Bitter taste of beer

Sabeco has just announced the closing of the list of shareholders to advance 2023 dividends in cash at a rate of 15%, payment date is February 7, 2024. With this dividend, Vietnam Beverage will receive 1,031 billion VND in dividends.

 Decline in demand

 Since spending nearly 5 billion USD to take control of Sabeco in 2017, in the past 6 years, Vietnam Beverage (part of Thai Beverage Group) has collected more than 9,278 billion VND in dividends from Sabeco. Cash flow from dividends has helped Thai Beverage Group recover about 8% of its investment in Sabeco.
 
Despite receiving large profits, Vietnam Beverage is facing an optimistic outlook when the business situation of Sabeco in particular and the beer industry in general is declining. After 9 months, Sabeco recorded revenue of 21,940 billion VND, net profit of 3,170 billion VND, down 12% and 24% respectively compared to the same period last year.

A series of other beer companies are in the same situation as Habeco - Hai Phong, whose profit after tax is 736 million VND in the third quarter of 2023, down 75% over the same period; Saigon - Quang Ngai Beer reduced its profit after tax by 55% after 9 months, to only 78 billion VND; Saigon - Song Lam Beer decreased by 45% to 22 billion VND; Hanoi - Hai Duong Beer reduced profits by 1/3, only 7 billion VND...
 
These are really bleak numbers compared to before 2019 - when Vietnam was the largest beer consumer in Southeast Asia. From 2019 onwards, the beer industry grew 5-6% per year on average. If this growth rate is followed, by 2022 the beer industry must increase by 20% compared to 2019. However, in reality, in 2021, the beer industry will decrease by 10-15% and in 2022 it will continue to decrease by about 5-7% compared to year 2019.

In this situation, not only domestic beer companies are facing difficulties, even large beer manufacturers such as Heineken and Carlsberg have witnessed a significant decline in sales in the Vietnamese market. Mr. Dolf van den Brink, CEO of Heineken, said that Heineken will reduce beer sales by 5.6% in the first half of 2023, because of the economic recession in Vietnam. "We are facing a strong economic downturn in our important market, which is Vietnam," Mr. Dolf said.
 
It can be seen that Vietnam's beverage industry is falling into "double difficulties" because sales have dropped sharply and at the same time, the price of raw materials has increased by up to 50%. Meanwhile, Decree 100 (regulations on administrative penalties in the field of road and rail traffic) will continue to make it difficult for beer market consumption to recover. Not to mention, the beer industry also faces a special consumption tax, expected to increase by at least 10% on product prices according to recommendations of the World Health Organization (WHO).

Waiting for the bright spot
 
At this time, the beer industry is looking forward to the end of the year with many party and Tet activities... but the situation is still not very bright. This can also be noted when pubs and beer gardens that were once crowded in big cities have now shrunk or closed in a deserted scene.
 
Mr. Nguyen Van Viet, Chairman of the Vietnam Beer - Alcohol - Beverage Association (VBA), commented that production and business activities of enterprises in the beverage industry have suffered heavy losses and the consumption market has decreased. 20-30%. "From now until the end of the year, the beer market is still very bleak," Mr. Viet said.
 
In 2023, SSI Research forecasts that Sabeco's net revenue and net profit will reach VND 30,500 billion (down 13% over the same period) and VND 4,400 billion (down 21%), respectively, about 10% lower than the previous year. previous estimates, due to reduced production estimates as beer consumption is weak.

A bright spot, according to SSI Research, is that consumers are switching from high-end products to popular products and Sabeco benefits from this trend thanks to the Saigon Beer brand. This may raise expectations that consumption output will increase again when the domestic economy recovers, possibly as late as the second half of 2024. In 2024, Sabeco's net revenue and net profit are expected to be forecast to reach VND 32,500 billion (up 7%) and VND 5,000 billion (up 15%), respectively.
 
However, domestic beer companies like Sabeco still face many risks such as the spending habits of Vietnamese people tend to decrease, in addition to increasing spending on healthy products after the epidemic. There is also saturation in consumption demand when average beer consumption in Vietnam has increased continuously for 20 years.

Vietnamese people's preference for foreign products will also be a big challenge for domestic beer companies. In addition to the threat of competition from foreign beer, on the market today there are also PET bottle products, bottled beer, and canned beer from small private enterprises at cheap prices such as Viet Han Draft Beer, Sao Vang, Hada Draft Beer. , Hanoi Special Lager beer...
 
Meanwhile, the Russia-Ukraine conflict remains tense with the epidemic still developing complicatedly, financial risks, inflation, foreign exchange rates, fluctuating interest rates... These will be factors. creates a potential risk of economic recession, which can greatly affect input factors and production and business costs of beer brewers next year.