HEINEKEN and Sabeco jousting over beer market dominance

The beer market is expected to grow by 5.6 per cent each year in the 2019-2023 period

A recent case attracted public attention as HEINEKEN Vietnam was reported to have been squeezing local distributors to focus promotions and sales on this one brand, with warning that the sellers could see their monthly support cut if they continue to sell other brands.

Since its announcement to begin collecting information about the case, there has been no official communication from the Ministry of Industry and Trade’s Vietnam Competition and Consumer Protection Authority determining whether a violation of the Competition Law has been committed. However, the case once again highlighted the fierce competition in the beer industry, especially in the premium beer and super premium beer segments that are seeing the highest demand.

In light of the attractiveness of the Vietnamese beer market, the rivalry is not difficult to understand. A recent study by market research firm Statista shows optimistic prospects for the domestic beer market. Accordingly, the total revenue of the market is forecast to reach $7.7 billion in 2019, while the annual growth rate is expected to hit 5.6 per cent in 2019-2023.

These appealing figures have brought all leading beer brands to the yard as Heineken, Tiger, Carlsberg, Budweiser, and Sapporo have all established footholds in the market. The Vietnamese beer market has thus gradually become more "cramped" with more than 30 major global beer brands vying for space. The appearance of more and more international brands has intensified competition, especially in the premium beer segment where the largest names reside.

However, over the past decade, Sabeco and HEINEKEN's total market share in the Vietnamese beer market has not once dipped below 63 per cent (by volume). In 2019, this figure was 73.1 per cent, as reported by Euromonitor International, with the rest being fought over by other players.

Industry insiders likened the marketplace to a battlefield, which makes it understandable that companies are pressing distribution agents for exclusive commitment – and as more new brands appear, pressure will only mount.

In Vietnam, HEINEKEN produces and distributes Heineken, Tiger, Larue, BIVINA, Bia Viet, and Strongbow cider. In its annual report, Heineken NV reported that Vietnam was one of its fastest-growing markets.

“The Asia-Pacific region delivered double-digit volume, revenue, and profit growth with simultaneous accelerated performance across multiple countries. In Vietnam, beer volume increased by double-digits. This was on the back of continued favourable beer market conditions and execution of our portfolio expansion strategy following the integration of HEINEKEN Hanoi to create one combined HEINEKEN Vietnam business,” the report read.

A rising number of consumers are paying more attention to premium beer thanks to its better quality and taste, and are willing to pay the higher price. Competition for market share of the two big players HEINEKEN and Sabeco has been a permanent state of affairs for long years now.

Sabeco extends its lead but HEINEKEN sees stronger growth due to premiumisation, according to Euromonitor’s Beer in Vietnam report released in August. Sabeco maintained its leading position in beer in total volume terms in 2019 and even managed to increase its share slightly thanks to its well-known Saigon Export, 333 Premium Export, and Saigon Lager brands. Besides, the company has an extensive distribution network reaching to rural and urban areas.

In turn, Sabeco is keen to forge into the mid-tier segment dominated by Tiger – a strategy it hopes will help lift its market share.

At the same time, Sabeco has introduced a new beer named Saigon Chill to take over the premium beer segment by targeting enlightened, optimistic, and sociable Vietnamese consumers.

Sabeco’s brands, which include Saigon Lager, Saigon Export, and 333 Premium Export, are “all over the place," general director Neo Gim Siong Bennett told Reuters.