Vietnam’s beer market is promising land for global brands

In 2017, around 305 million liters of spirits and nearly 4.1 billion liters of beer were consumed, making an average consumption of 42 liters of beer per capita. The 90-million population market is projected to swallow over 4.1 billion liters of beer in 2020 and 5.6 billion liters by 2035.

Saigon Beer Alcohol Beverage Corp (Sabeco) and Hanoi Beer Alcohol Beverage Corp (Habeco) are currently the two largest domestic brewers, holding a combined of 59% market share, while nearly the remaining share belongs to foreign companies.

The Dutch beer company Heineken made its first presence in the Vietnamese market in 1991, owning four brands of Heineken, Tiger, Larue and Amstel. The brewer owned a 22% market share in 2017, translating into millions of USD in profit every year.

According to Viet Capital Securities Company (VCSC), more than 90% of market shares are in the hands of Sabeco, Habeco, Heineken and Danish brewer Carlsberg. Meanwhile, other late arrivals such as Sapporo and Budweiser are struggling to get a foothold in the market.

High-profit industry

In 2017, Sabeco reported a revenue of VND34.4 trillion (US$1.47 billion), of which beer products accounted for 87% of total revenue. This resulted in a net profit of nearly VND4.95 trillion (US$212.41 million).

For many years, Sabeco has been maintaining revenue of over VND30 trillion (US$1.28 billion) and growing profits.

Similarly, Habeco brought in VND9.8 trillion (US$420.14 million) in revenue in 2017 and earned a net profit of nearly VND660 billion (US$28.29 million), of which beer was also the main contributor to its positive business results.

Meanwhile, Heineken recorded revenue of VND33.9 trillion (US$1.45 billion) in 2016, significantly higher than that of Sabeco in 2016 of VND30.6 trillion (US$1.31 billion).

Not only holding a large share of the market, foreign brewers have step by step aimed to dominate the entire beer market.

Last December, the Vietnamese government sold a nearly 54% stake in Sabeco to ThaiBev through its local unit Vietnam Beverage for US$4.89 billion. Sabeco on November 12 announced that it has removed the limit on foreign ownership, in turn opening up the company to further investment.

Consequently, ThaiBev, controlled by tycoon Charoen Sirivadhanabhakdi, could increase its shareholding at the company to 100%.

Carlsberg currently holds 17.34% of Habeco and has expressed an interest in raising the stake. As Habeco’s strategic investor, Carlsberg is entitled to increase its stake in the company to 30%, but the group has been targeting a majority share of 51%.

In a meeting with Prime Minister Nguyen Xuan Phuc on September 12, Carlsberg’s CEO Cees’t Hart said Carlsberg wanted to invest significantly in Vietnam's second largest domestic brewer, adding that the Danish brewer has been in talks with Vietnam's Ministry of Industry and Trade (MoIT) to facilitate the investment.

According to Reuters, the government planned to fully pest its 81% stake in Habeco.