Current situation of Vietnam beverage industry in Q1/2021
The closure of food services directly affects the operations of businesses in Vietnam beverage industry. Most of the manufacturing companies in the beverage industry in Vietnam have weak financial capacity. Hence, when the 4th wave of Covid-19 occurred, most Vietnamese enterprises face difficulties in inventory management, distribution, and human resource management. Therefore, more than 90% of enterprises have to restructure their production and distribution networks to adapt to the economic recession. In addition, 68.4% of companies have applied modern technology in production and distribution to create competitive advantages during the difficult pandemic period.
In terms of retail, small shops, minimarkets, and convenience stores would be temporarily favored against crowded markets or larger super/hypermarkets. Furthermore, the number of transactions for online shopping and home delivery has increased significantly since the Covid outbreak.
On the other hand, the delays in imported/exported shipments caused by the coronavirus outbreak are challenges for suppliers and traders to produce, distribute, and stock goods. It’s more likely to result in an uplift in price which might demotivate consumer spending on beverages.
Alcoholic beverages
Alcoholic beverages (including beer, wine, spirits) are the largest category, accounting for more than 70% of total beverage retail value. Despite receiving a modest compound annual growth rate (CAGR) of 3.5% through 2020, the beer industry in Vietnam is a great investment opportunity. Vietnam is among the top 10 in Asia with beverage consumption per capita was 42 liters in 2020.
Source: VIRAC, GSO, Euromonitor
By the end of Q1/2021, three Covid-19 outbreaks have had a great impact on the beer industry. Restaurants and bars have to be closed due to social distancing. Consumer psychology is afraid to gather to eat and drink. All lead to the gloom of the beer industry. In Q1/2021, beer production output decreased by 15% qoq but increased by 12.1% yoy.
The “giant” in the beer industry, Sabeco, which is famous for the familiar Saigon beer brand, accounts for nearly 40% of the market share. Followed by VBL with 33.5% and Habeco with 10.9%.
Source: VIRAC, GSO, Euromonitor
Spirits production grew 14% qoq and 19% yoy. This is the most positive result since Q4/2019. The scale of Vietnam’s spirits market has reached about 48.12 million liters in 2020, showing that the domestic field still belongs to imported products.
Besides, low domestic demand makes it difficult for manufacturers to operate and reduce production costs. In particular, due to the impact of Covid-19, the production stagnation has caused suppliers to fall into a deadlock situation. Domestic products have not yet created a reputation when faced with tax evasion, counterfeiting, and imitation, leading to unfair competition.
Some enterprises hold large market shares in the market such as Diageo, Pernod Ricard Groupe, Hite-Jinro Vietnam, Halico… However, none of them hold more than 5% of the total market share.
Source: VIRAC, GSO, Euromonitor
Wine production fell 6% qoq and nearly 40% yoy. The challenge of the wine industry is a shift in customer tastes. Previously, the sweet wine made in Vietnam was popular, but now it is less favorable than before. In fact, no domestic product stands out.
Non-alcoholic beverages
Source: VIRAC, GSO, Euromonitor
In Q1/2021, soft drinks output decreased by 8% qoq, and 16% yoy. The consumption of purified water accounted for 41% of total beverage consumption. Followed by all kinds of bird’s nest juice accounting for 35%; fruit-flavored water and non-carbonated mineral water accounting for 9% and 11%, respectively; nutritious bird’s nest water with 8.8%.
Vietnam beverage consumption trend in 2021
Due to the complicated pandemic, consumers are gradually tightening their spending and becoming pickier in choosing food and drinks. According to experts, the trend of beverage consumption in Vietnam in 2021 will be towards a green and healthy lifestyle. Beverages with high nutritional value, organic origin, and safe raw materials are favorable. Industry experts forecast that 2021 will be a breakthrough time for organic foods and the use of environmental protection materials and packaging.
A quick survey of consumer behavior in Hanoi and HCMC in September 2019 by Vietnam Report shows that consumers’ top priorities when buying beverage products are Nutritional Ingredients (response rate 60.3%), followed by Organic Products (51.5%).
Industry experts believe that the consumer demand for beverages, especially in urban areas and big cities, is more and more diverse. However, these needs are also considered more closely in highly technical criteria such as traceability, nutritional products, and health assurance. Therefore, enterprises need to improve the system from production to distribution in order to meet all the increasingly high and diverse needs of consumers.
Forecast of Vietnam beverage industry
A survey conducted by Vietnam Report at the end of 2020 shows that, under the pressure of the COVID-19 pandemic, 50% of customers spend more on drinks that strengthen the immune system as well as organic origin beverages, etc. Meanwhile, 63.7% of customers cut down their spending on alcoholic beverages. Keeping up with that trend, beverage businesses are adjusting their operating capacity and diversifying products accordingly. For example, Heineken has launched a new beer product of 0% alcohol in response to changing consumer demand.
Experts say that the beer industry may take up to two years to recover to the pre-Covid-19 period and before Decree 100 of the Government. It is forecasted that by 2024, the amount of consumption for alcoholic beverages may reach nearly VND 300 billion, with a CAGR in the period of 2020-2024 reaching 9.5%. The beer industry will maintain its dominant position in the alcoholic beverage sector with the majority of consumption. Wine and spirits consumption is set to average 7.7% and 9.2% annually over the medium term.
In addition, sales of non-alcoholic beverages – nutritional drinks are expected to grow by 10.5% by 2024. Carbonated drinks will also experience strong sales growth, averaging 11.9% annually in the medium term, from 14% in 2020.
