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Vietnam brewers in race to increase production capacity

Breweries operating in Vietnam have announced plans to increase production capacity as there is still huge potential for growth in a market that downed as much as three million liters of beer in 2013.

A worker stacks cases of Saigon Special beer at a beverage store in Ho Chi Minh City June 26, 2014.
A worker stacks cases of Saigon Special beer at a beverage store in Ho Chi Minh City June 26, 2014.

Sapporo Vietnam Co Ltd has approved a plan to send the production capacity of its plant in southern Long An Province from 40 million liters to 100 million liters a year, CEO Hirofumi Kishi said.

While it is currently focusing on the Ho Chi Minh City market, the chief executive officer said the company will expand into neighboring provinces in the Mekong Delta and even Hanoi.

The Saigon Beer-Alcohol-Beverage JSC, commonly known as Sabeco, has recently broken ground on the Saigon – Kien Giang brewery project in the Mekong Delta province of Kien Giang.

The VND600 billion (US$28.24 million) plant, expected to produce 50 million liters of beer every year, came just after the groundbreaking ceremony of a similar project in Can Tho.

In HCMC, where Sabeco is headquartered, the company has also planned to increase the capacity of its Cu Chi facility.

With these new expansions, Sabeco is expected to reach the milestone of producing two million liters of beer a year, given its current capacity of 1.8 million liters. The company will thus become the leading beer supplier in the Southeast Asian country.

Vietnam Brewery Ltd, which manages the popular brand Heineken, has already increased its production from 150 million liters to 420 million liters per annum.

Still, the market will soon welcome some newcomers.

Slovakia-based BTG Holding is scheduled to put its first-ever Vietnam facility into operation in the fourth quarter of next year. The EUR86 million (US$117.15 million) brewery is capable of producing 190 million liters a year.

U.S. player AB In Bev, which owns the Budweiser brand, is also speeding up the construction progress of its maiden Vietnam plant. The 100 million liter brewery is scheduled to become operational by the end of this year.

Nguyen Van Viet, chairman of the Vietnam Beer and Beverage Association, said beer consumption in the country is forecast to rise seven percent from three million liters in 2013, despite economic turbulence.

“Beer businesses are in a fierce competition for market shares,” he commented. “If the seven percent growth is really reached, it will be a great achievement given such a competition.”

Vietnamese breweries are facing yet another tougher challenge to avoid being defeated by foreign players on home soil.

“The competition pressure from international brands is truly challenging,” Sabeco general director Pham Thi Hong Hanh admitted.

Although foreign breweries have smaller market shares, their products have much higher commercial values than the locally produced, according to industry insiders.

In the same product segment, brands such as Heineken, Sapporo, Tiger and Budweiser have higher commercial values than Sabeco’s products, an analyst said.

“Sabeco may post larger sales than its foreign rivals, but it is understandable that the latter can report bigger profits,” he remarked.