The Vietnamese beer market is once again in turmoil following a series of mergers and acquisitions announcements and commitments from participating countries under the Trans-Pacific Partnership (TPP) economic agreement.

Illustrative image from the Internet

The recent announcement by the Japanese beer giant Sapporo that it has acquired Vietnam's stake in the Sapporo Vietnam (SVL) joint venture demonstrates the intense competition from foreign beer companies in the Vietnamese beer market. Furthermore, following the announcement of full ownership of SVL, a representative from Sapporo Group (Japan) stated during a press conference announcing changes to the packaging of some of its products that the company will boost sales through a nationwide expansion of its distribution network. Currently, the group's factory is located in Long An province and is the only facility supplying beer to Southeast Asian, Korean, and Australian markets.

A lucrative market

Prior to the Sapporo deal, news that the Ministry of Industry and Trade was determined to accelerate the equitization and divestment of state capital from the Saigon Beer, Alcohol and Beverage Corporation (Sabeco) also heated up the stock market. According to the plan, of the 89% of Sabeco shares currently owned by the state, a maximum of 53% will be sold to strategic investors. Immediately, Thai Beverage Company expressed interest in buying this stake for nearly $1 billion, and Singha Beer, also from Thailand, also stated its desire to become a strategic partner of Sabeco. Furthermore, a series of foreign beer companies such as Asia Pacific Breweries, Sabmiller, Asahi Breweries, Kirin Brewery, etc., all expressed their interest in becoming strategic partners of Sabeco.

Speaking to Thanh Nien newspaper, Mr. Mikio Masawaki, General Director of SVL, did not hide his ambition to continue researching and launching new products in Vietnam because the market still has potential due to the young average age of consumers who love new, modern products. In the next 10 years, Vietnam's middle class will also increase two to three times, and the group's ambition is to have Sapporo's revenue in the Vietnamese market account for 50% of the group's overseas revenue in Japan.

On the other hand, according to Nikkei, after the Japanese Ministry of Foreign Affairs announced a program to cut agricultural tariffs by 81%, the two beer markets that Japanese companies are anticipating are Vietnam and Malaysia. Similarly, assessing the opportunities from the TPP, representatives of the American Beer and Wine Association also stated on several media channels that Vietnam is the market with the greatest opportunity among the 12 TPP markets that American beer and wine businesses are looking forward to. With the TPP, according to the commitments, Vietnam will also gradually reduce the tariff on beer from 35% to 0% over an 11-year period. According to forecasts by the Vietnam Beer, Wine and Beverage Association (VBA), the price of imported beer will certainly decrease sharply after the TPP.

Earlier this May, Anheuser-Busch Inbev (AB InBev), a leading global beer company from the US, inaugurated a brewery with a capacity of 50 million liters per year in Binh Duong. According to plans, the company will increase this to 100 million liters per year in the next phase. According to AB InBev representatives, the company's products will serve the Vietnamese market and be exported to India, Laos, Cambodia, and the Philippines. “The competition in the domestic market is currently quite intense. We cannot yet conclude how much production costs will decrease, but after the TPP, there will certainly be changes in the price of beer products in general,” predicted the representative of the foreign beer company in Vietnam.

Leverage the internal distribution system.

In fact, Sabeco's popularity in the beer market is understandable, as the brand currently holds a 46% market share. According to the Vietnam Beer Association (VBA), in 2014, the total beer production and consumption nationwide was estimated at 3.14 billion liters, an 8.1% increase compared to the previous year. In 2015, this figure is projected to continue rising to approximately 3.3 billion liters. According to the VBA report, Vietnam currently ranks 5th among 10 Asian countries in average beer and alcohol consumption, behind only Japan, South Korea, Thailand, and China.

According to strategic consultant Robert Tran, CEO of Robenny, in charge of the Asia-Pacific and US regions, amidst the predicted influx of foreign investors into Vietnam in anticipation of the TPP, strategic investors in the fast-moving consumer goods (FMCG) sector are indispensable. The Vietnamese market is currently extremely attractive due to the state's divestment plan from lucrative sectors such as beer, dairy, and food. Sabeco and Habeco are considered prime targets in this privatization process. "Similar to the retail sector, acquiring large stakes in domestic beer companies to enter the market immediately is a strategy that foreign corporations are aiming for. Not only would they own dozens of large-capacity breweries, but the real estate holdings of these domestic beer companies also represent significant assets that are attractive to foreign investors," Robert Tran analyzed.

According to Dr. Nguyen Van Thuan from the University of Finance and Marketing, the main challenge for new investors is establishing a nationwide distribution network. Meanwhile, domestic beer brands already have a strong distribution presence. Furthermore, with the current movement prioritizing and supporting the use of Vietnamese goods, domestic brands have an even greater advantage, leading to increased sales. “Acquiring local production facilities allows for faster development. Combined with management capabilities and transportation solutions, foreign investors can easily reduce costs and increase profits. In particular, acquiring a large stake in mid-range beer brands with production facilities in provinces and cities to gain controlling power is easier. Therefore, competition between some large domestic brands like Sabeco and Habeco and foreign investors will continue to be fierce,” Dr. Thuan said.

According to Thanhnien online