FSS International Investment Advisory (FSSIA) expresses a subdued outlook for Thailand’s beverage sector in the second half of 2025, citing intensified competition in the domestic energy drink market, softening consumer spending, and a significant decline in Cambodia’s market demand.
While ready-to-drink green tea saw slight recovery, the overall beverage sector is expected to post weaker profits in 2H25 compared to the first.
According to FSSIA, the energy drink market—after 13 consecutive quarters of growth—began to slow in July-August 2025, contracting 0.1% year-on-year as purchasing power waned. The brokerage firm now forecasts the category will grow by just 1% in 2025, revised down from an earlier 3% estimate.
As the Cambodian market falters, Carabao Group (SET: CBG) has intensified its domestic focus, resulting in heightened price competition. Notably, Osotspa (SET: OSP) recently introduced a 10-baht “yellow cap” energy drink at 7-Eleven stores, a move that is expected to pressure sector gross margins in the second half of the year. Meanwhile, the ready-to-drink green tea market returned to year-on-year growth in July, offering some offset.
For the third quarter, FSSIA projects sector profits will fall 16.4% quarter-on-quarter and 4% year-on-year, led by CBG, OSP, and Sappe (SET: SAPPE). Only Ichitan Group (SET: ICHI) is expected to deliver a year-on-year and quarter-on-quarter profit rebound.
Looking ahead, the analyst cuts its profit forecasts for the beverage group by 3.4% in 2025 and 2.9% in 2026, with reductions across OSP, CBG, and SAPPE. ICHI stands out as the only company to see its 2025 normalized profit estimate revised up, by 16% year-on-year. Excluding one-off gains at OSP and ICHI, the group’s core profit is projected to grow by just 1.3% in 2025 and accelerate to 6.4% in 2026.
In the short term, positive catalysts remain, including the government’s ‘Half-Half’ co-payment stimulus, which previously boosted green tea sales by an average of 13.9% year-on-year during past implementation periods, while energy drink revenue fell by 2.2-2.5% year-on-year, underscoring a clear benefit for ICHI relative to its peers.
On top of this, the sector will be watching potential changes to industrial gas cost calculations in 2026; a shift from Single Pool Gas to LNG-linked pricing could impact OSP and CBG’s net profit by 7.7% and 4.3%, respectively.
Given these trends, FSSIA has downgraded its investment stance on the beverage sector to ‘Neutral’ for 2H25, maintaining ‘Hold’ recommendations on OSP, CBG, and SAPPE, due to weak profit outlooks, ongoing intense competition, slowing overseas revenue, and a stronger baht.
ICHI is the sole ‘Buy’ recommendation in the group, supported by anticipated 2H25 profit growth, a domestic revenue share of 85-90% insulated from U.S. tariffs and benefiting from potential government stimulus, attractive valuation at 12.7x 2025 PE, and the sector’s highest expected dividend yield at 9-10% per year. FSSIA sets ICHI’s target price at THB 14 per share.
