Vietnam looks to capitalise on soaring local demand for beer

By: Madeleine Keck - Posted on: August 9, 2017 | Business

Vietnam’s government, which boasts the thirstiest population in Southeast Asia, is seeking to attract investment in the country’s largest brewer

People attend the Hanoi Beer festival in Hanoi, Vietnam 02 December 2012. The festival which is held on the first Sunday of every December has attracted thousand of drinkers. People may enter the festival and enjoy free Hanoi beer with only one US dollar entrance ticket.
People attend the Hanoi Beer festival in Hanoi, Vietnam 02 December 2012. The festival which is held on the first Sunday of every December has attracted thousand of drinkers. People may enter the festival and enjoy free Hanoi beer with only one US dollar entrance ticket. EPA/Luong Thai Linh

The people of Vietnam like beer, an appetite that could soon pay off in a big way. Demand for the beverage has increased by 300 percent in the past 15 years, making it the top per capita consumer in the region.

Now, the state is prepared to start selling off shares of Saigon Beer Alcohol Beverage Corp (Sabeco), which is estimated to be worth some $7 billion and has already drawn the interest of some of the world’s biggest names in beer.

According to a Euromonitor International Report from June, an expanding middle class and youthful population has driven the surge in sales, contributing to a market worth 147.2 trillion dong ($6.5 billion) in 2016.

“Vietnam will be the market to watch,” Euromonitor said in their report. “Thanks to the strong street consumption culture and rapid urbanization, Vietnam is forecast to see the largest volume growth over 2016-2021.”

The rise in Vietnam’s beer consumption has attracted foreign firms such as Heineken NV, Anheuser-Busch InBev NV and Japan’s Asahi Group Holdings Ltd. 

The government has announced that it is preparing to sell off slices of Sabeco, one of two major state-owned brewers, according to Bloomberg Markets.

The sales will help fund infrastructure projects such as highways and airports as the communist party seeks to boost connectivity and narrow the country’s budget deficits. In order to extract the highest priced for shares in the brewer, they will be sold off in three tranches.

Shares of Sabeco have more than doubled since it was publicly listed in December, climbing 28 percent this year compared with a 19 percent gain in the benchmark Vietnam Ho Chi Minh Stock Index.

Javier Gonzalez Lastra, a London-based analyst at Berenberg told Bloomberg, said the phased-sale was likely to ensure that the government gets “maximum valuation” for its 90 percent holding in the company.

Sales in Sabeca will reportedly begin in the middle of next month, according to officials who spoke anonymously to Bloomberg, and will continue through 2018.

And though beer sales may slow slightly, there seems to be little doubt that growth will continue for years to come. 

Beer is expected to register a positive total volume performance over the forecast period, although at a slower pace than in 2016,” Euromonitor said in its report. “Beer consumption is now integral to daily life and considered a basic for most consumers.