Sabeco, Vietnam’s leading beer producer, is still struggling to find strategic partners after announcing such plans five years ago. And business observers are wondering what the problem is.
The Saigon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco) unveiled its intention to source strategic partners right from early 2008 when it convened a general shareholder meeting to commence operations under a joint stock model.
Top global brewers like Heineken, AB InBev, SAB Miller and Asahi had met Sabeco even before the time Vietnam’s top beer maker embraced equitisation in a bid to hike their stake in the Vietnamese market.
One market study showed that Sabeco’s beer production capacity made up 46 per cent of the country’s total, focusing on low and medium market segments.
As of early November 2012, businesses that expressed desire to become Sabeco strategic partners were three leading foreign brewers - Holland’s Heineken, Japan’s Asahi and SAB Miller of the US.
“Since Sabeco is Vietnam’s top beer maker in volume, its strategic partners would need to satisfy certain criteria such as not triggering interest conflicts between Sabeco and the business partner, that partner having interests compatible to Sabeco’s growth strategy, particularly not competing directly with Sabeco products,” an industry expert told VIR.
Besides, the expert added, the strategic partner should be in a position to help Sabeco boost production and improve quality of its beverages and alcoholic drinks.
In parallel to promoting technology, sales and marketing and enlarging markets, issues like effective governance of money flows in production and business or finding suitable remedies to properties which are being used or managed by Sabeco were held of foremost importance when choosing Sabeco’s strategic partners.
Industry insiders assumed the aforementioned foreign partners were less supportive of Sabeco’s plans to scale up technology innovations, sales or marketing since they produce and trade in items directly competing with Sabeco’s.
Besides, the production volumes of these foreign brands are far lower than that of Sabeco.
“Similarity in target markets and products is a stumbling block hindering cooperation between Sabeco and these foreign brands in selecting Sabeco’s strategic partners,” that expert noted.
Consider Heineken. It is the Vietnam beverage sector’s largest foreign investor, and acts as either a founding shareholder or stakeholder at Vietnam Brewery Limited, Song Han Brewery, Dung Quat Brewery, Quang Nam Brewery and some others. Heineken possesses almost all brands from top-notch to common ones.
In technology respect, Sabeco’s production factories feature cutting-edge equipment and technology with doubled production capacity compared to Heineken. In its application to become Sabeco’s strategic partner, Heineken reportedly did not mention any concrete cooperative plans besides the brewery.
In respect to Asahi, this Japan-backed brand just made presence in Hanoi and Ho Chi Minh City whereas Sabeco possesses an expansive network across the country. Besides, Asahi competes directly with Sabeco in securing exclusive sponsor packages at restaurants and food shops.
SAB Miller also competes head-on with Sabeco and its production volume is far below that of Sabeco.
About the opportunity to become Sabeco strategic partners, a representative from one of these three foreign partners admitted there was little chance for them albeit they were prideful of their technology as well as brand value.
Sabeco posted beer production output of 1.2 billion litres and after-tax profits of VND2,344 trillion ($114 million) in 2011. Corresponding figures in 2012 were 1.26 billion litres and planned after-tax profits of VND2,343 trillion ($112 million).
By Thanh Huong