Development of Vietnam’s beverage industry in the first 6 months of 2022
Pain covers the entire economic sector: Raw material prices increase
Rising raw material prices have had a serious impact on the beverage industry. The reasons for the increase in material prices can be mentioned as follows:
(1) The Russia-Ukraine geopolitical conflict, accompanied by the West’s strong economic sanctions against Russia and the opposite reactions of Russia, have had a comprehensive and profound negative impact on the economy. In the world economy, Vietnam is no exception.
(2) High global inflation caused the prices of inputs of the beverage industry to increase sharply: malt (for beer), aluminum, flavorings, plastic packaging, bottle caps, … increased by 40-50% compared to same period in 2021.
Beverage industry developments
Faced with the general situation of the whole economy, how does the beverage industry evolve?
Beer industry – heavily affected by rising raw material costs:
Supply situation of the beer industry:
- Beer production in the first 6 months of 2022 reached about 2.6 billion liters, down nearly 29% compared to 2021.
- Beer import turnover reached about 19.4 trillion USD
- The cost of production materials has increased, logistics costs have increased, especially the costs of two important materials for beer production: Malt and aluminum.
- Malt prices are up 40-50% compared to pre-pandemic levels. The main reason is due to the supply chain disruption from the Russia-Ukraine conflict when Ukraine is one of the top five barley producers in the world.
- The price of cans increased by 30-40% over the same period in 2021: The cans are mostly made of aluminum. The impact of inflation, as well as supply disruptions from Russia (a major global aluminum supplier) made the price of cans increase sharply over the same period
In addition, other costs such as bottle caps, paper boxes, filter aid powder prices, hops prices, and raw sugar prices also increased, causing difficulties for manufacturers.
Despite the high price of input materials, beer production volume in the first 6 months of 2022 increased by about 14% compared to the same period in 2021.
Consumption status of the beer industry
- Beer consumption is about 2.3 billion liters, sales revenue is about 14.8 trillion VND
- Revenue structure of domestic beer consumption in the first 6 months of 2022:
Canned beer accounts for the highest percentage of more than 70%, bottled beer accounts for nearly 25%, the rest is draft beer and draft beer.
- The outlook for brewing businesses is considered positive thanks to:
- Raw material costs tend to be more stable. Prices of key input materials tend to correct down in the second half of 2022, easing pressure on manufacturers.
- Demand for beer increases again
Euromonitor forecasts, Vietnam’s beer market will grow by 11% in the next 3 years when the Covid-19 epidemic is under control. In the short term, there are many signs that the beer industry will continue to prosper.
The spirits industry is rated as neutral growth:
The current situation of the supply of spirits industry:
- The production of spirits decreased rapidly in the first 6 months of 2022, down 30% compared to the same period in 2022,
- Import turnover of spirits reached about 370 million USD. Vietnam imports spirits in Singapore accounting for the largest proportion, followed by Hong Kong, UK,…
- The top spirits brands in 2021 are: Chamisul, Hanoi Vodka, Jinro, Chum Churum, Avinaa, Men’s,…
- Top spirits companies are: Hite-Jinro Vietnam, Halico, Diageo, Pemod Ricard Groupe, Lotte Vietnam, Avina, Binh Tay Wine,…
- Imported products dominate the Vietnamese spirits market, but there is not much incentive to produce for the domestic alcohol market:
- In terms of supply factors: domestic production of spirits is not attractive to investment, production lines and product capacity have not been breakthrough. The business situation of strong domestic enterprises such as: Halico, Aroma… are unstable in financial health, weak in management. Domestic products do not create prestige in the face of tax evasion, counterfeiting and imitation goods. Leads to unfair, unfair competition.
- Demand: the spirits industry is still facing many challenges. The tastes and requirements of consumers for food in general and alcohol in particular are increasingly strict in terms of product quality and image. and packaging design… Low domestic demand makes it difficult for manufacturers to operate, unable to reduce production costs. Especially, the impact of Covid-19 that has slowed down production has caused suppliers to fall into a difficult situation.
Status of alcohol consumption:
- Sales of about 36 million liters, an increase of about 2% of svck last year
- The outlook for spirits manufacturing businesses is assessed as neutral
Beverage industry – trends in safety and health protection:
Current status of beverage supply:
- In the first 6 months of 2022, beverage output reached more than 3.8 billion liters, down 19% compared to the same period last year.
- Input costs of petrol, plastic packaging, paper, aluminum prices, sugar,…) all increased suddenly
- Beverage market is considered as a concentrated market, the market share of the top 3 enterprises accounts for more than 50% of the industry’s consumption.
- The top companies with a market share of soft drinks are: Suntory Pepsico, Tan Hiep Phat, Coca-Cola, URC Vietnam, La vie, Red Bull (Vietnam), Interfood Joint Stock Company, Vinacafe Bien Hoa, Saigon Pure Water
- Top beverage brands: Green tea 0 degrees, C2, Aquafina, Oolong tea +, Twister, La vie, Coca-cola, Red Bull, 7-up revive, Pepsi
- Recent market studies show that the trend of using fruit juices and concentrates is increasingly popular.
- The reason, driving growth in this industry is because consumers are increasingly interested in healthy drinks. This is good news for natural fruit juice manufacturers. TH Group “paved the way” in the trend of producing juices, concentrated juices from oranges, longan…
- In addition, factors that help promote the growth of fruit juice imports:
(1) The average income of people increases, the demand for better quality and healthy products increases;
(2) Imported products are diversified with beautiful designs.
- Non-carbonated soft drink import turnover, carbonated soft drink import and export turnover
Beverage industry outlook:
Beverage has great potential in many small segments:
- Bottled water: According to Masan, the bottled water market in Vietnam, with a market size of VND 17.5 trillion in 2021, is forecast to grow double-digits in the short and medium term, with the main reason being quality. Water resources are increasingly declining in some regions, leading to a sharp increase in the demand for safe and clean drinking water. In addition, the majority of the population still lacks clean water, due to rapid population growth and urbanization. These are expected signals for the bottled water market to grow.
- Nutritional product lines: Consumers’ criteria tend to choose products with healthy ingredients: fruit juices, nutritious drinks (eg: bird’s nest…). With improved consumer income, this product line is expected to grow in the medium and long term.
- Soft drinks: The product line is associated with the development of fast food chains as well as the development of entertainment and entertainment services (eg, watching movies…). Nestle Vietnam with its Milo product line, is competing with Pepsi and Coca distributed in these channels, showing the diversification of the industry.
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