Carabao seek growth from Chelsea sponsorship
published : 29 Sep 2016 at 08:30
writer: Bloomberg News
Carabao Group Pcl, currently ranked as the world's best-performing energy drink stock, has signed to sponsor Chelsea Football Club of the English Premier League to fight Red Bull and go global.
Carabao, named after the iconic rock band, hopes to increase the share of revenues from abroad to 50% from about a third currently, partly by leveraging its sponsorship of Chelsea, managing director Nutchamai Thanombooncharoen said.
"We chose to spend a huge amount of money in the Chelsea partnership as a platform to build our brand worldwide," she said in an interview in Bangkok after an investor presentation. "It's a key stepping stone for us."
The company reportedly plans an outlay of £30 million (1.354 billion baht; $39 million) on the three-year sponsorship deal.
Ms Nutchamai said the tie-up is designed to help Carabao increase its UK market share, and provide a springboard for US and European expansion.
The rock group's buffalo-head logo adorns the energy drink but isn't well known outside Southeast Asia. Carabao hopes billionaire Roman Abramovich's storied Chelsea team will bolster the brand.
Carabao is the top performer globally this year among soft-drink makers with a market value of at least $1 billion (34.6 billion baht), posting a total return of about 100% and outpacing the likes of Monster Beverage Corp and PepsiCo Inc.
The Bangkok-based company, whose name stems from the Filipino word for buffalo, is starting from a low base in the UK. Sales were 36 million baht ($1 million) in the first six months of the year, according to Ms Nutchamai.
The target is a 10% market share, helped by steps such as distributing two million free cans of the drink over the next 12 months to challenge market leader Red Bull GmbH, an offshoot of Bangkok's Kratin Daeng energy drink, she said in the Sept 14 interview.
"There's concern about the impact of higher marketing expenses on the company's earnings," said Itsara Lertsudkanung, an analyst at AEC Securities Co in Bangkok. "This expenditure will be very high in the initial stage because it has to build a brand in the UK and other countries. We expect this will be compensated by higher sales from domestic and other Asian markets."
Carabao's net income more than doubled in the two years through 2015 to 1.3 billion baht. The business listed on the Stock Exchange of Thailand in 2014 and is up about 131% since then, compared with a 6% drop in the benchmark SET Index.
Thailand arguably sparked the modern day energy-drink industry, as the creators of the Red Bull brand are the late Thai tycoon Chaleo Yoovidhy and Austrian billionaire Dietrich Mateschitz.
Chaleo founded TC Pharmaceutical Industries Co. which markets the Kratin Daeng version of Red Bull in Thailand. Carabao's share in the country overtook Red Bull's in 2012, though the Lipovitan-brand beverages of Japan's Taisho Pharmaceutical Co and its local partner Osotspa Co dominate, Euromonitor International Plc data shows.
For 30 years, rock band Carabao's songs have touched on issues such as corruption and the plight of farmers. Hard-living singer-guitarist Yuenyong Opakul lent the group's name, image and sleep-deprived lifestyle to the energy drink. He's one of the largest individual shareholders and a senior deputy managing director of the company.
The sponsorship deal with four-time English Premier League champions Chelsea began this summer, and according to a Bangkok press report, it is worth £30 million.
Even with Carabao's buffalo-head logo on the club's training wear and at press conferences, Ms Nutchamai accepts the UK poses a major competitive challenge.
"Going to the UK is like fighting with other giants", she said. "But it doesn't intimidate us because Carabao overcame Red Bull in Thailand, which was in the market much longer".