Beer battle ahead shakes up goals

Beer battle ahead shakes up goals. Source: habeco.com.vn

Although domestic brewers have been faced with social restrictions during the pandemic and stricter regulations on road traffic to keep beer lovers safer, this year’s revenues and net profit targets show an attempted direction towards economic recovery.

The publicly-listed Hanoi Beer, Alcohol, and Beverage JSC, or HABECO (code BHN), approved its business plan at last month’s annual general shareholders’ meeting. Revenues from its main product lines of beer and UniAqua water was presented, reaching VND5.3 trillion ($230.4 million), while profits after tax amounted to VND225.4 billion ($9.8 million), down 8.5 per cent and 59.2 per cent on-year, respectively.

Although the beermaker holds the largest market share in the north, HABECO predicted that its business situation this year will still face many difficulties as the global fight against the pandemic persists.

In the context of the generally weak demand due to lowered consumers’ purchasing power, HABECO also must deal with pressure from competitors that are concentrating large resources on continuous promotions, investing heavily in their distribution systems, and bringing new products to the market that directly compete with popular segments of the company.

Ngo Que Lam, general director of HABECO, said that in the northern and north-central regions, which are the company’s main markets, the beer industry has experienced a stronger decline compared to other markets.

Despite being subject to stiff competition from international and local beer brands, HABECO however still maintains its position as the leading brewer in the market and recovered its business in the summer season and by the end of 2020 as a whole.

According to a report conducted by SSI Securities Corporation, the beer sector’s recovery momentum will continue but the demand is forecasted to not return to pre-pandemic levels before 2022.

Although Vietnam has handled the pandemic well, with catering and entertainment improving, the overall performance of the food and beverage sector is still a long way off pre-pandemic levels, and customer frequentation at restaurants, cafes, shopping centres, theme parks, and museums remains weak, representing an overall decrease of 10 per cent compared to the average rates.

Meanwhile, SABECO (code SAB) set a target revenue of VND33.5 trillion ($1.33 billion) with net profits of VND5.2 trillion ($208 million) for 2021, a 20 per cent and 7 per cent on-year increase, respectively.

Explaining the figures, Bennett Neo, general director of SABECO shared, “Our business plan for 2021 was made in January, but the goal of increasing sales by 20 per cent is not easy. Even so, the Management Board still maintains its commitment and strives to fulfil it.”

Despite the challenges from the pandemic, new regulations, and natural calamities last year, SABECO was able to post better-than-expected bottom-line results by implementing cost savings, leveraging new sales opportunities, and expanding the market by introducing new brands such as Lac Viet and Saigon Chill. With this, SABECO has also been able to meet its previously-approved 2020 dividend plan which maintained a rate of 35 per cent.

At the company’s presentation of its 2020 financial results, SABECO highlighted that while revenues and profit after tax went down 26 per cent and 8 per cent from the previous year, respectively, SABECO still managed to surpass its targets by 17 per cent and 52 per cent, respectively. In absolute figures, SABECO exceeded its revenue target by VND4.1 trillion ($178.2 million) and its net profit goal by VND1.6 trillion ($69.6 million).

“We were able to weather headwinds in 2020 by remaining fiscally prudent and operationally nimble,” said Neo. “We focused our spending on the essentials and continued to find efficiencies, where possible, while making sure that we are able to leverage on market opportunities.”

The spirit of accepting tough trials is rooted in the company’s transformation strategy that started three years ago after Thai Beverage acquired a majority stake in the state-owned brewer.

Both SABECO and HABECO showed solutions to shareholders to reach their targets, including improving the distribution network and adjustments to customer tastes, resulting in a larger market share.

Although the beer sector faced the dual pressure of the pandemic and regulations on drink-driving last year, the newly-introduced product lines could be utilised to increase market share as Vietnamese consumers begin to pay more attention to such products thanks to quality and taste, and thus are more willing to pay higher prices.