There is somewhat conflicting news coming from various sources with regards to the beer segment in Vietnam. One report mentioned that Heineken is trimming its business in this industry and has decided to suspend operations at one of its 6 breweries in Vietnam. Whereas, another report mentioned that Heineken has invested US$540 million on factory expansion to increase annual beer output by 500 million litres. The strategy seems confusing to any business, but this is what happen to Heineken in Vietnam.
The beer giant has recently decided to temporarily suspend operation at its beer plant located in Quang Nam, which is reported to have the smallest capacity in the country. According to the report, the move comes against a backdrop of declining beer sales in Vietnam. In addition, the recent strict enforcement on drink driving has led to some consumers altering their beer consumption habits leading to a drop in consumer demand.
Heineken also reported that Vietnam beer market has endured a single digit decline in 2024 after suffering a slump in 2023. GlobalData figures confirmed that 46.4 million hectolitres of beer were sold in Vietnam last year, down more than 12% from 2022. It is predicting sales to drop further in 2024 to just over 43.6 million hectolitres.
It is highly unlikely that the market will recover in the near future, as the drink-driving law will not be relaxed while the government is set to impose a higher consumption tax on beer from 65% currently to 70-80% in 2026 and 100% by 2030.
As such, Heineken’s move to reduce capacity and cutting costs is a sensible move.
Nevertheless, Vietnam will remain an attractive market in the medium to long term, as companies like Heineken can bring new innovative products to ignite consumer interest. The growing trend towards premiumisation could also rejuvenate the market. In fact, a new phase of lower volume growth could start after this brief period of volume decline, according to an analyst.
This could be the reason why Heineken will still go ahead with the construction of a US$540 million factory expansion project in Ba Ria-Vung Tau province later this year to increase annual output by 500 million liters, which is more than double the output at its Quang Nam factory.
Heineken remains the largest brewery in Vietnam accounting for 40% share or 18.5 million hectolitres in 2023. There is no plan to withdraw from Vietnam as the country remains as one of the most attractive market for Heineken.
