Ashadow of gloom has been cast over the media industry which in recent years has enjoyed prosperity.

Barriers to growth _ the slowing economy, the prolonged impact of the Dec 26 tsunami, violence in the South and inflation caused by rising oil prices _ have all created an uncertain outlook for the industry.

As a result, some advertisers are taking a waitandsee attitude on their media spending budgets and are moving ahead with caution.
Advertising is the main source of income in the media sector and was the key reason for industry growth in recent years.

But media spending figures released by Nielsen Media Research Thailand show disappointing results in the first quarter of the year.

The company said advertising in the first quarter of 2005 grew 1.2% to 19.9 billion baht year on year. In the same quarter of 2004, ad spending had risen 23.4% to 16 billion baht.

Tight economic times are making advertisers more choosy, but they still need to be aggressive by BAMRUNG AMNATCHAROENRIT

During the first quarter of the year, several listed companies suffered shrinking net profit. GMM Media Plc, the country's leading radio programme producer with five stations, posted an almost 53% decline in net profits to 42.9 million baht, while sales dropped 7%.

Its parent, GMM Grammy Plc, the nation's largest entertainment company, faced the same fate. Grammy's net profit dropped 72%, to 45.21 million baht, compared to the same period last year. Its sales declined 17% to 1.27 billion baht. Grammy attributed the drop in profits to the tsunami which forced concert cancellations in January and reduced music album sales.

BEC World Plc, the operator of television Channel 3, is another example. BEC's net profits dropped 64% to 153 million baht. Its firstquarter advertising sales declined 15% to 1.1 billion baht.

Chatchai Thiamtong, the vicepresident for finance at BEC, said much of the decline in net profits stemmed from excessive programme production costs.

Then, as the business climate became more difficult earlier this year, Channel 3 was hurt by the airtime oversupply as spending fell.

"At the beginning of 2005, the advertising industry moved slowly," said Suttatip Peerasub, an analyst at Kim Eng Securities. "The first two months, in particular, were quite bad. But it started to rebound in the third month with more spending."

The impact from the tsunami, rising oil prices and southern violence undermined consumer confidence and hurt the economy, she said.

In the second half of the year, Ms Suttatip said, the industry will see improvements, but planners still face uncertainty caused by rising oil prices and


RETAILERS ADDING CUSTOMER VALUE

Distribution centres play a critical role.

Retailers and consumer product manufacturers are now trying several methods to cope with shrinking demand and rising costs. One approach is to apply more effective cost management and adopt customer relationships based on a segmentation marketing strategy.

The consumer goods giant Unilever Thai Trading Co has introduced a "revolutionary" supply chain system, allowing it to deliver goods to stores directly from its 240million baht Synchronised Dispatching Facility. The new system helps the company reduce inventory in the warehouse as well as boost sales opportunities.

"The SDF represents a major development in the Thai manufacturing industry, setting a new benchmark to increase supplychain efficiency. While local product producers are now facing pressures from high oil prices and inflation, our competitiveness will be maintained after the launch of the new facility," said Somchai Tosomsakul, outbound logistics manager at Unilever Thai Trading.

Apart from Unilever, major retailers including Siam Makro Plc, the operator of Makro, EkChai Distribution System's Tesco Lotus, Central Food Retail's Tops supermarket and C.P. Seven Eleven also introduced steps to improve their financial management.

To cope with rising energy prices, Siam Makro Plc, temporarily suspended the opening of new stores this year but planned to open a new distribution centre and combine centres for fresh food in Wang Noi, Ayutthaya province and nonfood items in Nava Nakorn into one centre to reduce transport costs.

CP Seven Eleven Plc, allocated onesixth of its investment budget this year or 600 million baht for the construction of a second distribution centre near the new Suvarnabhumi Airport.

Meanwhile, Central Food Retail Co, the operator of Tops supermarket, has chosen to adopt customer relationship management with a segmentation strategy. It offers a different approach to consumers by providing new store formats, product variety and an initiative service.

Phattaraporn Phenpraphat, assistant vicepresident for marketing and public relations of Central Food Retail Co said the company planned to introduce two new store formats this year.

At an outlet in Chidlom, the "Food Hall" concept will be introduced while another concept yet to be detailed will be launched at the Tops outlet in CentralWorld Plaza. Apart from this, more exclusive product items, both local and imported ones, will be introduced to match customer demand at each location

"It will allow us to offer more quality foods that are currently not available in Thailand. We want to be recognised as an innovator that always provides an exciting range of quality food and to make Tops a truly international supermarket in Asia," said Ian Pye, president of Central Food Retail.

The company also plans to offer additional benefits on its Spot Rewards Card as way to increase customer loyalty. More than two million cards have already been issued this year.

"Based on different shopping information, we will be able to develop multiple strategies for different groups of consumers, based on individual demographics, purchasing frequency, shopping categories and regularly purchased products," Ms Phattaraporn said.

Grammy's `Pen Tor' is a ratings winner.

reduced advertising spending.
The floating diesel price, she said, would affect the industry negatively as consumers experience a drop in purchasing power.

"The wait is over," Mr Chatchai said. Now that the diesel price is floating, he said, companies now know what to expect in the second half of the year.
The industry will move ahead, he said, but not at the same levels of dynamic growth as in recent years.

"We [the industry] also hope that in the second half of this year we will benefit from government spending on mega projects which will help boost consumer spending," he said.

BEC is optimistic, Mr Chatchai said, that profits will improve in the second quarter. The reason is companies simply can't stop promoting products, he said, and brand awareness is often more important in times when money is tight.

Meanwhile, Channel 3 has tried to control production costs, he said, and produce cheaper nonsoap opera programmes, particularly during prime time.

Ms Suttatip has advised investors to sell BEC shares, saying the company showed disappointing net profits and audience ratings.

Jamnan Siritan, CEO of JSL Co, a leading television programme producer, said broadcasters faced struggles in the second half of the year due to shrinking ad sales.
To survive, television companies had to be more selective in the programmes they produced to limit their exposure to risk, she said.

Kosit Suvinijjit, the chairman of Media of Medias Plc, a SETlisted television producer, said television still has potential because the number of televisions is growing and they provide entertainment people can afford.

"Whether the economy is good or bad, TV is still popular among people as the cheapest home entertainment," he said.

Ad spending is unlikely to fall further, Mr Kosit said, but instead clients will be more selective. Advertisers will be more careful when deciding which programmes reach their target customers.

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