By Edward Barbour-Lacey

HANOI – Vietnam’s beer market is experiencing rapid growth, an average of 10 percent a year. Foreign firms are pouring into the country’s market and local firms are increasing the size of their operations in response to the increase in competition.

With the conclusion of the Trans Pacific Partnership in sight, competition in Vietnam’s beer market is only expected to intensify.

Three cheers for Vietnam

Vietnam represents a prime market for beer producers. Unlike some of the other countries in the region, the Vietnamese have a tradition of drinking beer and express a strong loyalty to their local brands.

The Vietnam Beer-Alcohol-Beverage Association has reported that the Vietnamese people consumed around 3 billion liters of beer in 2013. It is expected that this number will increase by a minimum of 5 percent in 2014.

Vietnam’s beer consumption is the highest in Southeast Asia and only ranks behind China and Japan in an Asia-wide ranking.

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While still dominating the market as a whole, Vietnamese beers tend to be drunk by those in the middle and low income markets, while the foreign brands are the clear winners in the upper end of the market. Much of this disparity can be explained by price differences and the hesitancy of many foreigners to try unfamiliar brands.

Foreign beer won’t water down this market

Foreign breweries have recognized the vast potential of the Vietnamese market and, like yeast rising to the top of a brewers vat, their numbers are rising fast.

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Anheuser-Busch InBev has announced that it will build a brewery in the southern province of Binh Duong in order to produce its leading beer Budweiser. Company representatives have reported that, upon completion, the brewery will be able to produce 100 million liters of Budweiser a year. AB InBev is also continuing to import its products into Vietnam.

Japanese beer maker, Sapporo, is also expanding its operations in Vietnam. It recently announced that it would expand the capacity of its brewery in the southern province of Long An from 40 million liters to 100 million liters. It is also planning on opening additional breweries throughout the country. Like AB InBev, Sapporo is also importing its products as well.

A variety of other foreign brewers are increasing their imports into Vietnam’s market. These include China’s Tsingtao, the Netherlands’ Heineken, and Singapore’s Tiger.

Local brews fight back

Not to be outdone, Vietnam’s local beer producing companies are aggressively expanding their operations in a bid to fight against the foreign competitors.

Vietnam’s largest beer producer, the Saigon Beer Company, has already broken ground on a new brewery in the Mekong Delta province of Kien Giang, which will be capable of producing 50 million liters of beer annually. The company has already invested in 24 other breweries around the country, most of which are online already and produce a total of around 2 billion liters of beer.

Another popular local beer is produced by the Hanoi Beer – Alcohol Beverage Corporation, which also has plans to expand its operations over 2014. The corporation already owns 14 breweries, which produce around 811 million liters annually.

A microbrewery culture is also beginning to take a strong hold in Vietnam, with an increasing variety of beers being made beyond the country’s staple of “Bia Hoi.”

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The Vietnamese government has also made efforts to help support the local brewing industry. Foreign beers are subject to a 45 percent import tax, a 50 percent special consumption tax and a 10 percent value-added tax.

However, this has done little to slow the influx of foreign brands and it seems that the Vietnamese beers will have to compete on factors such as taste and price – two categories which they perform particularly well in. The future looks bright for beer drinkers in Vietnam.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email vietnam@dezshira.com, visit www.dezshira.com, or download our brochure.

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