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., 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, 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 soft drinks industry promotes economic growth and employment in the areas where the
plants are located. Besides the distribution to retailers and wholesalers, distribution of soft drinks also
covered a variety of small businesses such as push-carts, beverage stands, and shops selling drinks. It
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 high-quality
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, use of new forms of packaging, 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. In
2006, a new operator has entered the soft drinks market in the North and North East regions with a
product under “Big Cola” brand, emphasizing on its bigger volume and cheaper price compared to
products in the market. In 2007, new cola drinks under brand name “Colala” and the one imported from
Malaysia under brand name “Mecca Cola” have entered the market with lower retail prices. With the
entrance of these new operators, the Company has to change its 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. Beside the Company’s Crystal drinking water, other major players with the large market
segment are Singha Drinking water, Pure Life, and Nam Thip. Despite the competitors’ strong efforts to
push their products into the market through the available distribution channels, sales of Crystal drinking
water continued to show very strong growth with 25 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.
In 2006, Lipton tea in 500 ml. PET bottle was introduced to the market. In 2007, a new 450 ml. PET
bottles were introduced. The bottling of the product is done by Serm Suk Beverage Co., Ltd., subsidiary
company of Serm Suk while distribution is still by Serm Suk Public Co. Ltd., as with other Lipton
products.
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 no. 1 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 is distributed in 400 ml and 250 ml glass bottles
and has two flavors, lemon and grape. Major competitors are Sponsor Sport Drink and M Sport.
Tropicana Twister Fruit Juice
Another step towards being a total beverage company was the launch of 10% fruit juice under
“Tropicana Twister” brand. The products are manufactured by Serm Suk Beverage Co., Ltd. and
distributed by Serm Suk Public Co., Ltd. Tropicana Twister, orange flavor, is available in 250 ml. nonreturnable 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. The growth in 2007 registered at 28 percent.
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 50 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 concentrate, no material sourced from a single supplier represents more than 30% of
total purchasing value.
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
Located at 211 Moo 4, Nakornratchasima-Kabinburi Road, Muang
District, Nakornratchasima Province
3) Nakornsawan Plant
Located at 72 Paholyothin Road, Tambol Nakornsawan Oak,
Muang Distric, Nakornsawan Province
4) Suratthani Plant
Located at 11 Moo 5, Asia 41 Road, Tambol Tarongchang, Pun Pin
District, Suratthani Province
5) Chonburi Plant
Located at 700/369 Moo 6, Tambol Nong Mai Daeng, Chonburi District,
Chonburi Province
Production Capacity and Production Volume
2007
Full Capacity (Unit: bottle per hour)
Soft drinks
584,816
2006
2005
560,041
575,510
Actual Production Volume (Unit: bottle per hour)
Soft drinks
Utilization (%)
Increase/(decrease) (%)
490,756
83.9%
-11,4%
533,475
95.3%
+5.9%
514,710
89.4%
+3.1%
In 2006, the production of soft drink in 10 oz. size continued decreasing while 15 oz size
showed an increase. Proportion of 10 oz. vs. 15 oz. production was 40:60 in 2005 and 35:65 in 2006.
This caused the reduction of total production capacity per hour.
Environmental Impacts
Wastewater Treatment
With over 50 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:
Standard
PH
BOD
(ppm)
COD
(ppm)
TSS
(ppm)
TDS
(ppm)
TKN
(ppm)
Grease &
Oil
5.5-9.0
< 20
< 120
< 50
< 3000
< 100
<5
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. River transportation is not only for cost saving purpose but it also
helps reducing pollution and traffic problem and promotes energy preservation for the nation.
3.4
Undelivered Project
- None –