Hanoi (VNS/VNA) - Vietnam’s beer market is forecast to see bigopportunities this year, as the country has always been held great potentialfor domestic and foreign beer enterprises. Fierce competition is incoming, asmore foreign brands are looking to tap the market.

The information was released in the Vietnam Industry Research and Consultancy(VIRAC)’s latest report.

With a population structure among the youngest in the world – 56 percent of thepopulation is under the age of 30 – Vietnam Beer Association (VBA) predictsthat total consumer expenses in Vietnam will double and reach approximately 173billion USD by 2020.

According to a Nielsen report, 56 percent of Vietnamese consumers are under 30years old and Vietnam’s middle class will double from 12 million (in 2014) to33 million (in 2020). It is estimated that Vietnam will have two million moreconsumers joining the middle class, becoming the fastest-growing middle classsegment in Asia.

The strong export markets of Vietnam, such as ASEAN countries and China, areall markets with high growth in food and beverage consumption. Along with aseries of free trade agreements, Vietnamese food and beverages have beenlargely able to access key free export markets (without tariffs).

In the context of international economic integration, mergers and acquisitions(M&A) will contribute to raise the size, competitiveness, market share,reputation and efficiency of larger businesses and start a new developmentcycle.

For example, Thai Beverage, a company owned by a Thai billionaire, spent 110trillion VND (4.8 billion USD) to buy 53.59 percent of Saigon Beer Alcohol andBeverage Company (Sabeco) in December 2017. This is not only the largestM&A deal in Vietnam’s history, but also the largest M&A deal in theAsian beer industry.

Beer consumption

In 2019, the total beer production will reach more than five billion litres (up22.9 percent over the same period in 2018); consumption reached over fourbillion litres (up 29.1 percent over the same period last year). Beer salesreached over 65 billion VND (up 0.5 percent over the same period last year).Regarding types of consumption, canned beer consumption accounted for 66.8 percentof total beer consumption in Vietnam, followed by bottled beer 29.9 percent;while draft beer is 3.1 percent and accounts for a modest market share of freshbeer at 0.1 percent.

Regarding imports, the imported beer output reached more than 37 million litres(an increase of 8.9 percent compared to the same period in 2018). The threemain sources of beer supply in Vietnam are the Netherlands (25 percent), Mexico(17 percent) and Belgium (16 percent). Compared to beer consumption in Vietnam,beer imports into the country account for a relatively small proportion.Domestic and FDI beer enterprises dominate the domestic market, with theadvantage of cheap beer prices, which suits the taste of the majority ofcustomers.

Regarding exports, the export beer output increased 46 million litres over theprevious year, reaching 45.87 million USD. The export volume decreased by about7 percent over the same period. The main reason is that Vietnam’s beer qualityhas not been highly appreciated and not created a brand in the internationalmarket. Equatorial Guinea (about 20 percent) is the largest market forVietnamese beer.

Challenges

The law coming into effect on January 1 has been effective in adjusting thedrinking habits of many people. It is forecasted that the beer industry growthrate in the year will not maintain the double-digit level as in previous years;reach 6-7 percent in the following years, although each year Vietnam has 1million more people of legal age to drink alcoholic beverages.

In the stock market, shares of the two “giants” in the beer industry, Sabecoand Habeco, have dropped from 0.4 percent to 0.8 percent. Meanwhile, the sharevalue of the entire industry will decline by nearly 13 percent in 2019./.