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Vietnam's beer industry at its lowest in 24 years and new directions in alcohol beverage business

Vietnam has long been one of Southeast Asia’s largest markets for beer and alcohol consumption. However, statistics show the country’s beer industry is facing its most significant downturn in over two decades as consumer habits and societal views change. Industry leaders are taking notice and adapting their businesses to remain viable in this evolving landscape.

According to the Vietnam Beer, Alcohol and Beverage Association (VBA), domestic beer consumption declined approximately 20-30% from its peak in 2019. This represents the sharpest annual fall the industry has witnessed since at least the late 1990s. Consumption had grown steadily at 5-6% annually in the preceding years. However, in 2021 beer sales decreased 10-15% compared to the prior high watermark, and in 2022 sales lagged 2019 levels by another estimated 5-7%.


Sales data released by Vietnam's two largest brewers, Sabeco and Habeco, corroborate this industry downturn. In the first nine months of 2023, Sabeco's revenue was down 12% year-over-year to VND22.1 trillion (US$931 million). Net profit declined even more sharply, dropping 26% to VND3.28 trillion ($140 million). Meanwhile, Habeco reported a nearly 6.3% revenue fall to VND5.63 trillion ($240 million) over the same period. Its net profit shrank nearly 39% to just VND291 billion ($12.5 million).

The causes of shrinking demand are both health-related and generational. Surveys show younger consumers place more importance on wellness, fitness, and sobriety compared to prior generations. About 50% of respondents in 1990-2000 polls said beer was their favorite drink versus just 37% saying the same in recent years. The rising costs of healthcare are also a deterrent for many to curb alcohol consumption. Additionally, Vietnam and other countries have implemented stricter regulations on alcohol sales and marketing in the name of public welfare.

Vietnam remains Southeast Asia’s second highest per capita alcohol consumer behind Timor-Leste. Average annual consumption was 8.3 liters of pure alcohol equivalent to around 170 liters of beer per person in 2022. However, changing social mores indicate this status may not hold for long if current trends persist. VBA Chairman Nguyen Van Viet acknowledges market difficulties, saying “2019 was the peak year for the beverage industry...the beer market has been very gloomy since and there are no signs of recovery by year-end.”

International brewers are responding to shifting global currents as well. Anheuser-Busch InBev, the world’s largest beer company, predicts non- and low-alcohol beer sales could amount to one-fifth of its total revenues by 2025. This segment grew 25% in value to top $11 billion globally in 2022, attracting increasing commitments from alcohol-focused brands. Heineken recently announced plans to invest €1 billion in new product categories like craft beer, cider, and non-alcoholic beverages by 2023.

Competition is also intensifying as non-beer beverage giants launch no- and low-alcohol drinks. Coca-Cola, PepsiCo and other leading non-alcoholic drink producers directly challenge core beer company markets. At the same time, the number of small independent brewers proliferates. The U.S. beer industry landscape exemplifies this phenomenon, expanding from around 1,500 brands in the 1990s to over 9,700 currently.

In Vietnam, industry experts forecast a 25% increase in the non-alcohol beverage segment from 2022-2026. To remain profitable, local brewers like Sabeco will need to transition parts of their operations and branding accordingly. Some tactics under consideration include developing new drink lines close to the tastes of favorite beer labels yet with zero alcohol content. Targeting health-conscious younger adults early could allow first-mover advantages to be retained even as customer profiles evolve. Regional expansion of non-beer offerings similar to Mộc Châu sparkling water may also diversify revenue streams.

Whether through product innovation, market segmentation or acquisition, adapting to changing social landscapes will determine which brands can endure in eras when even historically strongholds like beer face challenging conditions. More so than any recent global recession, shifts in cultural norms pose risks as substantial to the bottom lines of alcohol purveyors everywhere. How major Vietnamese producers like Sabeco and Habeco pivot their investments over the next few years may strongly influence whether they can maintain leadership roles during this ongoing transition. With determination and foresight, opportunity remains for those willing to meet the needs of tomorrow's customers today. Only time will tell which firms prove most adept at this high-stakes balancing act.

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