A production line of Sabeco (Photo: VNA)Hanoi (VNS/VNA) - Vietnam’s beer market is forecast to see big opportunities this year, asthe country has always been held great potential for domestic and foreign beerenterprises. Fierce competition is incoming, as more foreign brands are lookingto tap the market.
The information was released in the Vietnam Industry Research and Consultancy(VIRAC)’s latest report.
With a population structure among the youngest in the world – 56 percent of thepopulation is under the age of 30 – Vietnam Beer Association (VBA) predictsthat total consumer expenses in Vietnam will double and reach approximately 173billion USD by 2020.
According to a Nielsen report, 56 percent of Vietnamese consumers are under 30years old and Vietnam’s middle class will double from 12 million (in 2014) to33 million (in 2020). It is estimated that Vietnam will have two million moreconsumers joining the middle class, becoming the fastest-growing middle classsegment in Asia.
The strong export markets of Vietnam, such as ASEAN countries and China, areall markets with high growth in food and beverage consumption. Along with aseries of free trade agreements, Vietnamese food and beverages have beenlargely able to access key free export markets (without tariffs).
In the context of international economic integration, mergers and acquisitions(M&A) will contribute to raise the size, competitiveness, market share,reputation and efficiency of larger businesses and start a new developmentcycle.
For example, Thai Beverage, a company owned by a Thai billionaire, spent 110trillion VND (4.8 billion USD) to buy 53.59 percent of Saigon Beer Alcohol andBeverage Company (Sabeco) in December 2017. This is not only the largestM&A deal in Vietnam’s history, but also the largest M&A deal in theAsian beer industry.
In 2019, the total beer production will reach more than five billion litres (up22.9 percent over the same period in 2018); consumption reached over fourbillion litres (up 29.1 percent over the same period last year). Beer salesreached over 65 billion VND (up 0.5 percent over the same period last year).
Regarding types of consumption, canned beer consumption accounted for 66.8 percentof total beer consumption in Vietnam, followed by bottled beer 29.9 percent;while draft beer is 3.1 percent and accounts for a modest market share of freshbeer at 0.1 percent.
Regarding imports, the imported beer output reached more than 37 million litres(an increase of 8.9 percent compared to the same period in 2018). The threemain sources of beer supply in Vietnam are the Netherlands (25 percent), Mexico(17 percent) and Belgium (16 percent).
Compared to beer consumption in Vietnam, beer imports into the country accountfor a relatively small proportion. Domestic and FDI beer enterprises dominatethe domestic market, with the advantage of cheap beer prices, which suits thetaste of the majority of customers.
Regarding exports, the export beer output increased 46 million litres over theprevious year, reaching 45.87 million USD. The export volume decreased by about7 percent over the same period. The main reason is that Vietnam’s beer qualityhas not been highly appreciated and not created a brand in the internationalmarket. Equatorial Guinea (about 20 percent) is the largest market forVietnamese beer.
The law coming into effect on January 1 has been effective in adjusting thedrinking habits of many people. It is forecasted that the beer industry growthrate in the year will not maintain the double-digit level as in previous years;reach 6-7 percent in the following years, although each year Vietnam has 1million more people of legal age to drink alcoholic beverages.
In the stock market, shares of the two “giants” in the beer industry, Sabecoand Habeco, have dropped from 0.4 percent to 0.8 percent. Meanwhile, the sharevalue of the entire industry will decline by nearly 13 percent in 2019. Expertspredict that the beer and wine industry will adjust towards a shrinking trendby 2020, in which small businesses will be most affected.
Alcoholic beverages in Vietnam have to pay taxes at two stages of import anddomestic consumption, including three different taxes: import tax (from 5-80percent depending on type of FTA), tax value added (10 percent) and excisetaxes (up from 50 percent to 65 percent in 2018). This can affect theprofitability of beer companies, especially those in the mid-end segment, asthis is a competitive segment and customers are most vulnerable to the impactof the best-selling prices.
Production license can be considered a major obstacle for new businesses. Toopen a beer factory in Việt Nam, businesses must be licensed by the Ministry ofIndustry and Trade. While the regulations are quite clear, implementation canbe difficult. Even if all provinces were willing to facilitate new breweries tocollect taxes, the licensing would depend on the beer and beverage planning ofthe ministry, which may have been registered many years in advance.
According to VIRAC, Vietnam’s beer industry still faces many challenges such ascommunication, risks of changing consumer tastes and M&A, requiringcontinuous efforts and improvement to enhance the position in the internationalmarket./.
VNA
