Foreign investors roll out the barrel as Vietnam is thirsty for more beer

By Nguyen Nga - Mai Phuong, Thanh Nien News

Email Print


 A woman stands in front of the beer and wine shelves in a Vietnamese supermarket. Photo: Ng.Ng
As Vietnam is opening up its US$4.56-billion beer market to non-state investors, many foreign companies, including major Japanese and US brewers, are looking for opportunities to either break in or expand their business here.
More than 10 foreign and local investors have reportedly offered to buy into Sabeco, the country's biggest brewer, since the Ministry of Industry and Trade announced its plan to sell more state-owned shares in the company early this year.
Among the suitors are three local companies, while the rest are giants such as Japan's Asahi and Kirin, London-based SABMiller, and Thai Beverage Pcl.
According to the plan, pending the government's approval, Sabeco, which currently owns 46 percent of the market, will sell a stake of up to 53 percent. That means the state ownership will be reduced from 89 percent at the moment to as low as 36 percent. 
Officially known as Saigon Beer Alcohol Beverage JSC, the Ho Chi Minh City-based company had its initial public offering in 2008 for a 10.02 percent stake.
Hanoi Beer Alcohol and Beverage JSC, or Habeco, has also been ordered to reduce the state-owned stake from 81.79 percent to either 51 or 36 percent.
A few months ago the country's second biggest brewer stalled Danish-owned Carlsberg's plan to buy a 13 percent stake to increase its ownership in Habeco to 30.23 percent.
But a leader at the company assured with local media that the plan to sell more shares is still on. 
Commenting on the wave of foreign investment in Vietnam's beer market, Robert Tran, an executive at business advisory firm Robenny Corporation, said buying into local brewers can give foreign investors an immediate market entry and access to dozens of breweries. 
The fact that the government plans to pull its plug on the beer sector has made the market more appealing, he said.
No waiting
Many foreign investors have already made their own moves to cash in on the market, which expanded 8.1 percent to 3.4 billion liters of beer in 2014. The market is expected to grow around 40 percent over the next four years.
Japanese-owned Sapporo Holdings last month took over its Vietnamese subsidiary, after buying out its local partner Vinataba. The state-owned tobacco company had to divest from the joint-venture under a government's order.
Following the deal reportedly worth over one billion yen, or US$8.28 million, Sapporo Vietnam announced its plans to expand its distribution network to many other areas around the country, instead of focusing Ho Chi Minh City like now.
Sapporo Vietnam CEO Mikio Masawaki told Thanh Nien that his company, which runs a brewery with an annual capacity of 150 million liters in the southern province of Long An for both local consumption and exports, will continue to launch new products here.
Vietnam's beer market still has a lot of room for growth, considering local consumers are young and its middle class will expand in the next 10 years, Masawaki said.
At the moment, Sapporo Vietnam supplies 20 million liters of beer to the local market every year, but the output will double in the near future, and will hit 120-150 million liters in 2019, he said.
US-owned Anheuser-Busch InBev, the maker of Budweiser, opened its brewery in the southern province of Binh Duong in May.
The $30-million plus plant is able to churn out 50 million liters a year but its capacity is projected to double in the second phase. The company, which also eyes local mergers and acquisitions, reportedly targets a minimum of 10-15 percent of market share in the first three years.
TPP drive
Not only foreign investors are looking to enter Vietnam's beer market, many beer companies in Japan and the US have also expressed hopes to increase their exports, once the Trans-Pacific Partnership is signed and requires Vietnam to reduce its tariffs on alcoholic drinks.
Vietnam, Japan and the US are among 12 nations which have recently completed their negotiations on the Pacific Rim trade pact.
Japanese beer exports will increase significantly from the current 3.8 million yen ($31,900) a year, with Vietnam set to end its 47 percent duty on beer and 55 percent duty on whiskey in the 11th year of the pact, Asia Nikkei Review recently reported.
The American Brewers Association's CEO Bob Pease was also quoted in news website Just-drinks last month as saying that Vietnam now maintains a 35 percent tariff on imported beer, but if it is phased out over time under the trade bloc, US producers will have a tariff advantage.
Nguyen Van Thuan, a lecturer at the Ho Chi Minh City-based University of Finance and Marketing, said even though foreign companies are obviously eager to join Vietnamese market, it is not easy to compete with local brands which have existed for a long time with strong distribution networks and a huge customer base.
Vietnam Brewery Limited, which produces foreign beers such as Tiger and Heineken, now owns 17.3 percent of market share while local brewers, including Sabeco with the omnipresent Saigon Beer and Habeco with its popular light draft beer bia hoi, control the rest.

More Business News