Report March Abridged Version

Transcription

1 Beverage ndustry Report March 2018 Abridged Version

2 OUTLINE Market Overview Value Chain Analysis Key market drivers Competitive Landscape Market Entry Analysis Industry Outlook Top Companies Profile

3 Billion dong Market Size 450, , , , , , , ,000 50, % Total Value % increase Growth Rate of main drink segments 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Vietnam beverage market value increased by about 11.4%/year from 2012 to Market value in 2017 is estimated at about VND320,000 billion, an increase of 10.6% compared to This is because of Growing young population and rising number of middle income individuals Young and fast-pace economy Drinking culture Hot and humid climate Consumption of tourism industry Market is evaluated to gradually be saturated with the slowing-down pace of growth within main segments. For example, the soft drink market value increased 8.3% in 2017, compared with 22.3% in However, as of 2017, a Vietnamese individual consumed about 100 litres of drinks on average each year, which is smaller than that of the world which is estimated at about 130 litres/person. Vietnam is still considered a potential beverage market. 20.0% 10.0% 0.0% billion litres/year 100 litres/person/year 130 litres/person/year Alcoholic Drinks Soft Drinks Hot Drinks Source: Euromonitor; World Bank VietnamCreditI

4 Million litres Spirits In 2017, Vietnamese consumed 54.6 million litres of spirits. Accounting for only about 0.3% of global total spirit volume, Vietnam is just a small spot in the world s spirit map. Local white spirits, which accounted for about 83% of volume, was the key contributor to this market in Vietnam in 2016, although its total volume growth slowed significantly compared to Japanese whisky sees the highest total volume growth at 54% in This is followed by Shochu/soju of 12.1% Total Volume Total Value Brand name Company Vodka Hanoi Hanoi Liquor JSC Avinaa Avina JSC Men's Vodka Aroma Co Ltd Vina Vodka Hanoi Liquor JSC Hanoi Lua Moi Hanoi Liquor JSC Hanoi Nep Moi Hanoi Liquor JSC Dong Xuan Ruou Nep Dong Xuan Liquor Co Ltd Nang Huong Binh Tay Liquor Co JV Dong Xuan Nep Hoa Vang Dong Xuan Liquor Co Ltd Vodka Bluebird Hanoi Liquor JSC Total Source: Euromonitor; VietnamCredit % Total volume growth 2016/ CAGR 2016/11 Total Brandy and Cognac Brandy Cognac Liqueurs Rum Whiskies Bourbon/Other US Whiskey Japanese Whisky , Blended Scotch Whisky Other Whiskies White Spirits Gin Vodka Other Spirits Local White Spirits Shochu/Soju Spirits

5 Beverage value chain Upstream Downstream The Beverage value chain begins withthe cultivation activities to obtain the materials for production. For example, beer comes from Barley while spirits and wine come from variety of cereals and fruits for fermentation. Cultivation Raw Material Processing Beverage Production & Warehousing Transportation Distribution Retail, Marketing And Beverage Consumption Packaging Disposal Reuse and Recycle The materials then are used in manufacturing process with unique formulas to get finished products. Legend: Transport included in The disstribution section Recyling (if applicable) The finished products are stored and distributed through two main channels: on-trade channel and offtrade channel. Source: VietnamCredit Packaging and Material Production

6 Malt production capacity Source: VietnamCredit

7 Sources Mineral water source Mineral water source North West North East Red River Delta North Central Coast South Central Coast Central Highland South East Mekong River Delta Source: General Department of Geology and Minerals of Vietnam, Vietnam Credit Brand Water type Location Aquafina Purified Water N/A Lavie Mineral Water Khanh Hau - Long An & Van Lam - Hung Yen Vinh Hao Mineral Water Tuy Phong - Binh Thuan Dasani Purified Water N/A Sapuwa Purified Water N/A Vital Mineral Water Tien Hai - Thai Binh Mineral water source is crucial for the bottled water segment, which has experienced the highest growth rate recently. In total, Vietnam has 287 mineral water sources, located mainly in North West, South Central Coast and Mekong River Delta. Among popular bottled water brands, Lavie, Vinh Hao, Sapuwa and Vital are Natural Mineral water based products while some other brands such as Aquafina, Dasani and Sapuwa are Purified Water based products.

8 Distribution channel Off-trade channel 1,400,00 Traditional Grocery Retailers 2,500 Convenience Store 869 Supermarkets 170 Hypermarkets 8,513 Traddional Markets On-trade channel 116,485 Full-serviced Restaurants 26,506 Coffee shops, bars and pubs 21,000 Hotels 150,000 Street restaurants 100% 80% 60% 40% 20% 0% 71.5% 28.5% 37.8% 41.0% 62.2% 59.0% 54.6% 45.4% Alcoholic Drinks Soft Drinks Hot Drinks Total drinks Off-trade 2012 On-trade Drinks are distributed through two channels: on-trade and off-trade. On-trade refers to distribution through restaurants, coffee shops, bars, hotels and other catering establishments and off-trade refers to grocery retailers (Traddional grocery retailer, Convenience Stores, Supermarkets, Hypermarkets), vending machine and internet retailing. The majority of alcoholic drinks are distributed through the on-trade channel because of the culture drinking for social communication. However, the off-trade channel are gaining momentum through years. Consumers have been gradually willing to purchase alcoholic drinks and drink them in the comfort of their homes or during social gatherings. High-income urban consumers also invested in premium wine and spirits to drink at home, as they want to better appreciate the quality and taste. Soft drinks in contrast are mainly distributed through off-trade channel with the ratio about 60:40. This is because soft drinks are consumed more often and offtrade channel seems to be more convenient. This is similar for hot drinks when they are used a lot at home. In total, for both alcoholic drinks and soft-drinks, there is a relative balance between two channels. The ratio off-trade/on-trade volume in 2012 is around 45:55, increasing to around 50:50 in The reason for increase is the strong development of modern grocery, especially the convenience store chains along with the fast-pace urbanization process making people life busier. 100% 50% 0% Source: GSO; Euromonitor; VietnamCredit 70.6% 29.4% % 37.2% 64.2% 62.8% 50.7% 49.3% Alcoholic Drinks Soft Drinks Hot Drinks Total drinks Off-trade On-trade

9 Import tax and Free Trade Agreements Preferential rates Special preferential rates Ordinary rates Source: VietnamCredit MFN ATIGA ACFTA AKFTA AANZFTA AIFTA AJCEP VJEPA VCFTA VN-EAEU VKFTA ASEAN - VN - Eurasian Beverage type HS code 172 countries VN - ASEAN ASEAN - China ASEAN - Korea Australia/Ne ASEAN - India ASEAN - Japan VN - Japan VN - Chile Economic VN - Korea wzealand Union Bottled water Juice Other soft drinks Beer NA Wine NA NA NA NA 55 Spirits NA NA 48 Legal source 125/ / / / / / / / / / /2017 Effective Date 01/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2018 Goods imported into Vietnam is subject to import tax. As prescribed by the law No. 107/2016/QH13 dated 06 April, 2016, one of three tax rates can be applied, including preferential rates, special preferential rates and ordinary rates (Clause 3, Article 5). Preferential rates are applied to imports originated from MFN countriesthat accord Vietnam most-favored nation treatment (Official Letter No. 8678/TCHQ-TXNK dated 09 September 2016). In general, thanks to free trade agreements, import tax rate is reduced or removed (special preferential rates is applied). For example, ASEAN Trade In Goods Agreement (ATIGA) has removed import tax rate applied for drinks. Vietnam beverage market is predicted to be more competitive because of foreign companies, especially for soft drinks when the imported tax have largely decreased. There have been 10 FTAs becoming effective, 3 others (AHKFTA Asean - Hongkong, CPTPP Trans-Pacific Partnership and EVFTA Vietnam-EU) have been signed but not yet effective and 4 more are under negotiation. While soft drinks and spirits with ABV>=80% are mainly imported from ASEAN countries, alcoholic drinks are mainly imported from Chile (mainly wine) and Europe. However, the special preferential rates applied for wine in VCFTA between Vietnam and Chile are higher than preferential rates.

10 Key seccess factor Economies of scale Increase in volume of production will reduce cost, which allows to reduce unit price or achieve better profit margin. This is a key variable with respect to competitiveness. Distribution system Develop and focus on right distribution channels, cost effective and efficient. Differentiated products Create beverage with taste differentiating from competitors, being unique and superior Branding Branding: Build brand name through label design and intensive marketing campaign. Successful branding through sales promotion and advertising is critical to success in a brand-competitive market. Economies of scope Effective quality control A wider range of beverage types will enhance cost advantage in distribution and advertising. Make sure that products are manufactured, uniformly manufactured and packaged in clean environment with high quality ingredients.

11 10 Top Companies HENEIKEN SABECO HABECO SUNTORY PEPSICO NESTLE VINACAFE BIEN HOA COCACOLA VINATEA TAN HIEP PHAT Evaluation Score Company Full Name Saigon Beer - Alcohol Beverage Corporation Heineken Vietnam Brewery Limited Company Hanoi Beer Alcohol And Beverage Joint Stock Corporation Hanoi Liquor Joint Stock Company Short Name SABECO HEINEKEN HABECO Hanoi Liqour Main Segment Alcoholic Drinks Alcoholic Drinks Alcoholic Drinks Alcoholic Drinks Main Product Beer Beer Beer Spirits Suntory PepsiCo Vietnam Beverage Co Ltd PepsiCo Soft Drinks Soft Drinks Coca-Cola Beverages Viet Nam Limited Liability Company Coca-Cola Soft Drinks Soft Drinks Tan Hiep Phat Trading - Service Company Limited Tan Hiep Phat Soft Drinks Soft Drinks Nestlé Vietnam Limited Nestlé Hot Drinks Coffee The Vietnam National Tea - Joint Stock Corporation Vinatea Hot Drinks Tea HANOI LIQOUR 58 Vinacafé Bien Hoa Joint - Stock Company Vinacafé BH Hot Drinks Coffee 10 companies are selected by main segment and their market shares within segment, including 4 companies in the alcoholic drinks segment, 3 companies in soft drinks segment and 3 companies in hot drinks segment. Alcoholic drinks: Beer is the main alcoholic drinks in Vietnam, thus 3 beer companies are selected, which are also 3 largest companies by market share. Besides, one biggest spirit company is also selected Soft drinks: 3 largest companies are selected by market share, including 2 foreign companies and 1 domestic one. Hot drinks: 3 largest companies are selected by market share, including 2 coffee companies and 1 tea company.