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What’s Happened to Vietnam’s Beer Market? Unpacked 2024

The closure of the Heineken plant in Quang Nam, in central Vietnam, announced a week or two ago, has been big news with the provincial government set to lose out on VND 500 billion–or about US$19.8 million–in tax revenue each year. That is not to mention that a number of jobs will also likely be lost.

This is off the back of slow growth in beer sales post-pandemic and in line with falling revenues among a number of Vietnam’s major beer brewers. This has been blamed on broader economic challenges and harsher drink driving penalties, however, it is all a little more nuanced than that.

For example, COVID hit beer consumption hard with prolonged lockdowns around the country. With karaoke bars and beer clubs closed a key revenue stream for alcohol producers quickly dried up.

Furthermore, in Vietnam, there is a big social aspect to drinking which was taken away by lockdowns too.

But it wasn’t just that people were unable to leave their homes. The cost of living was rising but incomes were falling–Vietnam’s average wage between the fourth quarter of 2020 and the fourth quarter of 2021 fell by about VND 624,000 or just over 10 percent, whereas at the same time, inflation increased by 1.84 percent. On top of that, many workers left their jobs entirely, forgoing any pay packet at all to return to the perceived safety of their homes in the provinces.

All of that is to say, that consumers had less money, prices were rising, and there was nowhere to go drinking nor was drinking with anyone outside of an individual’s home permitted.

As a result, beer sales plummeted from US$7.6 billion in 2019 to US$5.7 billion in 2020 and US$4.6 billion in 2021, according to data compiled by Statista.

But whereas on this line of thinking, when lockdowns were lifted beer consumption should have returned to normal, the pandemic was quickly followed up with Russia’s invasion of Ukraine. This saw fuel prices spike, inflation in the US skyrocket, and subsequently demand for goods made in Vietnam fall.

Once again Vietnamese consumers were faced with economic uncertainty and again began to tighten their belts.

It’s not just a change in consumer behaviours, however, that has seen a downturn in local beer producer revenues, but also a fundamental restructuring of the market.

Specifically, Vietnam’s myriad of free trade agreements are making imported alcohol much cheaper. The EVFTA, for example, which came into force in August of 2020, has a fee schedule that will see import tariffs on wine, spirits, and beer reduced to zero progressively by 2030 from 50 percent, 48 percent, and 35 percent, respectively.

It’s a similar story for the CPTPP whereby import tariffs on beer, wine, and spirits will be eliminated by 2029

The point here is that the market is opening up to greater competition and beer is no longer just competing with other beers but also soju from South Korea, wines from Australia, and saki from Japan, to name just a few of the expanding options. 

In fact, from 2022 to 2023 Vietnam saw an increase in alcohol imports of 343.25 percent.

Vietnam alcohol imports, US$000s

HS CodeDescription (abbreviated)20222023%
2208Spirits and liqueurs with an alcohol content less than 80 percent28,087426,9081419.95
2204Wine with an alcohol content of greater than .5 percent35,09686,923147.67
2203Beer made from malt11,16929,538164.46
2207Undenatured ethyl alcohol with alcohol content greater than 80%51,50613,440-73.91
2205Vermouth and wine, flavoured with plants or aromatic substances191,1375884.21

Source: Trade Map

It’s also worth noting that Vietnam’s comparative advantage is its low cost and abundant labour. It does not have ideal conditions for growing key beer ingredients like barley, wheat, and hops nor does it have the experience of some of the other countries in its many free trade agreements.

All of that said, what seems to be drawing a lot of the spotlight is Decree 100, issued in 2019, which increased fines for driving under the influence in Vietnam. It should be noted, however, that it was actually Decree 123/2021/ND-CP issued two years later, that added licence suspensions to the penalties applied which are arguably the bigger deterrent.

That aside, specifically, a breathalyser reading below .25 nets a motorcycle rider a VND 2 to 3 million fine and a driver’s licence suspension of 10 to 12 months. For the driver of a car, the suspension remains the same but the fine jumps to VND 6 to 8 million.

That said, ignoring the greater public health and safety benefits, on a purely practical level, if Vietnam had adopted something more typical, a limit of .08, for example, it’s still only two standard drinks in the first hour and then one every hour after. Of note, a standard drink is 285 millilitres of full-strength beer, or about three-quarters of a can of Bia Hanoi.

The point here is that a more relaxed policy would be unlikely to have a huge impact on beer sales. Not to mention, there are already alternative means of transport that are cheap and easy and already functioning fairly well at getting people around–there hasn’t really been a need to drive after drinking in Vietnam for years. 

That‘s not to say that Decree 100 hasn’t had an impact but just that claims about the extent of that impact may be somewhat overblown: correlation does not necessarily mean causation.

Furthermore, it’s worth remembering that with any new policy, there is an adjustment period. It just happens to be that this particular adjustment period has aligned with broader economic challenges and increased access to the Vietnam alcoholic beverages market for foreign alcohol makers. This has also led to an expanding variety of choices for Vietnamese consumers, too.

That said, the Vietnam market is dynamic and changes quickly and with this in mind, foreign beer makers looking to enter the Vietnam market either to establish manufacturing operations or to look at importing beer into Vietnam should make sure they are abreast of the latest developments by subscribing to the-shiv.

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