The economic growth and social progress of Thailand led to the emergence of an increasingly affluent and urban middle class. The substantial improvements in living standards and decline in poverty, along with the expanding middle class have led to an increase in the sales of alcoholic drinks.

The World Health Organization identified Thailand as the country with the highest level of alcohol consumption in the Southeast Asian region, making the country an attractive destination for alcoholic drinks companies.

The spirits category is the most valuable beverage segment in the country in 2021. Vodka is the fourth most valued spirit in the Thai market, after whiskey, brandy, and liqueurs.

bar chart that shows the value of the spirits industry in Thailand by product types in %

The Thai vodka market was valued at 533.9 million USD in 2017. Until 2019, the market showed impressive growth that was significantly slashed by the COVID-19 pandemic in 2020. As a result, the market value peaked at 627 million USD in 2019. In 2021, the market is still recovering and valued at only 573.8 million USD.

bar chart that shows the vodka market value in Thailand in 2017-2021

Premiumization Drives the Spirits Industry

With the emergence of premiumization, major brands identify new opportunities in the craft spirits segment in Thailand. In order to respond to higher demand for craft spirits, entrepreneurs in the vodka market are active in developing new products.

However, craft spirits are not seen as a significant threat to commercial brand spirits, due to the low volume of production, accessibility, and price constraints. Despite that, the segment attracts more and more niche, small-batch distillers, which look to offer exclusive and locally-made products. For example, Edelbrand, a Chiang Mai-based distillery, sells its craft vodka under the Kristall brand.

Thailand’s Progressive National Alcohol Policy

By recognizing noncommunicable diseases (NCDs) as the number one killer in the country, Thailand is among the few countries that have passed progressive legal and policy measures to address them.

The country is among the leading countries worldwide to have implemented more than 70% of the recommended policy options and cost–effective interventions (“best buys”) designed to reduce the NCD burden.

Thailand’s success in alcohol control heavily influences the vodka market. The implementation of control measures, such as higher taxes, typically translates into higher prices for alcoholic drinks.

Thailand Lifts Decades-old Alcohol Ban

Thailand is a major tourism destination, which welcomed nearly 40 million tourists in 2019. The country is also among the top 20 most visited countries in the world for 2019. The Southeast Asian country recognizes tourism as one of the most important drivers of its economy, accounting for 11% of the country’s GDP in 2019.

The country’s tourism industry was heavily affected by the pandemic. Since 2015, Thailand regularly attracted more than 30 million tourists per year. However, in 2020, that number dropped to 6.7 million. In 2021, it declined further to less than 0.5 million tourists for the whole year.

bar chart that shows the tourist arrivals in thailand in 2015-2021

After more than two years of a crippling pandemic-induced drop in international tourism, Thailand has sought out new ways to stimulate the sector. As a result, the country decided to not only loosen COVID-19-related restrictions, but also lift a 50-year-old alcohol ban that forbids alcoholic beverage sales between 2pm and 5pm.

From the 1st of July, 2022, alcohol can be sold at hotels in the afternoon. Furthermore, each province is free to decide if the relaxation will be further extended to restaurants and tourist attractions. It is also interesting to note that tourists demand imported spirits. Despite being slightly more expensive, they are more familiar to them, than the usually unknown domestic options.

Thailand-EU Free Trade Agreement - Greater Benefits in Trade and Investment

The resumption of discussions about a Free Trade Agreement (FTA) between the EU and the Southeast Asian country now presents a significant opportunity for the spirits industry to grow in the next few years.

Negotiations for an EU-Thailand Free Trade Agreement (ETFTA) were formally launched in 2013 but put on hold due to a military coup in Bangkok in May 2014. Seven years after talks collapsed, the two parties agreed to resume negotiations on a free trade agreement (FTA) in June, 2021.

A potential FTA will likely become a mutually beneficial deal that could increase the EU’s access to trade and investment in South-East Asia’s second-largest economy, while Thai exporters would benefit from lower tariffs.