World’s Top Soft-Drink Stock Taps Chelsea F.C. to Fight Red Bull

(Bloomberg) -- The world’s best-performing major soft-drink stock is backing the allure of English soccer and Chelsea F.C. to fuel its global expansion.

Thai energy-drink maker Carabao Group Pcl -- named after one of the country’s most successful rock bands -- hopes to increase the share of revenues from abroad to 50 percent from about a third currently, partly by leveraging its sponsorship of Chelsea, Managing Director Nutchamai Thanombooncharoen said.

"We chose to spend a huge amount of money in the Chelsea partnership as a platform to build our brand worldwide," she said in an interview in Bangkok after an investor presentation. "It’s a key stepping stone for us."

The company reportedly plans an outlay of 30 million pounds ($39 million) on the three-year sponsorship deal, a tie up Nutchamai said is designed to grow Carabao’s U.K. market share and provide a springboard for U.S. and European expansion. The rock group’s buffalo-head logo, famous in Thailand, adorns the energy drink but isn’t well known outside Southeast Asia. Carabao hopes billionaire Roman Abramovich’s storied Chelsea team will bolster the brand.

Carabao is the top performer globally this year among soft-drink makers with a market value of at least $1 billion, posting a total return of about 100 percent and outpacing the likes of Monster Beverage Corp. and PepsiCo Inc.

The Bangkok-based company, whose name stems from the Filipino word for buffalo, is starting from a low base in the U.K.: sales were 36 million baht ($1 million) in the first six months of the year, according to Nutchamai. The target is a 10 percent market share, helped by steps such as distributing 2 million free cans of the drink over the next 12 months to challenge market leader Red Bull GmbH, she said in the Sept. 14 interview.

"There’s concern about the impact of higher marketing expenses on the company’s earnings," said Itsara Lertsudkanung, an analyst at AEC Securities Co. in Bangkok. "This expenditure will be very high in the initial stage because it has to build a brand in the U.K. and other countries. We expect this will be compensated by higher sales from domestic and other Asian markets.”

Carabao’s net income more than doubled in the two years through 2015 to 1.3 billion baht. The business listed on the stock market in 2014 and is up about 131 percent since then, compared with a 6 percent drop in the benchmark SET Index.

Thailand arguably sparked the modern day energy-drink industry, as the creators of the Red Bull brand are the late Thai tycoon Chaleo Yoovidhy and Austrian billionaire Dietrich Mateschitz.

Chaleo founded T.C. Pharmaceutical Industries Co., which markets a version of Red Bull in Thailand. Carabao’s share in the country overtook Red Bull’s in 2012, though the Lipovitan-brand beverages of Japan’s Taisho Pharmaceutical Co. and its local partner Osotspa Co. dominate, Euromonitor International Plc data shows.

For thirty years, rock band Carabao’s songs have touched on issues such as corruption and the plight of farmers. Hard-living singer-guitarist Yuenyong Opakul lent the group’s name, image and sleep-deprived lifestyle to the energy drink. He’s one of the largest individual shareholders and a senior deputy managing director of the company.

The sponsorship deal with four-time English Premier League champions Chelsea began this summer, and according to a report by The Nation is worth 30 million pounds. Even with Carabao’s buffalo-head logo on the club’s training wear and at press conferences, Nutchamai accepts the U.K. poses a major competitive challenge.

"Going to the U.K. is like fighting with other giants," she said. "But it doesn’t intimidate us because Carabao overcame Red Bull in Thailand, which was in the market much longer."

To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net, Lee Miller in Bangkok at lmiller@bloomberg.net.

To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Sunil Jagtiani, Daryl Loo

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