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Steady growth in Viet Nam’s beer market

Source:Ringier Food / FPMJ

Date Published:3/22/2015 06:03:36 PM

Players are vying for position in this booming and competitive market
SOME 3 billion litres of beer may sound like much, but for Vietnamese locals, that’s a year’s worth –in fact 2013 to be exact. With consumption per capita at roughly 32 litres per year, the country stands in 50th place in the world according to the Industrial Policy and Strategy Institute, MoIT.
The last five years has seen a very steady increase in beer consumption in Viet Nam, due largely to the demand from the middle class and the youth market developing their own social traditions. The growth in local consumption also needs to be attributed to the promotional campaigns and event sponsorship implemented by the brewers themselves.
Most beer consumers are higher income urban dwellers. In the cities, the new and ever-booming popularity of beer clubs (beer pubs with disco atmosphere) amongst Millennials, and the changing nature of urban restaurants are predicted to have a positive impact on the development of the local industry.
Boutique breweries (craft breweries/specialised/niche market breweries with limited quantity production and distribution capacity) are gaining traction for the past few years since they started appearing in 2010. Whilst market share for craft is still minimal at around 1%, the current growth rate indicates its development toward becoming a strong niche market.
Consumption of beer in cans accounts for 44%, in bottles 40%, and bia hoi (local fresh beer) 15%. Draft beer is a new-kid-on-the-block and is holding a modest share at around 0.01%, although the growth rate potential is estimated at around 11% pa.
According to Nguyen Van Viet, chairman of the Vietnam Beer Alcohol Beverage Association (VBA), the beer sector contributes greatly to the country’s economy. “In 2013 the estimated beer production was 3.19 billion litres,” he said. The industry helps in providing jobs to more than 400,000 people and also prevents the entry of clones, contraband and low-quality products into the market.
In 2012, the beer industry contributed around VND 19,000 billion, which accounted for 4.5% of the total national revenue contribution of the business sector (but excluding contribution from crude oil, custom sectors and aid given gratis). In 2013, contribution was estimated to reach VND 21,000 billion.
Other contributions such as VAT, special consumption tax, personal income tax, corporate tax, are estimated at VND 15,000 billion in 2013, bringing the total revenue contribution of the beer industry to VND 36,000 billion, according to the Regioplan and General Department of Statistics.
The robust beer market is a boon to support industries, particularly raw ingredients, packaging label printing, and logistics. Amongst them are Polyco, Eresson, manufacturers of various kinds of fermentation tanks, material importers and distributors such as Moët-Hennessy and Thai Tan, providing imported malt and houblon (hops), as well as providers of bottles and beverage cans.
Unreasonable regulations?
Although the Vietnamese government provides support to the beer brewing sector with new investment projects, a number of challenges face the industry. As in most countries, the industry is subject to certain restrictions on advertising of alcoholic products. But these restrictions drafted by the Vietnamese government are fairly reasonable. Companies employ direct marketing strategies, social networking, and/or event/sport/festival sponsorship.
Beer consumption levels are up, but companies are seeing
market shares fluctuate as a result of stiff competition
But draft laws on the table could have a potential negative impact on the local beer industry. In 2014, a draft decree on managing beer production and consumption presented by the Ministry of Industry & Trade was met with criticism by local brewers.  Amongst the proposals was to stamp products to ensure against counterfeiting, tax evasion and also to warn against alcohol abuse.  Whilst brewers said this would add dearly to cost, the Ministry said it would enforce the regulation upon the approval of government.
Local companies are also objecting to the special consumption tax rate on alcoholic beverages which will increase by up to 30% this year; the policy on prevention of harmful use of alcohol; the lowering growth rate trend in upcoming years, from average growth rate of 8-10 pa in 2008-2012, to 6-7% pa in 2011-2013, and 5-6% in 2014-2016.
Mr Nguyen said that VBA continues to monitor the progress of these and other regulations.
Tough competition
The industry is dominated by Saigon Beer, Alcohol and Beverage Corporation (Sabeco), with Vietnam Brewery Limited (VBL), Hanoi Beer, Alcohol and Beverage Corporation (Habeco), Huda and the relatively new entry Japan’s Sapporo, all vying for position.
In 2014, Viet Nam welcomed two new big players into the market when Sapporo and AB-InBev started operations in a big way in the south of the country, increasing the competitive tension between the country’s main players.
Over the past five years, competition has grown tenfold as the number of local and foreign brewers entering the market grows. Whilst consumption levels are up, companies are continuing to experience a high level of production, but market shares are fluctuating.
Leading companies are not spared. Sabeco has been reporting steady growth in recent years. But it saw its volume drop by 0.5% in the first half of 2014. The market share of Habeco dropped even sharper by 4.8% points against the same period in 2013.  
Given the current state of the industry, what is in store for local brewers and vendors?
“In the next couple of years, Viet Nam’s beer industry is forecast to show a positive growth, albeit much less than the years between 2010 and 2013,” said Mr Nguyen. “However, this limited growth is still in line with the global beer industry downward trends.” – ANTHONY EVANS
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