Thai Life and San Miguel brew distillery JV

JV to build on Thai Life''s extensive liquor experience.

The often-strained and costly relationship between life insurance and alcohol has been given an unexpected boost in the form of a new joint venture distillery between the Thai Life Group and Ginebra San Miguel. Upon completion, the diversified insurer will own 50% of the JV, San Miguel Corporation will control 40%, while the remaining 10% will be in the hands of minority investors.

The partnership between Thailand's number two life insurer and the San Miguel company will be formed through an acquisition of a 40% piece in C.N.T Wine and Liquor Co., Ltd, a subsidiary of the Thai Life Group. According to those behind the scenes, the agreement took nine monthes to finalise, with San Miguel emerging from several other prospective partners.

Through C.N.T Wine and Liquor, Thai Life has already received a licence to operate a distillery. In Amphur Thamuang in the Western Thailand region of Kanchanaburi, ground has been broken for facilities that are expected to be completed in 2006. When operational, the distillery will have nationwide distribution.

"Thai Life's had the licence since 1993 and have wanted to do it for a while," explains Stephen Briones, country head of Thailand for ING Bank, which advised the insurer from Bangkok, Hong Kong and Manila.

Thai Life's foray into the alcohol world is hardly a fresh endeavour. Under the guidance of the Chaiyawan family the group has dabbled in the alcohol business since September 1993 through its Thai Asia Pacific Breweries Co Ltd., a joint venture with Singapore's Asia Pacific Breweries Ltd. With its controlled interest, the brewer is the local manufacturer and distributor of the Heineken and Tiger brands, with the former capturing over 85% of Thailand's premium beer market.

In the spirits arena, the group also formed the whiskey-producing T&L Distillery Co Ltd in March 1996, which has carved out a presence in Laos and is run through a joint venture with Loxley Public Co Ltd, the conglomerate owned by Thailand's Lamsam family.

Aside from bolstering its presence in Thailand's liquor market, which quaffs 800 million litres annually, Thai Life also draws a portion of revenues from its hotel and property arm that has stakes in the Hilton International Bangkok and two of the country's Novotel hotels.

From San Miguel's point of view, the joint venture is the group's second large move into Southeast Asia in recent weeks. On November 17 it purchased Malaysia's Guolene Packaging Industries for $35 million from Hong Leong Industries and its JV with Thai Life follows aggressive activities in recent years to solidify its beverage business across Asia.

The new distillery enters a market that is expected to grow over 5% annually and hopes to exploit Thai Life's distribution capabilities along side San Miguel's technical and development expertise.