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Bottling up a fizzing business
Vietnam’s great thirst for alcoholic and soft drinks flags the local industry’s fizzing potential and the participation of big foreign investors.
In “Vietnam Food & Drink Report Q1 2009” recently released by the Business Monitor International Ltd. (BMI), the company forecast that alcoholic drink sales are set to increase by 51.4 per cent to 2.9 billion litres in 2013 from 1.92 billion litres last year.
Beer sales, which accounted for an estimated 97.9 per cent of alcoholic drinks sales in 2008, will remain the primary industry driver. According to BMI, beer sales were set to experience the strongest growth of 48.6 per cent during 2008-2013 due to the high levels of investment from local players and expansion-oriented multinationals.
“Vietnam is an attractive market for beer producers owing to its high economic growth and increasing disposable personal income,” the report said, adding that increased tourism and a large expatriate population were also having a strong impact.
Per-capita beer consumption in Vietnam is expected to increase by 41.1 per cent to 30.2 litres in 2013 from about 21.4 litres in 2008. Soft drink consumption is anticipated to move in the same positive direction as the alcoholic drinks industry, with the particularly high growth for carbonated soft beverages among young Vietnamese consumers.
Beer production expanded in recent years
The beer, alcohol and soft drinks industry has enjoyed rapid growth at an average of 20 per cent annually. According to the Ministry of Industry and Trade (MoIT), the industry made up 21 per cent of the total production value of the country’s food and drink sector and 4.56 per cent of the nation’s industrial production value.
MoIT figures showed that during 2005-2008, the sector invested VND27,200 billion ($1.53 billion) in production, with 55.8 per cent for beer manufacturing, 36.7 per cent for soft beverages and 6.06 per cent for alcohol and spirits. The Hanoi Beer, Alcohol and Beverage Corporation (Habeco), one of the biggest Vietnamese drinks producers, plans to double its beer output in 2010 from last year’s 370 million litres.
In 2009, the corporation targeted to increase its beer output by 17 per cent against last year. “The country’s economic downturn will surely have some negative impacts on local consumers who have seen their real income narrowing and are having to think carefully about their spending,” said Nguyen Van Hung, director of Habeco Trading Company.
“We will anyway see a strong demand and consumption of beer, alcohol and soft drinks this year despite the difficult economic situation,” Hung said.
Habeco, with 15 per cent market share, is preparing to build and expand some big beer projects in Haiphong, Hung Yen, Quang Tri, Vung Tau and Nghe An. The company targets a turnover of VND2,828 billion ($162 million) in 2008 and a profit of VND340.8 billion ($19.5 million).
Vietnam’s leading brewer Saigon Beer, Alcohol and Beverage Corporation (Sabeco), controls 35 per cent of national beer sales and a great proportion of sales is in southern Vietnam. It is also increasing beer production to raise its beer output to one billion litres in 2010 from 933 million litres last year.
Sabeco expected a revenue of more than VND10,000 billion ($571 million) for 2008, a 46 per cent year-on-year increase. It has been investing in new brewery plants in Ho Chi Minh City, Daklak, Bac Lieu, Binh Duong and Quang Ngai.
Foreign investors jump into lucrative beer market
Last year was seen as an impressive year with many mergers and acquisition deals made between local beer producers and giant international players.
In June 2008, Denmark’s Carlsberg acquired an additional 5.77 per cent stake in Habeco to take its total interest in the company to 15.77 per cent. US brewery giant Anheuser-Busch confirmed that it was to unveil its flagship Budweiser beer brand in the Vietnamese market.
According to BMI, the Budweiser brand was initially expected to mainly cater for tourists, although its appeal among local consumers was expected to grow as Vietnam’s increasingly affluent middle classes look to trade up from mass-market economy brands.
Earlier, Singapore-based Asia Pacific Breweries (APB), a joint venture between Singapore’s Fraser & Neave and Dutch brewing giant Heineken, increased output at its Hatay brewery facility in northern Vietnam. The company has invested $1 million in raising production capacity by 50 per cent to 460,000 hectolitres per annum at its wholly- owned facility, its second largest in the country.
“The company has sought both the expansion of its existing facilities and the acquisition of new plants in an effort to boost its market share,” according to the BMI report. MoIT deputy minister Bui Xuan Khu said the current production capacity of local and multinational players would be able to meet local consumption demand over the next decade.
“The MoIT has proposed the government steer drinks production to other kinds of beverages such as alcohol and soft drinks to avoid wasted investment in beer production, which has become excessive for the time being,” he said. The MoIT is considering requiring investors to apply for its permission for projects producing more than 50 million litres of beer per annum and the government’s permission for more than 150 million-litre plant construction.
The soft drink market is seen as having enormous potential in Vietnam, when Vietnamese people open their mouths to healthy drinks such as carbonated soft beverages, energy drinks and premium fruit juice.
Per capita consumption of soft drinks in Vietnam remains low, at around nine litres per annum, compared with 70 litres in the Philippines and 15 litres in China. The soft drinks sector is currently dominated by multinationals, of which the Coca-Cola Company and PepsiCo jointly hold 88 per cent share of the market.
According to BMI’s survey, multinationals’ major focus is on carbonated soft beverages, with small local drinks firms producing other types of drinks and fighting it out for the remaining market share. The largest of other players is Saigon Beverages Joint Stock Company (Tribeco) with about a 6 per cent share.
“Smaller drinks companies have had a chance in recent years to win some market share back from the major multinationals owing to the rising interest in healthy drinks, such as tea and juices, in which these local firms specialise,” BMI said. Most recently, Japan’s Kirin Beverage announced plans for a Vietnamese soft drinks joint venture with local noodle producer Acecook.
VietNamNet/VIR
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