Beer market increased rapidly in 2019
In 2019, the total beer market production will reach more than 5 billion liters (up 22.9% over the same period in 2018), consumption reached over 4 billion liters (up 29.1% over the same period last year). Beer sales reached over VND 65 billion (up 0.5% over the same period last year). Regarding types of consumption, canned beer consumption accounted for 66.8% of total consumption in Vietnam, followed by bottled beer 29.9%; draft beer is 3.1% and accounts for a modest beer market share of fresh beer 0.1%.
Regarding imports, the imported beer output reached more than 37 million liters (an increase of 8.9% compared to the same period in 2018). Three main sources of beer supply in Vietnam are the Netherlands (25%), Mexico (17%) and Belgium (16%). Compared to beer consumption in Vietnam, beer imports into Vietnam account for a relatively small proportion. Domestic and FDI beer enterprises dominate the domestic market, with the advantage of cheap beer prices, which suits the taste of the majority of customers.
Situation of production and consumption of beer industry 2010 –2019
Source: VIRAC, GSO
Regarding exports, the export beer output increased more 46 million liters than the previous year, $45.87 million. The export volume decreased by about 7% over the same period. The main reason is that Vietnam’s beer quality has not been highly appreciated and not created a brand on the international market. Equatorial Guinea (about 20%) is the largest market for Vietnamese beer. In which Mexico and the Netherlands are the two biggest beer suppliers in Vietnam.
Challenges to the beer market in 2020
The law coming into effect on January 1st, 2020 has been effective in adjusting the drinking habits of many people. It is forecast that the beer industry growth rate in this year will not maintain at the double-digit level as in the previous years and reach 6-7% in the following years, although each year Vietnam has more than 1 million people in legal age drinking alcoholic beverages. In the stock market, shares of the two “giants” in the beer industry, Sabeco and Habeco, have dropped from 0.4% to 0.8%. Meanwhile, the share value of the entire industry will decline by nearly 13% in 2019. Experts predict that the beer and wine industry will adjust towards a shrinking trend by 2020, in which small businesses will be most affected.
Alcoholic beverages in Vietnam have to pay taxes at 2 stages: import and domestic consumption. It includes 3 different taxes: import tax (from 5-80% depending on type of FTA), tax value added (10%) and excise taxes (from 50% to 65% in 2018). This can affect the profitability of beer companies, especially those in the mid-end segment, as this is a competitive segment and customers are most vulnerable to the impact of the best selling prices.
This can be considered as a major obstacle for new businesses. To open a beer factory in Vietnam, enterprises must be licensed by the Ministry of Industry and Trade. While the regulations are quite clear, implementation can be difficult. Even if all provinces were willing to facilitate new breweries to collect taxes, the licensing would depend on the beer and beverage planning of the Ministry of Industry and Trade, which may have been registered many years in advance.
According to VIRAC, Vietnam’s beer industry still faces many challenges such as communication, risks of changing consumer tastes, M&A,… requiring continuous efforts and improvement to enhance the position in the international market.
Opportunity for Vietnam’s beer industry
Vietnam has always been a potential market for domestic and foreign beer enterprises. The fierce competition has been forecast early since more and more foreign brands were looking for opportunities in Vietnam market. Therefore, experts predict that our country’s beer industry will have great changes in 2020.
Forecast of Vietnam beer consumption in 2019-2022f
Source: VIRAC, BMI
Gold population structure, income increased rapidly
With a population structure among the youngest in the world – 56% of the population is under the age of 30, VBA predicts that total consumer expenses in Vietnam will double and reach approximately US$ 173 billion by 2020. According to a Nielsen report, 56% of Vietnamese consumers are under 30 years old and Vietnam’s middle class will double from 12 million (2014) to 33 million (2020). It is estimated that Vietnam will have about more 2 million consumers joining the middle class, reaching the fastest-growing middle class in Asia.
Potential about export market
The strong export markets of Vietnam (ASEAN countries, China,…) are all markets with high growth in food and beverage consumption. Along with a series of free trade agreements signed, Vietnamese food and beverages have been largely able to access key free export markets (without tariffs).
M&A deals hit
In the context of international economic integration, M&A will contribute to raise the size, competitiveness, market share, reputation, efficiency of larger businesses and start a new development cycle.
For example, the deal of Thai Beverage, the company of Thai billionaire, costs USD 4.8 billion, equivalent to VND 110,000 billion, to buy 53.59% of Saigon Beer Alcohol and Beverage Company (Sabeco) in December 2017. This is not only the largest M&A deal in Vietnam’s M&A history, but also the largest M&A deal in the Asian beer industry up to this day.