The Progressive Breweries and Distilleries Act was published by the radical new party in Thai politics this Tuesday by leader Thanathorn Juangroongruangkit. It is the brainchild of Bangkok Future Forward MP Pita Limcharoenrat who wants to open up the regulatory regime to give entrepreneurs scope to flourish in a business that also hold promise for those working in agriculture.
Thailand’s Future Forward Party has published a bill which would revolutionise the production of alcohol in Thailand and allow local craft beers to move manufacturing into Thailand as well as opening up opportunity for thousands of entrepreneurs interested in what is still a fledgeling market but one which is growing fast.
On Tuesday, Thailand’s Future Forward Party introduced draft legislation that would liberalise Thailand’s brewing and spirit making industries which according to the party, have become somewhat monopolistic.
The legislation was presented at a press conference in Bangkok by the party’s leader Thanathorn Juangroongruangkit.
The Progressive Breweries and Distilleries Act would effectively open up the brewing and distilling industry in Thailand by doing away with onerous requirements that currently make it impossible for smaller commercial operators to brew beer and produce spirits.
Previous government strengthened penalties against commercial beer producers and sellers in Thailand
The moves appear to be the antithesis of current Thai government policy and legal provisions.
Indeed, the previous government under the 2017 Excise Tax Act passed by the old National Legislative Assembly strengthened the penalties in the original 1950 Act for those found operating outside legal requirements.
These stipulate, for instance, that to operate a brewery for commercial purposes, a brewery must produce no less than 10 million litres per year in volume and the minimum investment requirement is ฿10 million.
Thai beer market dominated by two players
Currently, Thailand’s commercial or retail beer manufacturing industry is dominated by two giants, each owned by wealthy Thai families.
The firms are highly successful and produce popular Thai beers which have extended their reach and popularity well beyond the kingdom’s borders.
The first is Thai Beverage which produces the world-famous Chang Beer and then since 1933, Boon Rawd Brewery which produces the kingdom’s two other favourite beers Singha and Leo.
Even large microbreweries in pubs must have ฿10 million investment under current laws
The only other way to produce beer commercially in Thailand, aside from meeting the requirements to operate a licenced brewery, is to operate a large craft beer brewery within the confines of a pub which sells craft beers within its precincts.
Even then, the volume requirement is 100,000 litres per year and there is still an investment required of ฿10 million.
Future Forward MP for Bangkok Pita Limcharoenrat behind the new bill to shake things up
The man driving this new beer brewing and selling regime is up and coming Future Forward MP Pita Limcharoenrat who gave some examples on Tuesday of how Thailand’s farming community and entrepreneurs are being restricted by the existing law.
Existing law stifles investment and confidence
Under the 2017 Act, those even found in possession of an illegally brewed beer can face a fine of ฿10,000 while brewers and sellers face fines of ฿100,000 and ฿50,000 as well as jail sentences.
The Audit and Law Enforcement Bureau of the Excise Department in Thailand does not give figures for prosecutions.
It is accepted, however, that they are rare but there has been activity against those promoting the commercial production of craft beers.
The statute and its provisions, in itself and by its existence, are enough to prohibit investment by business people seeking a return as well making it impossible for entrepreneurs to build a viable business.
Draconian old law has still not killed off the craft beer business and entrepreneurial activity
This has not, however, killed off the momentum and enthusiasm in Thailand towards producing independent craft beers and products for the burgeoning market place.
It has meant that serious commercials operators in the market have had to subcontract out production to breweries in Cambodia, Australia, News Zealand, Vietnam and Taiwan and then reimport such products thus fully complying with the law.
Existing law makes craft beer in Thailand more expensive and hinders quality development
This makes the new beers more expensive.
It also tends, according to beer production experts, to make it difficult for budding Thai beer brewers to perfect their recipes and production techniques which is according to those who know the industry, the secret to building a strong customer base.
Up to 100 brands on the market that would benefit from this law immediately if enacted
Currently, despite having up to 100 new brands on the market in Thailand legally selling and dozens of beer companies subcontracting out production, the industry still accounts for less than 1% of the market.
However, it is a market that is growing in line with trends all over the world.
Future Forward – initially estimate a ฿15 to ฿20 billion boost to the economy from the new law
On Tuesday, Future Forward’s Mr Pita said that if the law his party was proposing was passed, it would immediately generate up to an extra ฿20 billion for the Thai economy in addition to greater excise receipts for the Thai government.
It is also an opportunity for entrepreneurs and Thai farmers to add crops to produce new authentic Thai products with crops that are only grown in the kingdom.
This is in addition to offering a level playing field to up and coming operators and creating more competition within the industry.
‘Community-based producers of alcoholic drinks will never be able to grow and compete with those manufacturers with billions of baht in capital in hand. That’s why we have come up with this draft law,’ Mr Pita made it clear.
Thai farmers exporting to Japan with the processed product sold back at 170 times the price
Mr Pita gave the example of Thai Indica rice exported to Japan over the last 40 years.
He pointed out that over 200,000 tonnes of the product had left Thailand’s shores sold at between ฿10 to ฿20 per kg. The crop is used to brew Awamoro, an alcoholic drink unique to Okinawa.
‘The Japanese-made beverage is exported back to Thailand at 2,500 baht per litre, or 170-fold the price of the raw material,’ the MP explained.
The Future Forward representative said he had identified 70 beer brands that are already on sale in Thailand and which would flourish and expand under the new law if passed by the House of Representatives.
New law would also help preserve traditional Thai drinks and heritage in key regions
He also referred to the importance of preserving drinks and products which are unique to regions in Thailand and are part of Thailand’s culture and tradition.
Mr Pita gave an example of Lao Sa-iap liquor in Phrae province in the north which generates sales of ฿1 billion per year and returns excise income of ฿400 million.
3,000 community-based producers
He pointed out that there are 3,000 community-based alcohol producers in Thailand that would not only become legal but begin paying taxes but only if the new Future Foard provision came into force.
Demand for reform clear from Thai entrepreneurs already subcontracting beer brewing abroad
The demand for reform in this area is clear.
Despite the government’s onerous law, Thai entrepreneurs are already operating within the market by using subcontracting to remain legal.
As well as taking day control of quality out of the hands of the Thai brewers by subcontracting to countries such as Australia and Taiwan, it makes it difficult for Thai beers to use authentic and original ingredients sourced in Thailand.
In one case, a Thai beer being brewed in Australia had to use pasteurised mango as the Australian brewer feared that real mango may cause an infection in their beer products.
Brewery for Thai beers established in Koh Kong province in Cambodia near Trang province
The Stone Head brewery was established in Cambodia located within a short distance from the Thai border near Trang in Koh Kong. It was established by Thai business people with substantial investment to cater to the growing demand for more established Thai craft beers.
It can brew up to 3,000 litres of beer a day and works with a range of Thai beer brands to keep its brewing facilities busy.
Phnom Penh brewery Kingdom Breweries is a thriving production hub for Thai craft beers
A Cambodian brewing company, Kingdom Breweries, in Phnom Penh which as established in 2009 is now a flourishing business catering to not only Thai based craft beers but similar operators in Southeast Asia from Hong Kong, the Philippines and Singapore.
The brewing hub currently produces 30 craft beers including many from Thailand.
Commercial opportunity for Thailand with a new bottom-up approach to the economy
The current situation obviously represents a loss of opportunity to Thailand and one which the Future Forward party bill aims to open up and grasp.
The bill proposes effectively a bottom-up approach to economic development in this industry.
It stands in stark contrast to the current government’s emphasis both in this sector and others, on a top-down approach, relying on large established firms with access to capital or inward investment from large international companies, many of them already dominant players in their markets.