Beer industry overview at the beginning of 2023 – Challenges and opportunities for recovery in the second half of the year
Overview of beer industry in the first months of 2023
According to general reports, Vietnam’s beer consumption by 2022 is at 3.8 million liters/year, accounting for 2.2% of the world market. Thanks to this statistical result, Vietnam has become the leading country in the whole ASEAN region, ranking third in Asia (after China and Japan) in beer consumption. By the end of 2022, according to VIRAC’s forecast, Vietnam’s beer industry will have a CAGR of 11% per year in the period of 2023 – 2026. This growth forecast is concluded to be thanks to the recovery of tourism – economy after Covid pandemic.
However, according to reports from many sources, the production and consumption situation of the beer industry in general and the business activities of the domestic beer giants in particular, did not meet expectations in the first months of this year.
Beer production and consumption in early 2023
According to VIRAC’s report, the beer industry’s output in Q1/2023 increased by about 27% year-on-year although it decreased by about 15% compared to the previous quarter.
Source: VIRAC’s Report
VIRAC also pointed out that the low output of beer in the first quarter is partly because this is usually the time with the lowest output of the year, due to the long Tet holiday, production activities stop.
Regarding the consumption of the beer industry in the first months of this year, according to records, the purchasing power of this item is still slow. Business units had to race in promotions and advertising campaigns in order to sell products. Some beer dealers also assess that this year the beer market is particularly slow, in both the wholesale and retail segments. Purchasing power at retail distribution systems is very weak compared to the same period in 2022.
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The business activities of the two big domestic giants declined
According to aggregated reports in the first quarter, the two beer giants are Hanoi Beer – Alcohol – Beverage Corporation (Habeco – BHN) and Saigon Beer – Alcohol – Beverage Corporation (Sabeco) – SAB) are in a state of significant decline in both revenue and profit.
According to a consolidated report, the northern beer giant Habeco recorded net revenue at VND 1,172 billion, down nearly 14% compared to the same period last year, and also the lowest level since Q1/2020.
Reportedly, net sales of goods accounted for 98% of Habeco’s total revenue structure, the rest came from service provision activities. Although enterprises have tried to limit expenses such as management and selling expenses, especially advertising, promotion and support expenses, the sharp increase in input material costs has pushed cost of goods sold increased and brought Habeco’s gross profit margin down from 26% to 21%. Therefore, Habeco still has an after-tax loss of 3.7 billion dong, which is also the first time the company has reported a loss since Q1/2020. While, according to the report of the same period last year, the business made a profit of 34.5 billion dong.
Not much better, Sabeco also fell into the state of declining business results in the first quarter of the year. Specifically, the giant in the South earned VND 6,213 billion in revenue, down 15% compared to the same period in 2022. In the revenue structure, revenue from the beer industry accounted for about 90%, besides 8% from selling raw materials and only a few from beverage products, alcohol, alcohol and other revenue.
However, being more stable than competitors in the same industry, Sabeco’s gross profit margin fluctuates around 30%, with little difference. Enterprises also continue to spend more heavily on selling expenses (spending up to VND 479 billion for advertising and promotions) and corporate management expenses. At the end of the first quarter of 2023, Sabeco’s net profit was VND 1,004, down about 19%. This is the third consecutive quarter of Sabeco’s profit decline after peaking at VND 1,793 billion in the second quarter of last year.
Regarding the reason for the decline in business results of these two big brands, leaders of the two sides said that the lower business results in the first quarter of 2023 came from the weakening of the market after the Lunar New Year period. Consumer demand slowed down due to the pressure to reduce spending of low-income users this year, which had a strong impact on production and business as well as consumption of these two beer brands. In particular, the context of Decree 100/CP stipulating penalties for motorcyclists who use alcohol is tightened in key cities, which has significantly reduced the beer industry’s consumption in the first months of the year 2023.
Challenges and opportunities for the beer industry in the second half of 2023
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Challenges of the beer industry in the second half of 2023
– As analyzed, Decree 100/CP on penalties for alcohol drinkers will continue to be a major barrier to the recovery of the beer industry this year.
– The price of production materials is expected to continue to increase sharply, affecting profit. It is expected that some key ingredients in typical beer production such as filter aid powder will increase by about 25%, hop flowers by 10%, rice by 4%, sugar increased by about 8%. Especially with malt as an input material accounting for a large proportion of production costs, which is expected to increase by about 60% compared to the average purchase price in 2022.
– Vietnamese people’s spending habits are on a downward trend, besides, they will increase spending on healthy products after Covid 19. At the same time, Vietnamese people’s preference for foreign goods will also be a challenge. large with domestic beer brands.
– The threat from competitors of imported beer, foreign beer, beer produced by multinational corporations such as Heineken, Budweiser, … These manufacturers are multinational corporations, receiving support huge support in terms of experience, financial resources, human resources, techniques, raw materials and activities to maintain – develop the brand as well as the market. In addition to threatening competition with foreign beer products, on the market today there are also competitors who are PET bottles, bottled beer and canned beer of small private enterprises, with low prices (lower prices). products including special consumption tax) in localities such as: Viet Han draft beer, Golden Star, Hada draft beer, Hanoi Special Lager beer,…
The conflict between Russia and Ukraine is still tense and the epidemic is still complicated. These will be the factors that create the potential risk of economic recession, financial risks, inflation, foreign exchange rates, and interest rate fluctuations. These factors will likely have a great influence on inputs and production costs this year.
What opportunities for the beer industry in the second half of 2023?
Impact of tourism:
The beer industry will continue to recover thanks to the opening and encouraging activities for tourism of the State. This will be a great opportunity to promote consumption of beer industry in particular and beverage industry in general. In particular, earlier this year, the industry also set expectations that when China reopens, it will help tourism grow strongly in 2023, thereby partly offsetting the decline in domestic consumption, boosting the tourism industry. beer industry growth prospects. As expected, according to the National Administration of Tourism, tourism grew strongly thanks to the main driving force coming from the Chinese market. After the country reopened group tours to Vietnam from March 15, the source of Chinese tourists reached 112,000 arrivals in April, an increase of more than 60% compared to the previous month, recording a good growth rate. in the customer markets. Therefore, it is not impossible that the beer industry has every right to hope for its strong recovery thanks to the positive tourism situation of Vietnam.
Changes in customers’ consumption trends:
In the face of inflation pressure and spending cuts this year, if there is a demand, customers will tend to consume cheaper beer, which may be opportunities for domestic enterprises such as Habeco and Sabeco.
Input materials:
According to VIRAC’s report, aluminum is an important raw material in beer production, accounting for about 20-30% of production costs. Currently, when aluminum supply is added from China after the country opens, a positive sign shows that aluminum prices are on a downward trend in the first 3 months of the year and will continue to be stable.
Information on Vietnam’s beer industry is compiled from the “Report on Vietnam beverage industry in Q1/2023” conducted by VIRAC. The report provides full information on the macroeconomics, trade supply and demand of the beer, spirits, wine and beverage industry, relevant information and forecasts from the latest updated data.
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