VIETNAM BEVERAGE INDUSTRY VIEW IN THE FIRST 6 MONTHS OF 2023 – WILL THE MARKET GROW IN THE HOLDER OF THE YEAR?
I. Overview of Vietnam’s beverage industry in the first half of 2023
At the Workshop “Drinking culture and responsibility to the community” on June 29, 2023, Chairman of the Vietnam Beer Alcohol Beverage Association Nguyen Van Viet shared: Vietnam’s beverage – beer and wine industry is currently a technical and economic sector that makes a very important contribution to the development of the country.
Every year, the beverage and alcohol industry contributes about 60 thousand billion VND to the State budget. Thereby, contributing directly and indirectly to millions of workers, meeting the needs of both domestic and export consumption.
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Beverage industry dropped significantly in the first 2 quarters of 2023
After a long period of being heavily affected by the Covid-19 epidemic since the beginning of 2020, currently, the beverage industry in general and the beverage industry in particular are suffering with many difficulties.
At the same time, in the new context, many management regulations are not really appropriate, which may lead to the narrowing of production and business in the beverage industry, leading to social consequences. The average growth rate in the period 2015-2021 has therefore been dragged down to 5.6%.
According to the beverage industry report of VIRAC, in the first 6 months of 2023, the production of soft drinks decreased by about 80% compared to the same period in 2022, of which pure mineral water decreased very deeply by about 90%, beverages Non-alcoholic decreased by about 6% over the same period in 2021.
Regarding finished product inventory, according to the general survey results, currently 20.8% of enterprises say that the volume of finished products inventory in the second quarter is increasing compared to the first quarter.
In which, the beverage manufacturing industry had the highest rate of assessment of finished product inventory in the second quarter, with 32.4%.
According to experts, in the second quarter, there were two factors “low domestic market demand” and “high competitiveness of the domestic beverage industry” that most affected the production and business activities of enterprises. beverage industry with 55.5% and 47.2% respectively.
a. Mineral water, bottled purified water has a deep decline in the first 2 quarters of 2023
In the first 6 months of 2023, production of bottled mineral water and purified water decreased by 89% compared to the same period of 2022, mainly in the bottled purified water segment.
- The highest proportion in the output of this beverage industry is bottled purified water, accounting for 74%; but is on a deep downtrend (-20.5%).
- According to the report, Hai Duong is currently the largest production area among the production areas of mineral water and bottled purified water.
Vietnam is having a surplus of bottled mineral water products. In which, the main import market is Korea (accounting for 37% of the total import value). Meanwhile, the market for Vietnam’s bottled mineral water products is the UK (accounting for 50%).
b. The group of non-alcoholic beverages is not out of the decline
The production of non-alcoholic beverages decreased by about 6% compared to the same period in 2022, besides that accounting for the highest proportion in the non-alcoholic beverage industry was soft drinks, accounting for 59%;
In the second quarter, non-alcoholic beverage producers still face difficulties when sugar prices are high, (and this trend is forecasted to continue until the end of 2023).
Vietnam’s beverage industry is currently importing freshwater fish products.
- The main import market is the US (accounting for 28% of the total import value).
- Exports to the US increased sharply in the first 6 months of 2023 (more than 100% compared to the same period in 2022).
c. Fruit juice exports in the first half of 2023
Compared with other categories in the beverage industry, Vietnam currently has an advantage in fruit juice products, when exporting this super product in the first 6 months of 2023 reached more than 150 million USD. In there,
The main import market of fruit juice is China,
Fruit juice exports to the US increased sharply in the first 6 months of 2023 (more than 100% compared to the same period in 2022).
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Situation of enterprises in Vietnam’s beverage industry in the first 2 quarters of 2023
In the past few years, Vietnam’s bottled beverage market has clearly shaped a group of dominant market players including 3 FDI enterprises: Suntory Pepsi, Coca-Cola, URC and 2 domestic enterprises. locations are Tan Hiep Phat and Masan. Pepsico is the leading enterprise in the beverage segment (by value), besides by segments, Pepsico is also leading in segments such as: carbonated beverages, fruit juices, and bottled water. bottles and even sports drinks.
The second place in 2022 belongs to Coca-Cola Vietnam; The company holds a large market share in the segments of bottled water, carbonated drinks and fruit juices.
Tan Hiep Phat and URC Vietnam took the lead in the Instant Tea segment while Red Bull ranked first in the energy drink segment. However, if the recent incident of Tan Hiep Phat becomes more serious, it may lead to a gap in market share in the beverage industry. Therefore, this will be an opportunity for new actors in this industry.
In the beverage industry alone, Vietnam currently has about 1,800 production facilities. And it can be clearly seen that the profits of enterprises in the industry are very different. The dominant advantage will belong to the enterprises holding the dominant market share in the market.
Meanwhile, small businesses are currently suffering from many disadvantages, with a thin market share, but sales and profits have plummeted at times due to the impact of the Covid-19 pandemic. Especially in terms of the prices of some input materials for production, there have been times when record high costs have affected the resilience of SMEs in the beverage industry.
Besides, in terms of current product development trends, businesses are tending to be interested in community activities. Some businesses invest 10% of the media budget (equivalent to 16 billion VND) for activities to propagate the message “Drink responsibly” or “Protect the planet for a better Vietnam”.
Combined with reuse or recycling forms of nearly 99% of waste or by-products. Thereby contributing to reducing 2,500 tons of CO2 emissions in the logistics and transportation stage alone; 100% of wastewater from factories is also treated to meet and exceed standards so as not to adversely affect the environment.
Businesses that are always aiming for sustainable initiatives and solutions deploy environmental, social and governance (ESG) initiatives to support the National Green Growth goals in the 2021-2030 period. ..
II. Signals predicting the prosperity of the beverage industry in the second half of this year
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Summer is a golden time for FMCG businesses, especially in the beverage industry
Although the decrease in output is a concern for businesses in the beverage industry in Vietnam, we can still hope for a recovery in the second half of the year.
With the characteristics of a tropical country, Vietnam has hot and humid weather and the fact that people are active outdoors will definitely lead to the demand for refreshments. This is also the time when tourism thrives, as well as the festive season, so it will be a strong driving force for consumption of the beverage industry. In particular, in 2023, Vietnam’s tourism industry is also on the rebound.
This will be a positive forecast signal that the summer market this time is a playground for FMCG giants in the beverage and bottled beverage industry.
Catching the signals of summer, the beverage industry, bottled (non-alcoholic) drinks in the country became extremely bustling. Starting from the time when summer knocks on the door, the race to conquer consumers of FMCG beverage brands has begun, signaling a positive recovery for the second half of the year.
In line with the diverse needs of the market, FMCG beverage brands have started to launch a lot of beverage product SKUs with a long list of uses, serving the needs of customers from refreshments to nutrition. majority of consumers. The word “cooling”, “instant thirst quenching”; to non-existent uses such as “detox, purify the body”, “replenish minerals and electrolytes”, …
Besides, there is also a trend of environmental protection, limiting the use of plastic products, which has led to consumers starting to give up buying plastic bottled products or being extremely interested in whether the bottles of bottled water have good health. recyclable or not. That led to a change in the marketing strategy of many brands.
According to aggregate data, the revenue of the beverage industry in Vietnam in 2023 is estimated at 8.25 billion USD, this figure will exceed 10 billion USD in 2027.
The macroeconomic situation also predicts that the beverage industry in general and the beverage industry in particular will be stable in 2023 as average inflation is forecast to decrease to only 3.3% over the same period in 2022. Along with that, On-trade channels in 2023 are on the rebound, with an open-door policy encouraging tourism, which in turn will promote beverage consumption.
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Impact of excise tax on sugary soft drinks on beverage industry in the coming time
On July 5, the Vietnam Federation of Trade and Industry held a workshop to propose the development of a draft Law on Special Consumption Tax (amended).
Head of Business Environment and Competitiveness Research Department (Central Institute for Economic Management – CIEM), TTS. Nguyen Minh Thao, said the beverage industry is an industry that provides jobs for more than 300,000 workers (according to 2021 figures).
However, at present, enterprises in the industry are facing difficulties. In the first half of 2023, enterprises in the beverage industry went against the growth trend, the business environment was slow to change, and even encountered more severe barriers.
Dr. Nguyen Minh Thao raised the issue, the Draft Law on Special Consumption Tax when amending and expanding taxable objects, including sugary drinks, barley drinks, non-alcoholic beverages; Besides, it also applies to soft drinks according to a certain content, then will the fiscal, social or public health goals be achieved as desired or not?
The reason why the application of special consumption tax to the beverage industry group can lead to negative impacts. These can be mentioned as increasing retail costs, reducing output, failing to nourish budget revenue, as well as increasing smuggling. The increase of excise tax from 0% to 10% is forecasted to cause a decrease in output, GDP and also income of employees and tax revenue.
According to experts’ measurements, the application of a special consumption tax on the sugary beverage industry with a tax rate of 10% will help increase the state budget by about VND 2,279.1 billion, but will reduce revenue and the output of beverage industry and sugar cane industry is 3,159.5 billion dong. From there, the total impact was reduced by VND 880.4 billion. This could also affect thousands of workers in the beverage industry, affecting up to 9,000 small and medium enterprises along with one million product business households.
Also in the seminar, Mr. Nguyen Van Viet, Chairman of the Association of Alcohol – Beer – Beverage cited the data of the General Statistics Office recently announced on the economic situation in the first half of the year. Accordingly, GDP in the second quarter was estimated to increase by 4.14% over the same period in 2022, but this result was only higher than the growth rate of 0.34% in the second quarter of 2020, when the Covid-19 epidemic was complicated.
At the same time, the consumer price index (CPI) in the first 6 months increased by 3.29% while core inflation increased by 4.74%. In addition, businesses in the industry are on the way to recover from the pandemic but at the same time have to bear financial responsibility pressure from other policies such as responsibility for packaging recycling according to Decree 08/2022/ND- CP starts from 01/01/2024.
Therefore, if the tax reform policy is not appropriate, it will greatly affect the recovery of businesses in the beverage industry and the growth target of the Government.
Information on Vietnam’s beverage 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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