Serm Suk Public Company Limited
4.
Business Operations by Product
4.1
Products and Services
Annual Report 2009 (56-1)
Manufacturing and Distribution: The Company has been appointed by Pepsi-Cola International
Ltd., New York to manufacture and distribute carbonated soft drinks under the brand names of Pepsi, Pepsi Max,
Pepsi Twist, Mirinda, Seven-Up, Mountain Dew, and Club as well as concentrate, under the 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 nontransferable. The Company is also the manufacturer and distributor of drinking water and soda water under its
own Crystal brand name, 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 orange flavored fruit juice,
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.
4.2
Marketing and Competition
Soft Drinks
The production and distribution of soft drinks is a major industry requiring modern machinery for
production and quality control, and large numbers of personnel for transport and delivery of products to
customers. The business is important in supporting businesses throughout an extensive value chain including
those that produce sugar, glass bottles, plastic bottles, plastic cases and bottle caps.
Competition is a year-round factor in the carbonated soft drinks industry, but growth in this
product category is not as high as other beverages due to new entrants in the market and changes in consumer
behavior in favor of drinking water, fruit juices, mineral water and milk products. These products are now
competing directly with carbonated soft drinks.
The keys to success in the soft drinks industry are the ability to offer products manufactured to
high-quality standards, providing good service and responsiveness to consumer demands. Opportunity in the
beverages industry depends on the increase in distribution channels and expansion in the business of
established customers, such as large wholesale and retail outlets, supermarkets, convenience stores and quick
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Serm Suk Public Company Limited
Annual Report 2009 (56-1)
serve food outlets. Ultimately, the growth rate in the industry is largely determined by the economic fundamentals
of the country in which that industry operates.
The prospects for the growth and development of an individual soft drink enterprise are
impacted by its ability to execute marketing activities, including advertising, sales promotions, packaging design
and the introduction of new flavors/variants that attract consumers. All of these efforts can contribute to the
expansion in the business.
As mentioned, competition in soft drink business has become fiercer with the entry of new
players, emphasizing higher volume and lower prices compared to existing products in the market. The Company
has had to alter its marketing and distribution strategies and employ a range of measures to protect and increase
the market share of the Company’s products. In 2009 Serm Suk introduced several new non-returnable package
sizes including 460 ml, 480 ml, 1.2 litre and 1.5 litre and combined them with an aggressive pricing plan. This
move was well received by the market.
Crystal Drinking Water
The success factors of Crystal drinking water are product quality, customer service and
engaging marketing activations. These factors are critical in the drinking water market, where a plethora of
producers compete with no price differentiation. Today, in addition to the Company’s Crystal drinking water and
the products of other major players, there are an increasing number of entrants to the market leading to consumer
confusion and a cluttered retail environment. This profusion of new brands in the market has had a significant
impact on sales of drinking water. Despite strong competition in the drinking water business, sales of Crystal
drinking water continued to show very strong growth with 16 percent increase of its sales volume last year.
The success of Crystal is attributed to its high quality including certification from NSF
International, an international audit agency that inspects and certifies quality standards of bottled drinking waters.
Crystal is the only bottled drinking water in Thailand to have received this certification.
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 chose to employ 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 beverage company in Thailand. Various promotional activities were
organized jointly by Unilever and Serm Suk resulting in the rapid growth in Lipton Ice Tea 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
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Serm Suk Public Company Limited
Annual Report 2009 (56-1)
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 10 oz. and 15 oz. returnable bottles and 350 ml. and 450 ml. PET
bottles, during 2009 Lipton grew by a strong 19%. The bottling of this product is done by Serm Suk Beverage Co.,
Ltd., a subsidiary company of Serm Suk, while the distribution continues to be handled 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’s number one sport drink. Gatorade is a highly
recognized and popular sports drink brand. Gatorade is scientifically formulated to offer excellent absorption
without carbonation and good taste, which makes it ideal for athletes and anyone who loses fluids through
perspiration. Gatorade currently has two flavors, lemon and grape and is distributed in a new 350 ml and the
500 ml PET bottles.
Tropicana Twister Fruit Juice
Another step towards being a total beverage company was the launch of 14% fruit juice
under the Tropicana Twister brand. This product is manufactured by Serm Suk Beverage Co., Ltd. and
distributed by Serm Suk Public Co., Ltd. Tropicana Twister, orange flavor, is available in 250 ml. returnable
bottles as well as 250 ml. non-returnable glass bottles and 350 ml. PET bottles. In 2009, Serm Suk successful
introduced Tropicana Twister with pulp to extend the brand franchise. Tropicana Twister is another alternative
for consumers who wish to purchase refreshing and healthy products.
Red Carabao
In October 2002, the Company was appointed the distributor of the Red Carabao energy
drink by Carabao Tawandang Co., Ltd. In 2009, sales of Red Carabao slowed as a result of the economic
contraction in Thailand’s manufacturing sector, which significantly impacted the purchasing power of the
brand’s primary consumer base.
Oishi Green Tea
With the growing popularity of green tea, the Company was appointed the distributor of Oishi
green tea for Oishi Trading Co., Ltd. beginning in November 2005, for traditional trade channel. Over the
course of 2009 sales of Oishi increased 6% in the face of increasing competition.
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Serm Suk Public Company Limited
4.3
Annual Report 2009 (56-1)
Products and Services Sourcing
Sources of key materials are as follows:
Concentrates for Pepsi, Pepsi Max, Pepsi Twist, Mirinda, Seven-Up and Club are sourced from
Pepsi-Cola (Thai) Trading Co., Ltd.
Concentrates for Lipton are sourced from Pepsi-Cola (Thai) Trading Co., Ltd.
Concentrates for 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 product owners.
Other materials for production such as sugar, CO2, various chemicals, bottles, crown seals, plastic
cases, PET bottles, cans, shrink film, and cardboard trays and boxes are sourced locally.
With the exception of 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 a continual supply of raw
materials and packing materials at reasonable prices.
Currently production is being conducted in 5 plants
1) Pathumthani Plant
Located at 63 Nonthaburi-Pathumthani Road, Tambol Kayang, Muang
District, Pathumthani Province
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 District, Nakorn Sawan Province
Located at 11 Moo 5, Asia 41 Road, Tambol Tarongchang, Pun Pin District,
Surat Thani Province
Located at 700/369 Moo 6, Tambol Nong Mai Daeng, Chonburi District,
Chonburi Province
Production Capacity and Production Volume
Full Capacity (Unit: bottle per hour)
Soft drinks
Actual Production Volume (Unit: bottle per hour)
Soft drinks
Utilization (%)
Increase/(decrease) (%)
2009
2008
2007
585,202
594,350
584,816
483,155
82.6%
+0.2%
489,640
82.4%
-1.5%
490,756
83.9%
-11.4%
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Serm Suk Public Company Limited
Annual Report 2009 (56-1)
Actual soft drink production volume in 2008 and 2009 declined due to increased production volume of
products in larger package sizes which generate lower volume per hour compared to smaller package sizes.
Environmental-Protection
Serm Suk has focused on environmental protection by mandating strict environmental policies and operation
guidelines to minimize the Company’s environmental impact. The company has operated under the 5 Serm
Suk Green Dimensions which are water, packaging, energy, environment and human resources.
First Dimension: Water
Wastewater Treatment
Serm Suk was one of the first companies in Thailand to introduce an effective wastewater treatment
system in its waste elimination process. Currently, it is used as a showcase for students and other business
operators seeking knowledge on effective waste elimination and management.
The Company has continued to invest in its wastewater treatment system according to governmental
regulations in all of its production facilities.
In particular, at the Pathumthani plant which is located on the bank of the Chao Phraya River, Thailand’s
most important river, the Company has invested close to Baht 50 million to construct a powerful wastewater
treatment system before releasing water into the river. This system is in full compliance with the standards set by
the Ministry of Industry and Ministry of Transportation which are as follows:
PH
Standard
5.5-9.0
BOD (ppm) COD (ppm)
< 20
< 120
TSS (ppm)
TDS (ppm)
TKN (ppm)
Grease & Oil
< 50
< 3000
< 100
<5
The Company monitors its waste water treatment system 24 hours a day and analyzes water quality
before the treatment process as well as prior to release. The treated water discharged from the plants contains
less than 5mg/l BOD (Biochemical Oxygen Demand) which is 5 times cleaner than the requirement of the
Department of Industrial Works and Pollution Control Department and 50 times cleaner than waste water
discharged from residential households. In 2006, the Company invested over Baht 10 million to install the HACH
BOD examination system in its 5 plants. The system helps ensure round the clock water quality monitoring with
data sent directly to the Department of Industrial Works via satellite to facilitate effective real-time water
management.
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Serm Suk Public Company Limited
Annual Report 2009 (56-1)
Natural Resource Protection
The Company conducted a water 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 the past
few 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.
- Reuse of Treated Waste Water / The Use of Effective Microbes (EM) in Fertilizer Production:
The Company has incorporated treated water from its plants in the recycling process. The treated waste water is
reused in small parks, lawns, and trees at the factories. The water treatment using EM naturally creates large
amounts of activated microbial sludge from the digestion of water contaminants. The sludge is then used to
fertilize the green space at the Company’s facilities.
Second Dimension: Packaging
Serm Suk has targeted to minimize waste associated with packaging by applying the 3R concept:
Reduce; Reuse; and Recycle as follows:
- 1. Reduce packaging materials used by developing a lighter PET bottle, using just the right
amount of plastic resulting in a reduction in plastic use of 1,000 tons per year. The company also plans to reduce
paper used in product trays so that fewer forest resources will be used.
- 2. Reuse packaging by promoting the use of returnable bottles
- 3. Recycle by sorting materials that can no longer be used and sending them to recycling
facilities.
Moreover, Serm Suk also joined with 20 leading companies and 5 major industrial groups to establish the
Packaging Management Institute in 2006. The Institute is under the supervision of the Federation of Thai
Industries and has the objective to manage the country’s used packaging materials properly and sustainably so
as not to cause an environmental impact.
Third Dimension: Energy
River Transportation System for Better Pollution Control
The Company has utilized a river transportation system since 1980. Currently, the Company has 3
engine boats and 4 barges in operation. Each of the tuck boats has a capacity of 8,640 cases of beverage, which
is equivalent to the capacity of 20 transportation trucks. With this method of transportation, it can reduce 240,000
liters of oil and relieves traffic congestion. River transportation is highly cost efficient while it also helps reduce
pollution and traffic problems and promotes energy conservation.
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Serm Suk Public Company Limited
Annual Report 2009 (56-1)
The Use of Methane Gas as a Replacement for Bunker Oil and alternative energy
The Company has deployed methane gas which is a bio fuel generated as a by-product from 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. Moreover, the company also facilitated the use of alternative energy
such as NGV, LPG or diesel B5 in its entire fleet of vehicles which both help reduce the nation’s dependence on
foreign energy and lowers the Company’s carbon footprint.
Fourth and Fifth Dimension: Environment and Human Resource
Human Resources are a key element in the success of environmental sustainability programs. To be a
best practice company, it needs drive from employees who genuinely care about the environment. Serm Suk has
appointed a team of over 30 environmental crews, certified by the Department of Industrial Works and the
Thailand Environment Institute, to handle environmental issues and the waste water treatment system. The
company also provided enhanced environmental knowledge for employees in the environmental protection area
by facilitating continuing education with internal and external organizations.
Additionally, Serm Suk provides an opportunity for the public, including academics and students to visit
and observe its waste water treatment system. The program welcomes more than 1,000 visitors annually. Serm
Suk has offered instruction on waste water management to many organizations.
4.4
Undelivered Project
- None –
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