Beer giants starting to feel brunt of COVID-19 pandemic

Beer giants are looking for prudent business strategies for the rest of the pandemic

In early August, Heineken announced that the COVID-19 pandemic continued to wreak havoc on its business in a number of key markets in Asia and Africa. The Dutch brewer forecast that its 2021 financial results would remain lower than pre-pandemic level although it has generated a profit of $1.2 billion in the first six months of the year. Other challenges include headwinds in input costs in H2 and a material impact from commodity costs in 2022.

Likewise, SABECO posted a net revenue of VND7.23 trillion($314.35 million) in Vietnam in H2, which is almost equal to the corresponding period a year ago. However, its selling expenses have skyrocketed by 39 per cent and other expenses increased by 210 per cent, leading to a 12 per cent slump in its after-tax profit to VND1.07 trillion ($46.52 million). This year, SABECO aims to achieve a net revenue of VND33.49 trillion ($1.46 billion) and after-tax profit of VND5.28 trillion ($229.57 million). So far, the company has fulfilled 40 per cent of the target.

Another beer maker Habeco also witnessed a decline in profit in the second quarter. It posted a net revenue of VND1.94 trillion ($84.35 million), down nearly 10 per cent compared to the same period last year. Meanwhile, its gross profit was VND512 billion ($22.26 million) in the period, with gross profit margin remaining at 26 per cent, unchanged from the same period last year. Along with shrinking sales, Habeco's selling expenses have also surged by 15 per cent to VND249 billion ($10.83 million).

Although the beer industry has been hit by the pandemic, Vietnam still takes the lead in the world in beer consumption. Thus, the competition is becoming fiercer as beer makers are stepping up their game to increase profits and acquire market share. They pin their hope on the recovery of the market in 2022 when the pandemic would be under control.

According to a report by SSI Research, beer companies have increased their presence in all segments. Currently, Sabeco is gradually penetrating into the high-end segment with its ongoing launch of new products and adoption of flexible marketing strategies. Sabeco launched Saigon Chill in October 2020 and Lac Viet in June. At the same time, Heineken rolled out Bia Viet in April to compete with other beer brands in the affordable segment.

Beer companies have also been making efforts to use optimise costs during the tough time. Habeco slashed its financial expenses by 35 per cent to VND4 billion ($173,910). In 2021, Habeco aims to sell 280 million liters of beer, maintaining its No.1 position in the North and North-Central markets. The company will restructure its brand and product portfolio to increase market share.

At the 2021 annual general meeting of shareholders, Habeco said that the company will develop a new brand strategy this year to exploit key market segments. The company will continue to improve its distribution plan as well as apply technology in sales management and organisation.

Meanwhile, Sabeco also unveiled its strategy for the pandemic. General director Bennett Neo said that Sabeco can overcome headwinds in 2020 by maintaining financial prudence and take quick action. The company will restrict spending to the essentials and constantly look for high-performance opportunities in the market.

Sabeco has completed its 2020 dividend payout plan with a ratio of 35 per cent. It has set a revenue target of VND33.49 trillion ($1.46 billion) and after-tax profit of VND5.29 trillion ($230 million) for 2021, respective increases of 20 and 7 per cent on-year.

With a global strategy, Heineken will effectively restructure its operations, aiming to save $2.42 billion within three years to 2023. However, Heineken has a plan to cut 8,000 jobs worldwide depending on local circumstances.

After the past few months of crisis, beer makers need to be careful in their business planning to ensure the dual goals for generating profit and ensuring safety for workers.