3.
Business Operations by Product
3.1
Products and Services
Manufacturing and Distribution The Company has been appointed by Pepsi-Cola International
Ltd., New York to manufacture and distribute carbonated soft drinks under brand names of Pepsi, Pepsi Max,
Pepsi Twist, Mirinda, Seven-Up, Mountain Dew, and Club as well as concentrate under brand names of Pepsi,
Mirinda, and Seven-Up. The exclusive bottling agreement does not specify an expiry date and includes a
significant condition that the Company must procure the supply of concentrate solely from Pepsi-Cola (Thai)
Trading Company Limited or its subsidiaries. The Company is also required to maintain product quality according
to Pepsi standards. In addition, the right to manufacture and distribute is exclusive and non-transferable. The
Company is also the manufacturer and distributor of drinking water and soda water under its own brand name
Crystal, Lipton Ice Tea in returnable bottles for Pepsi Lipton International Ltd., Tropicana Twister in returnable
bottles for Pepsi-Cola (Thai) Trading Co., Ltd., and Gatorade Sport Drink under license from Strokely-Van Camp
Inc. USA.
Distribution: The Company is the distributor of Red Carabao for Carabao Tawandang Co.,
Ltd.,a distributor of Oishi ready to drink green tea for Oishi Trading Co., Ltd., a sole distributor of Lipton ready to
drink tea in cans and PET bottles, and a sole distributor of Tropicana Twister ready to drink fruit juice, orange flavor,
in non-returnable bottles for Pepsi-Cola (Thai) Trading Co., Ltd. Both Lipton in PET bottles and Tropicana Twister
are bottled by Serm Suk Beverage Co., Ltd. under co-packing agreements from both licensors while Lipton cans
are co-packed by Serm Suk Public Co., Ltd.
3.2
Marketing and Competition
Soft Drinks
The production and distribution of soft drinks is a large industry requiring modern machinery for
production and quality control, and large numbers of personnel for transport and delivery of products to
consumers. The business also helps sustaining industries that produce sugar, glass bottles, plastic bottles, plastic
cases, and bottle caps.
Competition is a constant factor throughout the year in the soft drinks industry. However, growth in
this industry is not very high as other beverages due to the new entrants into the market and the change of
consumer behavior towards other drinks and juices, such as drinking water, fruit juices, mineral water and milk
products competing with soft drinks to a large extent.
The requisite to success in the soft drinks industry is having products manufactured to highquality standards, good service, and timely responsiveness to consumer demand. Opportunity in the beverages
industry depends on the increase in distribution channels and expansion in the business of established customers,
such as big wholesale and retail outlets, supermarkets, convenience stores, and fast food outlets. The growth rate
in the industry is largely determined by the economic fundamentals of the country in which that industry operates.
The prospects for growth and development in the soft drink industry depends mainly upon
marketing activities, including advertising, sales promotion, packaging design, and the introduction of new flavors
that can attract consumers. All these efforts contribute to expansion in the industry.
As mentioned, the competition in soft drink business becomes fiercer with the entry of new players, emphasizing on
bigger volume and cheaper price compared to products in the market. The Company has to change its marketing
and distribution strategies and employ every measure to protect and increase market share of the Company’s
products.
Crystal Drinking Water
The success factors of Crystal drinking water are quality and service to the customers. These
factors are critical in the drinking water market, in which a plethora of producers compete with no difference in
price among them. Today, besides the Company’s Crystal drinking water and the products of other major players,
there is a tendency that the hotels, restaurants, and other food and beverage chains prefer to have bottled drinking
water under their own names and logos. Such private brand drinking water has a great effect on sales of the
drinking water business. Despite strong competition in the drinking water business, sales of Crystal drinking water
continued to show very strong growth with 24 percent increase of its sales volume last year.
The success of Crystal is attributed to its high quality standards with a certification from NSF
International, an international audit agency who inspects and certifies quality standards of the bottled drinking
water. Crystal is the only drinking bottled water in Thailand to receive this certificate.
Lipton Ice Tea
When Unilever Thai Holdings Co., Ltd., one of Thailand’s largest producers and distributors of
consumer products, entered the ready-to-drink tea market in Thailand with its Lipton Ice Tea, in both cans and
bottles, it wished to use Serm Suk’s expertise in the soft drinks industry as both a producer and nation-wide
distributor. Serm Suk was appointed as the licensed manufacturer and sole distributor of Lipton Ice Tea. This
made Serm Suk the first truly integrated beverages company in Thailand. Various promotional activities were
organized jointly by Unilever and Serm Suk resulting in rapid growth in sales.
In 2004 PepsiCo and Unilever entered into a global joint venture, Pepsi Lipton International Ltd., to
promote the sale of Lipton Ice Tea primarily through the Pepsi bottling system. Serm Suk continues to manufacture
and distribute Lipton Ice Tea in returnable bottles and cans but does so now under the authority of Pepsi Lipton
International Ltd. This is another step forward in Serm Suk's relations with PepsiCo to co-operate and
develop opportunities connected to non-carbonated beverages.
Lipton Ice Tea is available in the 10 oz. and 15 oz. returnable bottles and 450 ml. and 500 ml. PET
bottles. The bottling of the product is done by Serm Suk Beverage Co., Ltd., a subsidiary company of Serm Suk
while the distribution is still by Serm Suk Public Co. Ltd.
Gatorade Sport Drink
The Company has been appointed by Strokely-Van Camp Inc. as its sole manufacturer and
distributor in Thailand for Gatorade Sport Drink, the world number one sport drink. Gatorade is a recognized and
favorite sport drink with its better performance than the other sport drinks. Gatorade is also scientifically formulated
to have the right taste and good absorption without carbonation, which is good for athletes and anyone who loses
liquid by perspiration. Gatorade has two flavors, lemon and grape, distributed in 400 ml and 250 ml non-returnable
glass bottles and 500 ml PET bottles.
Tropicana Twister Fruit Juice
Another step towards being a total beverage company was the launch of 14% fruit juice under
Tropicana Twister brand. The product is manufactured by Serm Suk Beverage Co., Ltd. and distributed by Serm
Suk Public Co., Ltd. Tropicana Twister, orange flavor, is available in new 250 ml. returnable bottles as well as 250
ml. non-returnable glass bottles and 350 ml. PET bottles. Tropicana Twister is another alternative for the
consumers to fulfill their needs towards healthy products.
Red Carabao
The Company was appointed the distributor of an energy drink Red Carabao for Carabao
Tawandang Co., Ltd. since October 2002. With Serm Suk’s efficient distribution network and over 20 years of
experience in energy drinks as well as the strength of the Red Carabao brand, sales of Red Carabao continue to
grow every year.
Oishi Green Tea
With the growing trend towards green tea, the Company was appointed the distributor of Oishi
green tea for Oishi Trading Co., Ltd. since November 2005 onwards for traditional trade channel. The growth of
Oishi distributed by the Company was over 26 percent last year.
3.3
Products and Services Sourcing
Sources of key materials are as follows:
Concentrates of Pepsi, Pepsi Max, Pepsi Twist, Mirinda, Seven-Up, Mountain Dew, and Club are
sourced from Pepsi-Cola (Thai) Trading Co., Ltd.
Concentrates of Lipton are sourced from Pepsi-Cola (Thai) Trading Co., Ltd.
Concentrates of Tropicana Twister fruit juice and Gatorade are sourced from Pepsi- Cola (Thai) Trading
Co., Ltd. by the co-packers.
Distributed goods such as Red Carabao and Oishi Green Tea are sourced directly from the manufacturers
and the product owners.
Other materials for production such as sugar, hi-fructose 55%, CO2, chemicals, bottles, crown seals,
plastic cases, PET bottles, can, and paper boxes are locally sourced.
Except concentrates which are supplied by the brand owners, the Company sources other raw materials
and packing materials from 3-4 suppliers in order to ensure the continued supply of raw materials and packing
materials at reasonable price.
Currently production has been run in 5 plants
1) Pathumthani Plant
Located at 63 Nonthaburi-Pathumthani Road, Tambol Kayang, Muang
District, Pathumthani Provinces
2) Nakornratchasima Plant
3) Nakornsawan Plant
4) Suratthani Plant
5) Chonburi Plant
Located at 211 Moo 4, Nakornratchasima-Kabinburi Road, Muang District,
Nakornratchasima Province
Located at 72 Paholyothin Road, Tambol Nakornsawan Oak,
Muang Distric, Nakornsawan Province
Located at 11 Moo 5, Asia 41 Road, Tambol Tarongchang, Pun Pin District,
Suratthani Province
Located at 700/369 Moo 6, Tambol Nong Mai Daeng, Chonburi District,
Chonburi Province
Production Capacity and Production Volume
2008
Full Capacity (Unit: bottle per hour)
Soft drinks
Actual Production Volume (Unit: bottle per hour)
Soft drinks
Utilization (%)
Increase/(decrease) (%)
2007
2006
594,350
584,816
560,041
489,640
82.4%
-1.5%
490,756
83.9%
-11.4%
533,475
95.3%
+5.9%
Actual production volume in 2007 and 2008 declined due to the increased production volume of
the higher volume-content products. The production of higher volume-content products delivers lower volume per
hour compared to the production of the lower volume-content products.
Environmental Impacts
Wastewater Treatment
With over 55 years of operations, Serm Suk Public Company Limited has realized the importance of
environmental issue. It is one of the pioneer companies who introduced the high standard wastewater treatment
system to its waste elimination process. Currently it has been used as a showcase for students and other business
operators pursuing knowledge and experience in waste elimination management.
With high regard of social responsibilities and environmental protection, the Company has invested in the
standard wastewater treatment according to the governmental regulations in every plant set up in the provincial
areas.
In particular, at Pathumthani plant which locates on the bank of Chao Phraya River, Thailand’s most
important river, the Company has invested close to Baht 50 million to construct a powerful system for wastewater
treatment before draining down into the river in accordance with the standard set by the Ministry of Industry and
Ministry of Transportation which is as follows:
PH
BOD (ppm) COD (ppm)
TSS (ppm)
TDS (ppm)
TKN (ppm)
Grease & Oil
Standard
5.5-9.0
< 20
< 120
< 50
< 3000
< 100
<5
The Company monitors the waste water treatment system 24 hours a day and analyzes the water quality
before the treatment process as well as before the water is released. The treated water discharged from the plants
contains less than 5mg/l BOD (Biochemical Oxygen Demand) which is 4 times lower than the requirement of the
Department of Industrial Works and Pollution Control Department. In 2006, the Company invested over Baht 10
million to install the HACH BOD examination system in its 5 plants. The system helps ensure the water quality data
is monitored 24 hours a day and sent directly to the Department of Industrial Works via satellite to facilitate effective
real-time water management.
In addition to the investment on equipment, the Company focuses on the development of people’s
knowledge and capabilities on the environmental issues by nominating its staff to attend both internal and external
waste water treatment training and water conservation programs organized by various institutions in order to
enhance their knowledge and experience which can be applied for use in the Company.
River Transportation System for Better Pollution Control
The Company is the first who introduced river transportation system since 1980. With continuing
development, currently the Company has 3 engine boats and 4 tuck boats in operation. Each of these tuck boats
has a capacity to transport up to 8,640 cases of beverage, which is equivalent to the capacity of 10 transportation
trucks. Moreover, in 2008, the Company started using sea transport for the finished products from Patumthani
plant and Chonburi plant to the southern areas instead of transporting by trucks. River and sea transportation is not
only for cost saving purpose but it also helps reducing pollution and traffic problem and promotes energy
preservation for the nation.
Natural Resource Protection
The Company conducted a natural resource protection program to promote the efficient use of natural
resources and minimize waste. The projects that the Company has undertaken include:
- Water Saving Project: The project is run in conjunction with the Metropolitan Waterworks Authority
and the Water Technology Office, the Department of Industrial Works. The initiative transfers knowledge and
technology to reduce the amount of water used and waste water generated by the Company. Over more than 3
years, the amount of water used and waste water generated at the Company’s production plants has declined by
over 60,000 cubic metres annually.
- The Use of Methane Gas as a Replacement for Bunker Oil: The Company has deployed methane
gas which is a bio fuel generated from the digestion of the microbes process of the waste water treatment system.
The use of methane gas to replace bunker oil in the boiler system leads to the reduction of over 200,000 litres of
bunker oil annually which helps reducing the nation’s dependence on foreign energy as well as the global warming
issue.
- Reuse of Treated Waste Water / The Use of Effective Microbes in Fertilizer Production: The
Company has incorporated treated water from its plants in the recycling process. The clean treated waste water is
reused in small parks, lawns, and trees at the factories. The water treatment using biological processes has
naturally creates large amounts of activated microbial sludge from the digestion of water contaminants. The sludge
is used to fertilize the green space at the Company’s facilities.
- Cooperative Efforts with the Government on Natural Resource Protection Scheme: In 2007, Serm
Suk joined the Ministry of Industry’s “Love Chao Phraya River” program and the Bangkok Metropolitan
Administration (BMA)’s “We Love Chao Phraya” initiative. In 2008, Serm Suk participated in the “Love Mother,
Protect Environment” program run by the Ministry of Industry to conserve and rehabilitate the Chao Phraya River.
- Scholarship Program: The Company and the Song Bulsook Foundation have continued the
support to the students through annual scholarship awards with intention to develop the youth’s potential and
education, as well as to encourage the young generation to demonstrate their power of creativity in regards to
environmental protection for the benefit of Thai communities and society. In 2007, the Song Bulsook Foundation
presented 125 scholarships worth Baht 1 million to students who won the contest on the environmental projects
based on the “Protect the Environment with the Power of Creativity” concept. In 2008, 179 scholarships worth over
Baht 1 million were awarded to the students who won the contest on the green environmental projects.
3.4
Undelivered Project
- None –