos aimed at exploiting the export market, specifically neighbouring Thailand, under the ASEAN Free Trade Agreement, which goes into effect in 2008 for the 10-country Association of South-East Asian Nations.
But the government of Laos and Thailand recently decided that beer was too sensitive a product to be tariff-free in their respective markets.
"Both governments decided to keep the tariffs on beer until 2011," said Sounthone Phommachak, senior deputy managing director of the Lao Brewery Co. "Each country is still trying to protect their own beer market."
Lao Brewery, a joint venture between the Lao government and Denmark's Carlberg, is to open a new plant in Pakse in southern Laos at the end of this year with an initial annual capacity for 50 million litres of beer.
The 25-million-dollar project was originally planned to tap the beer market of neighbouring Thailand, but now it is to focus on satisfying the growing local demand of Beer Lao, currently the only domestically brewed beer available in Laos.
The Vientiane-based brewery, currently with an annual capacity of 140 million litres, is deemed a corporate success story in communist Laos, a land-locked country with a population of less than 6 million.
Beer Lao is popular among visiting tourists and has won numerous international awards. It is one of the few brand names Laos can boast of.
"The Swiss make watches, the Germans make cars, but Laos has nothing right now except Beer Lao," Sounthone said.
In 2006, Lao Brewery's revenues were 80 million dollars with a profit of 15 million dollars and taxes to the government of 47 million.
Sales in the first eight months of this year were up 16 per cent, Sounthone said.
The brewery seemed happy with the government's decision to protect its domestic market, of which it claims a whopping 99-per-cent market share, even though it has meant a lost opportunity in Thailand.
"I think it's good for us because we have more time to make ourselves strong," Sounthone said.
Lao Brewery plans to boost its Pakse plant's capacity to 100 million litres in 2010 in preparation for the liberalization of the ASEAN beer market, but the company faces new competition at home next year when APN of Singapore plans to open a brewery in Laos to produce Tiger Beer.
ASEAN is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Under the group's free trade scheme, tariffs on most items will be slashed to less than 5 per cent next year, excluding beer and several other "sensitive" items. dpa pj ls
