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Inflation high, but beer still selling well   2008-09-21 - VNN

Despite the high inflation and lower living standards consequently, beer, which is considered a luxury item, is still selling well, and bringing high profit growth rates to breweries.


High growth rate for brewery industry


The Hanoi Beer Company (Habeco) said that its industrial production value in the first six months of the year was VND1,711bil, an increase of 23.5% over the same period of last year, while total pre-tax profit was VD247.2bil. The company hopes to gain VND2,824.9bil in turnover in 2008 and sell 250mil litres.


Meanwhile, Saigon Beer Company (Sabeco) has also confirmed satisfactory business in 2008 with the estimated industrial production growth rate of 38% over last year. Its total turnover is expected to reach VND10,159bil, an increase of 46% over 2007, with 933mil litres sold.


Other brewery companies including Vietnam Brewery Company, Ha Tay Brewery Factory, Halida and Huda have also reported satisfactory growth rates.


According to the Vietnam Association of Beer, Alcohol and Soft Drinks, the brewery industry still got the high growth rate of 14% in the first half of the year, despite great difficulties.


Though material prices have increased by 30-70%, and beer prices have risen by 10-20%, Vietnamese people still consumed beer in large quantities. Bia hoi shops in Hanoi reportedly consume 1,500-5,000 litres of bia hoi every day.


It is estimated that Vietnamese people now spend over VND20tril on beer every year. Vietnam is a nation with a young population, 33mil people between the ages of 20-40, the age group that consumes the most beer.


28 litres of beer per capita per year


Statistics show that every Vietnamese person consumes 18 litres of beer a year, which is just equal to ½ of a South Korean and 1/6-1/7 of an Irish, German or Czech person. However, as the result of changes in drinking habits (people in rural areas now tend to drink beer instead of self-brewed wine as previously), the figure is expected to increase by 28 litres a year.


Beer output in Vietnam has increased rapidly in recent years from 1.29bil litres in 2003 to 1.37bil litres in 2004, 1.5bil litres in 2005, 1.7bil litres in 2006, and 1.9bil litres in 2007. It is expected that total output will exceed 2bil litres in 2008 and reach 2.7bil litres by 2010, an increase of 45% over 2007.


In 2003, the then Ministry of Industry, now Ministry of Industry and Trade, released the overall strategy on brewery industry development by 2010, which predicted that beer output would reach 2.5bil litres by 2010. However, after witnessing the skyrocketing growth of the industry, the ministry hurriedly changed the strategy with the prediction of 3bil of litres.


Vietnam is expected to have a population of 100 mil by 2023. At that time, with the 20% growth rate in population, 200% increase in GDP per capita, the beer demand is believed will five-fold higher than at present.


Beer market frothing


Vietnam’s big market with bigger and bigger demand explains why investments in the industry are booming.


Habeco and Sabeco, two big names in the brewery industry, now hold 50% of the market share.


In 2007, Sabeco spent VND6,500bil to expand production, hoping to see output exceeding 1.2bil litres by 2010.


Meanwhile, Habeco is implementing several big projects, like a brewery in Vinh Phuc province, upgrading Hanoi-Hai Phong brewery to reach the capacity of 25mil litres a year. The company hopes to gain the output of 650mil litres a year by 2010.


As such, by 2010, Habeco and Sabeco alone will churn out 1.9bil litres a year.


Other brewery companies have also been rushing to expand production. Ha Tay Brewery has finished the upgrading of its workshop’s capacity from 30mil litres/year to 50mil litres/year. Huda has announced the upgrade of the capacity of Phu Bai brewery from 100mil litres to 160mil litres a year by 2011-2012.


France’s Kronenbourg has officially set foot in Vietnam. The construction of a 150mil/year Kronenbourg brewery, a joint venture between Scottish & Newcastle and Vinataba in Long An province, has been kicked off.


On August 24, San Miguel of the Philippines announced it would spend $8mil to upgrade its brewery in Vietnam.


According to the Ministry of Industry and Trade, there are 350 breweries in Vietnam, which include 20 breweries with the capacity of over 20mil litres a year, 15 with the capacity of over 15mil litres, and 268 workshops with the capacity of less than 1mil litres a year.

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