Small-scale brewers and beer merchants have welcomed a cabinet decision to approve key changes to the 2022 ministerial regulation on the production of alcoholic beverages, paving the way for the nationwide distribution of craft beer in kegs.
They believe the changes will give entrepreneurs more trade opportunities while consumers will have a wider variety of beer options available to them.
On May 13, cabinet approved in principle a draft ministerial regulation on alcohol beverage production, proposed by the Excise Department under the Ministry of Finance.
The change aims to revise the criteria and conditions related to production, reducing entry barriers for new producers, particularly small-scale and community-based beer or liquor makers.
The move is aligned with the government’s policy to boost the competitiveness of local producers, raise community income and promote the use of domestic agricultural products.
Key revisions to the regulation include simplifying the licensing process for medium-sized producers, implementing solutions for legalising community distilleries in remote areas and streamlining processes for operators to establish medium-sized liquor businesses.
One of the most significant changes allows brew pubs and craft beer producers to distribute their products in kegs, with designs and sizes in accordance with Excise Department guidelines, nationwide. It was an option that was previously restricted and a major hurdle for small brewers trying to scale up operations.
These on-site beer production outlets will be recognised under the new regulation as “fresh beer breweries”.
The regulation is expected to stimulate growth in the craft beverage sector and encourage innovation among local producers while boosting tourism and cultural exports tied to unique regional products.
The revised regulation will also allow small- and medium-sized distilleries to be established less than 100 metres from a public water source by providing wastewater treatment systems that meet environmental safety standards.
Finally, entrepreneurs can establish a medium-sized production site immediately without having to operate as a small-scale one for a year beforehand.
Benefit local industry
Prapawee Hemathas, a business partner of United People’s Brewery and founder of Group B Beer, a craft beer distributor, welcomed the changes, saying brewers and sellers have called for certain restrictions to be removed for a long time, particularly one that limits craft beer sales only to the premises of breweries.
She said the regulation will benefit the local craft beer industry as consumers will have wider and easier access to high-quality craft beer products, and it will also allow new high-calibre entrepreneurs to enter the market.
She also brushed aside concerns from anti-alcohol networks who say the regulation will encourage more beer consumption.
“By nature, those who are non-drinkers still abstain from alcoholic beverages,” she said.
However, she said that the new rule may push down the prices of craft beer.
“The prices may go down a bit, but not too much. The main production cost is taxes imposed on brewers. Often, the production of craft beer has to be outsourced overseas so brewers have to pay taxes in several steps of the production process,” Ms Prapawee said.
“While local brewers will be allowed to produce their own beer under the new rule, prices will not go down much,” she said.
“But the new rule will still encourage more competition among brewers, and consumers will have wider and cheaper beer options available.”
Apart from taxes, other production costs will account for the import of raw materials for making beer and packaging and labour, she said.
“Small-scale brewers are disadvantaged compared to larger-scale manufacturers. The alcohol tax calculation is based on alcohol content and price,” she said.
“Large-scale manufacturers can sell large quantities in convenience stores at cheaper retail prices so their calculated taxes are lower, while small-scale craft beer brewers [which have a limited number of retail outlets] have to pay five times as much in taxes,” she said.
In Thailand, the excise tax on alcoholic beverages, including beer, spirits and wine, is a combination of ad valorem (based on value) and specific (based on volume) taxes.
The rates vary depending on the type of alcoholic beverage, alcohol content and whether it’s imported or domestically produced.
Ms Prapawee also said that craft beer brewers are unlikely to compete with large-scale brewers for market share as their customers are different.
“Craft beer brewers produce high-quality products which incur higher production costs. Consumers of craft beer are mostly premium customers which also drink wine and liquors and earn more than general beer consumers,” she said.
She added there are currently about 30 registered small-scale brewers, and most of them are ready to distribute their products once the new regulation takes effects.
“However, the challenge is for them to build brand awareness and consumer trust,” she said, adding the long-established brewers will have a competitive advantage as they are already well-known.
“It will boil down to competition in a free market. The quality of the products, affordable prices and marketing strategies will be key factors in the competition,” she said.
“Craft beer brewers still have a lot to learn. They will have to find customers away from their breweries before distributing products.”
She also called for other restrictions to be removed, such as the ban on alcohol ads and the rule regarding the alcohol sale time.
Trade opportunities
Taweechai Thongrod, owner of a local distillery, echoed the view that the new regulation will give customers more choices of alcoholic beverages while local entrepreneurs will have more trade opportunities.
“The existing requirement for a minimum investment of 10 million baht in these businesses is also removed under the new rule,” Mr Taweechai said.
“If you have 1 million baht to invest in building a brewery, you can now make up to 500 litres of draft beer for sale. In the past, this was only an unfulfilled dream.”
However, he said that it is unlikely that the new rule will help reduce large-scale manufacturers’ dominance in the industry.
“It is hard to say that this will reduce monopoly. But we can say that more income is expected to be generated and distributed in local communities,” he said, while expressing support for calls for the ban on alcohol sale ads to be removed.
‘One licence fits all’
However, Taopiphop Limjittrakorn, a Bangkok MP from the People’s Party, voiced strong criticism, calling the measure a minor and delayed step in the broader effort to liberalise the local alcohol industry.
He said that considering the new Liquor Act has already passed in January, “this new move feels like offering mere crumbs”.
He argued the new regulation fails to align with the broader intent of the updated Liquor Act, which aimed to open up the industry and support small producers.
One issue, he noted, is that under the new rules, producers are still limited to kegs and are not allowed to bottle their products.
He suggested the government issue “a single licence” that allows the production of all kinds of alcoholic beverages, including beer and liquor.
“The production process of beer is not much different from that of liquor. Why not allow all kinds of alcoholic beverages to be made at a single factory? Liquor taxes and beer taxes can be paid separately,” he said, adding the regulation should also allow craft beer brewers to bottle their own products.
He added the Excise Department should only be responsible for issuing licences for liquor production and collecting taxes.
“The department should not determine how much liquor should be produced,” he said. “The department should only focus on issuing licences easily, so it can collect taxes. That should be its main role.”
As for the potential health and environment issues and the size of the breweries, there are other laws that regulate them, Mr Taopiphop said.
He also downplayed the concern that the new rule may help breweries expand their business, leading to more social problems in the country.
He said the number of small-scale breweries is still limited, and that it is the government’s duty to take measures to regulate them.
However, he agreed that the new rule would bring about more economic benefits, saying that craft beer is more expensive than regular beer. “When the production of craft beer is easier, more employment will follow. New entrepreneurs will emerge,” he said.