Leading brewers’ ad spending meets diminishing returns

August 07, 2017 | 17:05
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In the context of fierce competition among brewers, two of Vietnam’s largest brewers Sabeco and Habeco have millions of dollars on advertisements, which they consider an important weapon in the race to gain the market share, according to newswire Vnexpress.
Sabeco and Habeco's advertisement spending bring little to no success (Illustration image)

Notably, according to its half year report, Sabeco spent VND740.3 billion ($32.5 million) on advertisements and promotional communications campaigns, equaling 53 per cent of sales expenditure and signifying an increase of VND333 billion ($14.5 million) compared to the same period last year.

According to Sabeco chairman Vo Thanh Ha, the corporation is facing heated competition with leading brewers in terms of brand image and financial potential. Besides, customers are increasingly consuming high-end beer products, while Sabeco has yet to come out with products at this segment. Thus, one of the most important targets of Sabeco in 2017 is retaining its existing market share.

Habeco, in the first six months, spent VND223 billion ($9.8 million) on advertisements, promotion, and communications programmes, doubling the figure on-year.

According to the theory, when firms increase spending on advertisements, their business results will improve. However, in reality, efficiency has been decreasing.

In 2012, Sabeco’s revenue was 50 times higher than its expenditure for advertisement, promotion, and communications programmes, however, in the first six months of this year, the figure was 20 times only.

Regarding Habeco, in recent years, in spite of the consecutively increasing expenditure on advertisements and promotion, the firm has seen a consecutive decrease in profit since the 2014 record. In the first half of this year alone, although the firm spent double on advertisements and promotion, its revenue reached VND4.2 trillion ($184.6 million) only, up 5 per cent on-year, with a light decrease in after-tax profit.

Sabeco is the largest brewer in Vietnam in general and in the south in particular. The firm currently owns 24 manufacturing plants with a total designed capacity of 1.8 billion litres per year, 20 of which are in operation, while the remaining ones are expected to come into operation in the near future. In 2015, Sabeco sold 1.5 billion litres of beer, equaling 40 per cent of the market.

Sabeco has expanded its market share in the north. Notably, in the first six months of 2016, its market share increased to 15.5 per cent from the previous 10 per cent.

Regarding Habeco, the firm ranks third among the largest brewers in Vietnam, with an 18 per cent holding of the domestic beer market in general and 50 per cent of the north in particular. Its beer sales in 2015 reached 700 million litres. It owns 15 beer plants, almost all of which are located in the north.

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By By Ha Vy

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