TPP to Drive Competition in Vietnam’s Beer Market

Posted by Reading Time: 3 minutes

By Edward Barbour-Lacey

HCMC – Vietnam’s domestic beer industry is preparing itself for fierce competition from foreign beer companies after the signing of the Trans Pacific Partnership (TPP), a U.S. led free trade agreement. Under the TPP, Vietnam will reduce its imported beer tax from 35 percent to zero percent.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Pre-Investment, Market Entry Strategy Advisory Services

Vietnam represents a clear market opportunity for foreign beer brands.  Unlike some of the other countries in the region, Vietnam has a strong culture of beer drinking.  According to the Vietnam Beer, Alcohol, and Beverage Association, Vietnam is one of the region’s largest consumers of beer, ranking behind only China and Japan.  In 2013, consumption levels reached 2.9 billion liters; a 2.5 percent increase year on year. The beer market has seen an average growth of 10 percent per year.

Despite their higher prices, demand for foreign beer brands has in recent years seen significant growth. In general, foreign beer costs around US$1-2, which is up to four times as expensive as local brands, such as Saigon Beer and Hanoi Beer. Drinkers are increasingly being split along economic lines in their choice of beer – Vietnamese beers tend to be drunk by those in the middle and low income classes, while the foreign brands are the clear winners in the upper end of the market.

RELATED: Cheers to Vietnam: Competition on the Rise in Vietnam’s Beer Industry

Supermarkets, such as Big C and Carrefour, have proven to be key distribution points for foreign beer.  In many locations, foreign beer brands now dominate the shelves at the supermarkets. However, the local beers still dominate the Bia Hoi; the classic outdoor drinking venues which brew their beer daily and are frequented by both Vietnamese and adventurous foreigners.

Further signifying that competition is already heating up within the market, advertising spending by both local and foreign beer companies has seen strong growth. In addition, Vietnam’s growing online population has allowed beer companies to better target the country’s growing consumer class.

Foreign beer is not just simply being imported into Vietnam; many brewers are choosing instead to set up their operations within the country in order to make their supply chain more effective and take advantage of the government’s advantageous tax policies.  For example, 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. 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.

Other brands that are stepping up their activities in Vietnam include China’s Tsingtao, the Netherlands’ Heineken, and Singapore’s Tiger.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira 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 China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading

Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.

An Introduction to Doing Business in Vietnam 2014 (Second Edition)
An Introduction to Doing Business in Vietnam 2014 (Second Edition) provides readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in the country.

Leave a Reply

Your email address will not be published. Required fields are marked *