At a Glance

Moody predicts 2.7% GDP growth in 2014 and the BOT expects 5.5% growth in 2015. The

economy will likely sustain high growth in the medium term however if there is not more political

stability Thailand is at risk of losing their competitive advantage.

Franchise Glance

Thailand is the 2nd biggest economy in Southeast Asia and the 4th richest economy. The World

Economic Forum Global Competitiveness Report 2013-2014 has Thailand in 37th place out of 148

assessed economies.

The government strongly supports foreign direct investment from all countries and as franchising is

viewed as a boost to the economy, they are open and supportive to franchise systems from

overseas entering the market.

Thailand is very keen to continue to pursue Free Trade Agreements but with recent problems some

of these discussions are on hold until the political landscape has stabilized. Despite this, within the

ASEAN network, Thailand is the 3rd largest trading partner with the EU and Thailand imported

US$632 million in consumer oriented foods from the US in 2013; a very respectable increase of

73% from the previous year (GAIN).

Globalization, the media, and rising living standards-helped by Thailand’s government policies such

as minimum wage increases and tax relief-are causing changes in consumption patterns. In

particular, the urban population and young demographic are showing an increased demand for

global products to match their improving lifestyles.

Macro data:

Thailand’s GDP is US$662 billion and the economy expanded by 2.9% in 2013. Driven by

domestic consumption and the government’s Keynesian fiscal policy, GDP is forecast to grow

by nearly 3% in 2014.

The retail and wholesale industry grew by 9% in the first half of 2013 (Thai Retailers

Association).

Food consumption from 2013 to 2018 is expected to increase by (CAGR) 6.2 % (BMI).

Per capita disposable income rose 6% to US$3,595 in 2012 (GAIN).

Nearly 60% of the population is employed and the majority of those are under 30 years old.

Generally the population is already well-developed in terms of globalization and it is a young

population; people aged from 15 to 35 represent 32% of the total population. This demographic is

open and willing to try new products and they follow global trends through social media as they

seek to live a more global lifestyle emulated by television and the internet.

Moreover the some 30 million middle-class overseas educated consumers are also willing to

purchase foreign brands as they perceive them to represent status and to be better quality than

local brands.

Thailand is following a similar pattern seen across other Asian countries, the rising middle-class and

their associated increased spending power is creating a new market that has huge potential and is

relatively unexploited. These consumers have become choosier about the products they buy and

you are seeing products that have health benefits and superior quality as key points-again, an

overall Asian trend.

The rising purchasing power of consumers will continue to stimulate demand over the coming years.

This demand coupled with a proven willingness to try new products translates into increased

revenue for global franchisors.

Thailand’s franchise industry is in a good place and has grown 20% annually and all expectations

point to continued good growth. In 2013 there were 370 franchise brands with over 12,000

franchisees. The number of franchise brands is expected to reach 500 in 5 years (US Export.gov).

Of the 370 existing brands, 85% are domestic companies. Although this is a large percentage, the

majority of these franchises are in stalls/kiosks and cafes. The remaining 15% of the market is

made up of foreign operators who have a much stronger market share in other sectors such as

QSR/restaurant, services and beauty.

As is similar in most countries, the food and beverage sector is the main franchise area. You will

find most of your international USA big brands represented (KFC, McDonalds, Dunkin Donuts,

Baskin Robbins; Burger King, Starbucks, Subway etc.) but there are only 18-20 USA brands,

representing just 5% of total foreign brands.

This lack of penetration equates to a potential untapped market for non-domestic franchisors, a

recent trend Japanese franchisors have been quick to pick up on and they now account for the

majority of recent market entrants. There are around 20 Japanese food brands in the market.

Within the food sector, exciting areas include:

Ready-to-eat foods.

Functional foods.

Fast foods.

Bakeries.

Snack foods.

Confectionary dairy products.

| FRANCHISE Key Point | One key point that makes franchises attractive to Thailand franchisees is

the low capital requirement and the low operating costs. | FRANCHISE Key Point | Adapting a

franchise model to a smaller scale operation or introducing a mobile model will appeal to a wider

range of potential franchisees.

Thailand consumer

Thailand consumers, on average, spend a low 18% on housing which frees up money for higher

spending in other areas: 30% on food, beverages and tobacco; 13% on recreation, reading and

education and 12% on clothing and footwear (Santander). With increasing salaries this

comparatively larger proportion of disposable income has resulted in a change in purchases and

how the consumer values brands.

This change in buyer behavior has had a welcomed effect in the food sector. Retail foodservice

locations are forecast to experience an average growth of 3.9% from 2010 to 2015 (Euromonitor).

Traditionally Thailand people rarely eat out instead they cook at home with their family. Particularly

in the urban and rising middle-class demographic this trend has changed: Nielsen recorded that

70% of Thais eat out at least once a week. This emerging trend, the afore-mentioned consumer

economics and just more adventurous, global eating habits are driving this sector. Likewise, the

take-way/home delivery sector has displayed rapid growth as consumers are valuing their free time

and the convenience over the comparatively higher expense of having delivered food.

Foreign franchisors have an in-built competitive advantage to attract this developing market as

they are well-experienced in terms of marketing/promotion strategies, ambience and level of

service compared to domestic players.

With a more brand aware, less price-oriented consumer, does not come a frivolous consumer and

franchisors have to be careful to balance their price point. Thailand consumers still retain a strong

value for money philosophy. Free samples, coupons and POS discounts are a mainstay of retail

outlets and therefore remain important tools to attract and retain consumers.

Thailand Tastes

Thailand consumer expenditures on food and beverages reached US$63 billion in 2012 . (Board of

Investment: Thailand’s Food Industry).

The typical Thailand diet consists of rice, meats, eggs, vegetables, fish and seafood. The

fundamental 4 tastes that dominate Thailand cuisine are:

Sour.

Sweet.

Salty.

Bitter.

To help franchisors adapt their menu, here are the staple ingredients of Thai dishes:

Vegetables.

Poultry.

Pork.

Fish.

Chili.

Lime juice.

Lemon grass.

Coriander.

Black pepper.

Ginger.

Tamarind.

Coconut milk.

The bottom line

The franchise market is well-developed but by no means saturated. The expanding economy and

middle-class segment will continue to fuel demand for foreign brands. It is a dynamic market and

so will continue to generate new opportunities across various sectors. In its strong favour is the

proven demand for overseas brands and the pre-equipped knowledge and experience an overseas

franchisor has.

To conclude: An attractive, aware market.

Franchise Meets reckons: 6/10. (2014 political uncertainty downgrades Thailand)