Beer
Vietnam is expecting a recovery for domestic beer consumption in the 2nd half of 2020, with a 20% growth expected in 2021. Nevertheless, according to SSI Research, beer consumption volume is unlikely to reach the figures recorded prior to the pandemic.
Apart from the pandemic, the issue of new law, which sanctions drunk driving early this year, will hamper the growth of this industry.
The first half of 2020 has been ‘hell’ for this industry with consumption plunged by 12.7%, according to Nielsen data. Vietnam saw the weakest performance for beer in the 2nd quarter when consumption volume dropped by 22.6% against last year period.
SSI Research data showed that SABECO, Vietnam’s leading brewer, will see its beer output in 2020 decrease by 30%. However, beer consumption in June almost recovered to levels prior to COVID-19 outbreak.
The pandemic has also changed the industry with growing sales through off-trade channels. In the past, consumption was mainly done at pubs, bars and restaurants.
In 2019, total beer production reached more than 5 billion litres, up 22.9% from 2018. 2020 will most probably end with a much lower figure from 2019.
Wine
Vietnamese households saw an average 9.9% growth in their incomes for the past 10 years, which accelerated demand for alcoholic drinks including wine. In 2020, the average household has a disposable income of Dong 113.6 million (US$4,890), while per capita disposable income is estimated at Dong 44.4 million (US$1,910). Despite the pandemic, Fitch is still optimistic of growth during the medium term. According to Fitch, Vietnam’s large youth consumer base and higher disposable incomes led to growing consumption of wine.
Traditionally, wine was mostly consumed via the hotels, restaurants and bars and by a small expatriate community in Vietnam. Wine and sparkling wine offerings were of a higher price point compared to beer which attracts the mass market.
However, with rising incomes and entry of cheaper New World wines (wines produced outside the traditional wine growing areas of Europe and the Middle East) through Free Trade Agreements, one can see growing consumption of wine in the country, according to Fitch. Local supermarkets can now be seen stocking on wines from Chile, France, Italy and Australia.
Vietnam also offers an attractive consumer demographic for wine producers. In 2020, approximately 72.8% (70.9 million people) of the Vietnamese population are aged over 18 (the legal drinking age in Vietnam). The 20-64 age group can be broken down into 2 sub groups, with each offering an important, albeit different, opportunity for wine majors. The young adult (20-39 years) population, the high spenders, meanwhile contributed 32.5% to the country’s population. This group usually consumed the mass produced wine products. In contrast, the higher-income middle aged group (40-64 years), which contributed 29.8% to the population, have more sophisticated taste and go for premium wines. Growing shift towards urbanisation, with now more than 37% urban dwellers in the country, will also boost demand for wine.
Despite the optimism, Vietnamese per capita consumption of wine is only 0.2 litres, far lower from its neighbours in Thailand, Malaysia and Singapore. However, due to its large population, Vietnam is still the 3rd largest wine market in ASEAN at 15.3 million litres in 2020. Only Thailand (103.3 million litres) and Malaysia (26.7 million litres) have higher wine consumption.
Fitch Solutions forecast Vietnam’s wine consumption to grow by an average of 7.4% annually, one of the fastest in the region. By 2024, wine consumption will reach 22.3 million litres. Currently, red wine dominates the market in Vietnam with 76% share followed by white wine (18%), sparkling wines (2.3%) and fortified wines (2.9%).
Dairy
SSI Research showed that demand for dairy products was less affected by the epidemic, with consumption only down by 4% in value terms compared to a 7.3?cline in sales growth.
Nielsen data showed that milk consumption accounted for 12% of FMCG consumption in Vietnam in the 1st half of 2020, unchanged from 2019.
Interestingly, Vinamilk gained more market share during the pandemic due to its diversified product range and strong distribution network. Both Vinamilk and Moc Chau Milk saw sales growth of 2.5% and 9.7% during the 1st half of 2020, outperforming the industry.
Nevertheless, although milk is an essential commodity, demand from low-income consumers could still be affected by the pandemic.
SSI Research also forecast that selling price will not move up in 2021 as consumers become more price sensitive during this period. Premiumisation is also likely to slow as consumers’ incomes are affected.
Milk is one of the top products with increased purchase volume through e-commerce platforms during a pandemic.
Although domestic brands dominate the market, competition from foreign brands is still present. The EVFTA free trade agreement will also eliminate the 5-20% tariffs on European dairy products within the next 3 to 5 years.
Meanwhile, domestic dairy producers like Vinamilk, TH True Milk and Moc Chau Milk have also started exporting to China.
