Though the consumption level has been increasing rapidly, having reached 3 billion liters per annum, Vietnam still has 10 percent of output in excess.
Nearly all the big brewery manufacturers once did, or have been present in Vietnam; many of which had leave the market after the failures. Therefore, once the leading manufacturer Anheuser-Busch InBev (AB InBev) sets up its brewery in Vietnam, the market would become more cramped, while manufacturers would not have much living space.
Phan Dang Tuat, President of Sabeco, when noting that Vietnam is the rendezvous of the world’s brewery manufacturers, said that nearly all the big guys in the sector had gathered in Vietnam by the end of 2012.
This is not the sector Vietnam encourages the investment in. Over the last 10 years, the beer consumption level of Vietnamese has increased by 200 percent. However, the competition has become stiffer because the supply has increased more rapidly than the demand increase.
Tuat said that domestic manufacturers have been put at a disadvantage. It requires high expenses on advertisement and marketing campaigns, while domestic companies cannot spend much money on the works.
Under the current regulations, domestics have to pay no more than 10 percent of their total turnover on ads and marketing, which has put big difficulties for them in competing with foreign rivals.
Tuat’s explanation can partially explain the common difficulties of domestic manufacturers. In the northern market, Habeco, a 100 percent domestic owned company, once held the biggest market share. However, things have changed – it now has to share the big piece of the cake with the South East Asia Brewery.
The Phu Yen Brewery has to sell itself to Masan Group at $12 million, also because the competition became unbearable to it. Danish Carlsberg attempts to raise its ownership ratio in Habeco to 30 percent after fully taking over Huda.
In case of AB InBev, experts believe that in the first years in Vietnam, the big guy may not strive to making profit, but it would take the steps to obtain more market shares from the existing leading manufacturers. After that, with the financial capability advantage, they would also develop products in other market segments, thus putting pressure on other breweries.
Sabeco is now believed to lead the popular product market segment, while VBL is superior in the high end product market segment with its Heineken brand. A report of Euromonitor, a market survey firm, showed that 80 percent of the beer market is being controlled by Sabeco, Habeco and VBL.
Controlling the domestic market, but domestic enterprises might still have worries about the joining of AB InBev to the domestic market. Tuat of Sabeco also said it would be not easy for the big guy to succeed in Vietnam. However, the pressure from the big guy still has forced existing enterprises to spend more money to develop different market segments.
In 2012, for example, Sabeco launched two products into the market, namely Saigon Special and Saigon Lager, with an effort to penetrate the high grade product market, where Heineken brand products are dominating.
In 2012, Sabeco implemented a series of the investment projects on the Saigon – Vinh Long, Saigon – Soc Trang and Saigon – Ninh Thuan breweries. VBL is moving ahead with the plan to increase the productivity of the Tien Giang Brewery from 65 million liters to 150 million liters.