20171110 - Vietnam's Beer Industry Analysis - V1

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20171110 - Vietnam's Beer Industry Analysis - V1

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Vietnam's beer industry. Including competition landscape, life cycle, regulation, supply chain, etc.

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Vietnam Beer Industry Analysis – 2017 Contents 1.

Report summary ................................... .................. .................................. ................................... ................................... ................................... .................................... ..................

2.

Life cycle and performance ................................. ................ ................................... ................................... ................................... ................................... ........................ .......

3.

2.1

Life cycle .................................. ................. .................................. ................................... ................................... ................................... .................................... ........................... .........

2.2

Trade performance .................................. ................. ................................... ................................... ................................... ................................... ........................... ..........

Competition landscape landscap e .................................. ................ ................................... .................................. ................................... ................................... .............................. ............. 3.1.

Market share ................................. ................ .................................. ................................... ................................... ................................... .................................... ..................

3.2.

Major players ................................... .................. .................................. ................................... ................................... ................................... .................................... ..................

3.3.

Market segmentation ................................. ................ ................................... ................................... ................................... ................................... ........................ .......

3.

Drivers and Barriers ................................. ................ .................................. ................................... ................................... .................................. ................................... ..................

4.

Supply chain ................................. ................ ................................... ................................... .................................. ................................... .................................... .............................. ............ 4.1.

Feedstock ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................ ......

4.1.1.

Malt ................................. ................ .................................. ................................... ................................... ................................... .................................... ........................... .........

4.1.2.

Hops ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................ ......

4.1.3.

 Yeast ................................... .................. .................................. ................................... ................................... ................................... .................................... ........................ ...... Sign up to vote on this title

4.2.

useful ..................  Useful  Not Manufacturers Manufactu rers ................................. ................ .................................. ................................... ................................... .................................. ...................................

4.3.

Distributors ................................... .................. .................................. ................................... ................................... ................................... .................................... ..................

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1. Report summary

In the past five year, Vietnam ’s beer consumption increased by 8.2% on average annually. The mark

volume was estimated to be 4.08 billion liters in 2016. Most of the production is carried out domest as trade is negligible.

The beer market is dominated by 4 players, including Sabeco, Habeco (local), and Heineken, Carlsbe (foreign). Other players are Masan Brewery, Sapporo, AB Inbev, etc. The market can be segmented

premium, mainstream, and economy. While Heineken is the foremost brewery in the premium mar

geographical dominance is the order of the day among mainstream beer. For example, Sabeco has t biggest share in the South, while Habeco ’s stronghold is in the North. The rapid growth of the domestic market is driven by Vietnamese’s penchant for beer, huge youth

population, expanding urbanization, improving income, and relative low beer consumption per cap

However, the beer industry suffers from reliance on foreign raw materials, steep special consumpti tax (SCT), and fierce rivalries among breweries. The value chain consists of feedstock’s suppliers, manufacturers and distributors. Key ingredients

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include malt, hops, and yeast, which are mostly imported. Regarding distribution, the most common Unlock full access with a free trial.

channel is on-trade, which means consumers buy and drink beer at the same premise.

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In terms of regulation, SCT is a major point of contention as roughly a quarter of the retail price is

attributed to SCT. Meanwhile, Ministry of Industry and Trade (MOIT) is responsible for issuing licens 

Sign uptotoentry vote on this title make beer. Since the number of license is limited, significant barrier exists in the beer mark

fall substantially.  Thanks to trade agreements, import tax for beer is expected to Useful

Not useful

Regarding outlook, the domestic beer market is projected to continue increasing by 4-5% annually i

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Vietnam’s beer consumption, 2012 – 2016 (bn liters)

4.08

3.89

3.67

3.57 2.98

2012

2013

2014

2015

2016

Source: Kirin Beer University Report

2.2Trade performance


In 2016, beer’s import volume was only 31.4 million l iters (UN Comtrade), representing a tiny fract Unlock full access with a free trial.

compared to total domestic production. Likewise, export volume was 64.9 million liters. As for raw Chain” materials’ import, refer to “Section 6. Supply Download With Free Trial

3. Competition landscape

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 3.1.

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Market share

Vietnam’s beer market is highly concentrated, with 4 biggest players accounting for more than 90%

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Vietnam’s beer market shares by brewery, 2015

1.4% 8.0% 9.7% 45.8% 17.3%

17.8%

Sabeco

Habeco

Heineken

Carlsberg

Sapporo

Other

Source: Euromonitor

In terms of brands, Saigon Export (18.4%) and 333 (14.7%), both from Sabeco, are the two best-selli

ones. Other popular names include Hanoi Beer (Habeco, 13.6%), Saigon Lager (Sabeco, 11.8%), Hein (Heineken, 7.8%), Huda (Carlsberg, 6.7%), and Tiger (Heineken, 5.2%).


shares major Vietnam’s beer market Unlock full access withby a free trial. brand, 2015



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Major players

Tracing it roots back to 1875, Sabeco has established itself as a foremost brewery in Vietnam, with

production capacity of 1.8 billion liters. Its strengths lie in strong presence in the mainstream segme wide distribution and factories network, successful entry into the North, and effective adoption of modern marketing.

With capacity of 800 million liters, Habeco has a dominant position in the North. The company has

extensive distribution system, with 3 trading companies and 345 tier-one distributors. Habeco is als

able to leverage its vast amounts of capital to expand operation. However, compared to Sabeco and Heineken, Habeco has fallen behind in terms of advertising and promotion.

In recent years, Heineken Vietnam witnessed double-digit growth on the back of Tiger’s sales. Hav been in the country since 1991, the Dutch brewery now has 5 factories in the South. Determining

Vietnam as a key market in Asia Pacific, Heineken is active in scaling up its business. In 2016, Heine acquired a Carlsberg’s factory in Vung Tau and will invest a further $185 million USD to advance its

capacity.


Carlsberg has established 2 brewing facilities in Vietnam, including Hue Brewery in Hue (360 millio Unlock full access with a free trial.

liters) and South East Asia Brewery in Ha Noi (65 million liters). In addition, Carlsberg has 17% stake

Download With Free Trial Habeco. The brewery also distributes its own brands such as Carlsberg and Tuborg. However, their

revenue is insignificant compared to Huda, a Carlsberg’s local brand. Thanks to Huda, Carlsberg has leading position in Central Vietnam.


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 a leading  domestic consumer go Regarding other players, Masan Brewery is a subsidiary of Masan, Useful

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corporation. The brewery has two production lines, one in Phu Yen (50 million liters) and the other

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Market segmentation

The beer market of Vietnam can be segmented on the basis of price, i.e. premium, mainstream, an

economy. Premium category is further divided into luxury, premium itself, and affordable premium a bottle/ can of 330 ml, luxury beer costs more than 23,000 VND (VCSC, 2016). Premium one varies

15,500 to 18,500 VND, while affordable premium lies within 12,000-13,500 VND. Mainstream beer g from 8,500 to 10,000 VND, and economy beer is priced under 8,000 VND. Vietnam’s beer market segments, 2015

8.0% 21.0%

71.0%


Premium

Mainstream

Economy

Unlock full access with a free trial. Source: Heineken Vietnam Brewery

Download Withpremium), Free TrialHeinken and Tiger (Heineken) In the premium segment (luxury, premium, affordable

leading position, accounting for two-third of the market share. Saigon Special (Sabeco) also has siza

 foothold. The mainstream market is more characterized by geographical dominance (examined in Sign up to vote on this title “Section 3. Major players”) Vietnam’s beer market shares - premium, 2015

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Vietnam’s beer market shares - mainstream

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3. Drivers and Barriers The rapid growth of Vietnam’s beer mar ket is fueled by: 

Vietnamese’s preference for beer: beer makes up 94% of total alcohol consumption in Viet

Beer is widely drunk in family and friends’ gatherings, whether at home or restaurants. 

Young population: The mean age of Vietnamese is 30 years old, compared to 37 in Thailand

China. Every year, there are 1 million young adults who reach the legal drinking age of 18. 

Rapid urbanization: from 2001 to 2016, urban population ratio increased from 24.9% to 34

(World Bank). It is estimated that beer consumption in urban area is 1.6 times greater than region (Heineken Brewery Vietnam). 

Rising income: Vietnam ranks among the most swiftly growing economies in Asia. Improvin

income should result in higher discretionary spending on beer. 

Upside potential: although Vietnamese drinks more than some countries per capita,

consumption is still less than Japan and South Korea. On the downside, the beer industry encounters multiple challenges, including:




Dependence on imported feedstock: covered in “Section 6.1 Feedstock”



High special consumption tax: discussed in “Section 7. Regulation”



Download With Free Trial Internal competition: intense rivalry among breweries has already pushed up marketing co

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significantly. Companies are also under pressure to adopt latest technology and increase production capacity.


 4.

Supply chain

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In Vietnam, the majority of malt is imported, amounting to 452,100 tons in 2016 (UN Comtrade). In

terms of quantity, Australia is the leading import source (30.3%), followed by France (19.3%), Belgiu (12.8%), Germany (11.5%) and China (10.9%). Domestically, Interflour – one of the largest grain

processor in South East Asia, has built a malt factory in Vietnam in 2017. The facility is the first of its with annual capacity of 110,000 tons. 4.1.2.

Hops

Hops are flowers of the hop plant Humulus lupulus used as a flavoring and preservative agent in be

Hops can add bitter, citric, and floral taste. Hops may also be utilized for their antibacterial effect. Despite constituting only 2% of production cost, hops play an integral part in modern brewery.

Again, hops are mostly imported. In 2016, Vietnam procured 634.4 tons of hops (UN Comtrade), ma from Germany (75.4%), Czech (13.6%) and Italy (9.8%). 4.1.3.

Yeast

Yeast is the microorganism that facilitates fermentation in bee r. Besides, yeast also affects the

and attributes of beer. Vietnam’s breweries rely onaforeign suppliers, sourcing mostly from Bra You'realso Reading Preview and Japan.

4.2.

Manufacturers

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Already discussed in “Section 3. Market share”, and “ Section 4. Major Players” .

4.3.

Distributors




 Useful  Not useful Beer’s distribution network consists on-trade and off-trade. On-trade is the channel at which the

product is sold and consumed at the premise, e.g. hotel, restaurants, beer clubs, etc. On the other h

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5. Regulation

In Vietnam, special consumption tax (SCT) accounts for 25.5% of the beer’s retail price (Euromonit

2015). From 2013 to 2017, SCT for bear increased from 45% to 60% and is scheduled to reach 65% in

2018. SCT weighs heavily on mainstream breweries as customers are most sensitive to price increas

this segment. On the other hand, demand for premium beer is relatively inelastic. In the higher-end segment, price is just another purchase criterion, in addition to brand message, value and image. Recent regulatory change in SCT is a subject for debate on how to determine the taxable price.

government stipulates that the taxable price of beer is the selling price of trading companies - the fi phase of the distribution process. Also, the taxable price must not be 7% lower than the average

monthly price of first-tier distributors. Previously, taxable price was the selling price to the first inte

distributor. The decrease in the monthly price gap from 10% to 7% also makes it difficult for brewer to adjust for seasonality and annual SCT increase.

Regarding licensing, the Ministry of Industry and Trade (MOIT) is in charge of authorizing factories

produce beer. While the official procedure seems straightforward, obtaining a new production licen


depends on the long-term planning of MOIT. For example, Masan Brewery was only permitted to o

full access with a free trial. beer factory in Hau Giang thanks to anUnlock unused license issued to another company. Due to difficultie

license application, foreign companies typically establish a joint-venture with local companies who


familiar with the process.  The domestic beer industry is expected to be more competitive when numerous Free Trade Sign up to vote on this title Agreements (FTA) come into effect. The current import tariff forUseful beer made from malt is 35% useful  Not

(Customs). At the moment, the preferential rate under ASEAN Trade in Goods Agreement (ATIGA) a

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16.08% in 2015, which was much higher than the 5-6% growth of other beer segments (Euromonito

Domestic breweries have also come up with their own premium lines. For example, Sabeco recently

launched Saigon Gold, while Habeco introduced Truc Bach. By and large, foreign companies benefit premiumization as Vietnamese tends to associate overseas goods with quality. In addition, Sabeco Habeco have long been affiliated with inexpensive brand image so it will be difficult to change the customer perception.

7. Technology

The beer brewing process mainly consists of malting, mashing, boiling, fermentation, and bottlin

(Beeriety): 

Malting: refer to “ Section 6.1.1 Malt”

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


Mashing & soaking: malt grains are first crushed and then put in hot (not boiling) water for

hour. The aim is to activate enzymes in the malt to produce sugar. Subsequently, water is 

Signsticky, up to vote on liquid this title drained from the mix, which is now filled with sugar. This sweet is known as wo

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Fermentation: yeast is added to the wort for fermentation. The yeast consumes sugar and

release alcohol together with CO 2 The fermentation and storage process takes weeks or mo at room temperature.

You're Reading a Preview 

Unlock full access with a free trial. Bottling : the beer is now bottled and either artificially carbonated like soft drinks, or natura

carbonated by the CO2 that the yeast produces.



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20171110 - Vietnam's Beer Industry Analysis - V1

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