Ichitan

What a really worrisome share for Mr. Tan Passakornnatee’s Ichitan Group Public Company Limited or ICHI, one of Thailand’s biggest green tea drink manufacturers and sellers. According to the 2Q18 consolidated financial statements, ICHI shifted from gaining profit to a loss of 30.37 million baht. The Gross margin sank from +23% to +16% in 2Q18. Questions are being raised regarding whether Mr. Tan, the creator of “no dead end to this life” motto [in thai Tan (his name) means dead end), is leading ICHI to a dead end or not. The factor to this question is the turnaround loss of 30.37 million baht from ICHI’s 2Q18, when the company was able to gain 90.24 million baht in the same period of 2017. While in the first half of 2018, ICHI only gained less than 3 million baht profit, which decreased from 152.7 million baht in the same period of 2017. From the outlook, ICHI is facing an unavoidable loss. ICHI is being pressured from the evident decrease of sales in ready-to-drink tea, along with a rise of production cost from sugar tax and the Excise Department, which causes net profit margin to fall. While the international sales are increasing, but due to the high competition, ICHI resorted towards “undercut” to be able to compete with other leading Thai brands and the local brands as well. Although the revenue from international sales are 30% of ICHI’s total revenue, the profit turned out to be very little. Especially, in Cambodia that ICHI dumped the price to the point of creating a chaos in tea market there. The ready-to-drink green tea and Yen Yen herbal drink market are reaching their saturation point, while Bireley drinks could not make a comeback as Mr. Tan has hoped. The investment on Bireley turns out to be in vain since Mr. Tan purchased the copyright in 2014. More importantly, the popularity of ICHI’s products is not because of its quality drinks, but Mr. Tan himself, who individually runs the market for ICHI. The same strategy was also used by him to make Oishi Green Tea popular. It was a turning point in the green tea drinks market at that time. However, the “free gift” strategy is not the way for marketing nowadays. What’s more is that the sales of ICHI clearly rises only during the campaign! What causes ICHI to stumble is the desire to make a difference in product and market strategy. To even make a return possible, ICHI needs to erase its picture of successfulness from the same old strategy that consumers and competitors are all aware of. Otherwise, ICHI would walk into a dead end for real or maybe at par at the best. Anyone would be shocked when taking a look at ICHI’s shares. The price went down 8% in one week, 11% in a month, 21% in a quarter and 108% since the beginning of 2018! The price is not just down, but down to the ground. Not to mention the shabby consolidated financial statements in 2Q18 that keeps sinking ICHI’s shares even further. This is another challenge for Mr. Tan to prove if he can break ICHI through the dead end or not. Maybe the breakthrough is just to find another dead end. Let’s wait and see.