Vietnam’s beer market is forecast to see big opportunities this year, as the country has always been held great potential for domestic and foreign beer enterprises. Fierce competition is incoming, as more 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% of the population is under the age of 30 – Vietnam Beer Association (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 (in 2014) to 33 million (in 2020). It is estimated that Vietnam will have two million more consumers joining the middle class, becoming the fastest-growing middle class segment in Asia.

The strong export markets of Vietnam, such as ASEAN countries and China, are all markets with high growth in food and beverage consumption. Along with a series of free trade agreements, Vietnamese food and beverages have been largely 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 development cycle.

For example, Thai Beverage, a company owned by a Thai billionaire, spent VND110 trillion (US$4.8 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 history, but also the largest M&A deal in the Asian beer industry.

Beer consumption

In 2019, the total beer production will reach more than five billion litres (up 22.9% over the same period in 2018); consumption reached over four billion litres (up 29.1% over the same period last year). Beer sales reached over VND65 billion (up 0.5% over the same period last year). Regarding types of consumption, canned beer consumption accounted for 66.8% of total beer consumption in Vietnam, followed by bottled beer 29.9%; while draft beer is 3.1% and accounts for a modest market share of fresh beer at 0.1%.

Regarding imports, the imported beer output reached more than 37 million litres (an increase of 8.9% compared to the same period in 2018). The 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 the country 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.

Regarding exports, the export beer output increased 46 million litres over the previous year, reaching US$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 in the international market. Equatorial Guinea (about 20%) is the largest market for Vietnamese beer.

Challenges

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