Vietnam’s guzzling more beer than ever as the economy accelerates and the population gets younger. Vietnam Brewery Limited (VBL) wants to ensure the pint glasses don’t stay empty.
Established in 1991 as a joint venture between Dutch beer giant Heineken and local partner Saigon Trading Group, VBL targets the premium beer segment. It is now the second largest brewery in Vietnam with 25 percent market share after state-owned Sabeco.
“Of the total alcohol consumed in Vietnam, 94% is beer, so it is really part of the Vietnamese culture,” says Leo Evers, managing director of VBL.
“Walk into any restaurant or bar and you’ll notice that everyone is drinking beer,” Evers says in a “Managing Asia” interview.
The frenetic growth – Vietnam is aiming to raise beer output by 25 percent from 2015 to 2020, according to a January statement by the Vietnam Beer Alcohol Beverage Association – has been underpinned by a combination of factors.
Economic growth has picked up, with Vietnam’s economy currently expanding at its fastest pace in seven years. Demographics have also helped: 50 percent of the population are below 30 years old, says Evers.
Other major foreign players such as Anheuser-Busch InBev, Carlsberg Group and SABMiller have also staked their bets on Vietnamese drinkers and set up breweries in the country.
For VBL, the partnership between Heineken and Saigon Trading company has been extremely successful, says Evers, who adds that it has been beneficial to have a Vietnamese partner to provide the “local know-how.”
He says the trick to a successful joint venture was finding the right balance of working culture the two companies.
The partnership strategy has paid off handsomely for VBL, which has seen its beer production capacity grow 15 times in the past 25 years of operations, says Evers.
In addition the country’s large consumer market, the Trans-Pacific Partnership agreement is also expected to boost Vietnam’s beer industry.
Currently, Vietnam’s special consumption tax rate has imported beer taxed at 55 percent, and this is set to increase to 60 percent from January 2017, according to a May USDA Foreign Agricultural Service report.
If the trade deal is ratified by all participating nations, the tax on imported beer in Vietnam would be slashed, and costs of raw materials such as hops and malt will be significantly cheaper, Evers says.
However, Evers added that the company is not just banking on lower import duties to drive down costs but carries out “cost programs throughout the year to make the organization as cost-effective as possible.”