Vietnam Beer market potential is enormous yet why are there are so few successful players?

Heineken-bottle Christmas tree

October 2012 – With 40% of the population less than 20 years old and one million people a year turning 18, there is a huge emerging & untapped market for new beer brands as these consumers reach the age of majority.

Although the current market is already big, the Vietnam beer market potential is enormous.  Yet why are there are so few successful players?  

Well, part of this is due to the nature of the brand consumer cycle in Vietnam, as current consumers primarily seek social recognition.  As a result, the beer industry is in a period of consolidation with many small brands dying.

Nevertheless, there is great opportunity for brands that can connect with these nascent consumers.

Starting with the bad news, some of the brands that had big marketing budgets and yet failed to connect with consumers include:

  • Laser (2003 – 2005)
  • Coors Light (2006 – present)
  • Kronenbourg 1664 (2008 – 2009) 
  • Miller High Life (2010 – 2012)

Let’s look at a bit of history with each.

Laser:

Laser was launched by THP (perhaps the most successful Vietnamese beverage group) as a “Draught Beer” in a bottle.  It had a significant advertising spend (US$4.9 million in 2004 making it the fifth biggest advertiser in Vietnam that year) but it could not make a dent in the market.  

Whatever about the concept, the product itself, or the advertising (http://www.youtube.com/watch?v=mBOrxvsJd4c&noredirect=1;  http://www.youtube.com/watch?feature=endscreen&NR=1&v=SXXRNyhTeqs),  Laser experienced extreme resistance from the incumbent breweries and found it very hard to access outlets for distribution due to contracts for exclusivity between the venues and the breweries.  This resulted in legal action which laser and its affiliates lost.  The law has since changed but distribution remains a key factor for consideration when approaching the beer market in Vietnam.

Coors:

US brewer Molson Coors’s first attempt to sell Coors Light Beer in Vietnam in 2006 didn’t result in much success.  There were probably many reasons for this but two key factors must surely have been the product itself and the fact that it was distributed by APB.  In a market where consumers traditionally add ice to their beer, a very pale coloured, 4% abv offering is unlikely to fare well.   Being in direct competition with your distributor is also unlikely to yield enormous reward.

In 2010, Coors returned & paired up with a new partner (the Highlands coffee group), hoping its second foray would be more successful.  The book is still open on this but the current approach of a little bit of tinkering with packaging, is unlikely to bear fruit.  Coors does not appear to be making the inroads that it requires to achieve critical mass.

Kronenbourg 1664:

1664 POS - Nov '08

Scottish & Newcastle (S&N) established a 50:50 JV (Kronenbourg Viet Nam Co. Ltd.) with, the state-run, Viet Nam National Tobacco Corp. (Vinataba) to construct a brewery in southern Vietnam.  It was licensed in 2008 to construct a brewery with an annual capacity of 1.5 million hL. 

However, the JV collapsed as a result of the sale of S&N and the acquisition of global rights to Kronenbourg by Carlsberg.   The partnership was reportedly “not in line with Carlsberg’s objectives”.

The beer was however imported and sold in Vietnam.  It made some inroads but despite getting many things right, got a few key things wrong.  A constant comment from consumers at the time was that the beer gets you too drunk.  You might not think that this would be a major concern considering that in this market the general intention IS to get drunk. 

However, it appears that it was the rate of onset of inebriation that was at issue.  A simple thing.  The beer was no stronger than comparable beers in the market.  Rather, the promotion girls had been instructed to serve the beer in a branded glass without ice.  No ice, no dilution.

Miller High Life:

SABMiller managed to secure reasonable distribution for this brand.  It should have been a reasonable success as the product was novel and interesting for the consumer, provenance was acceptable and the brand was an open slate, carrying no negative baggage.

Unfortunately they went with the tagline “It’s American Time, It’s Miller Time.”  As we mentioned here https://pomegranate.asia/w/2012/06/the-breweries-in-vietnam-focus-on-sabmiller/#.UE768LLiaew, although American products and America itself are aspirational, American values may not be.  Thus, there was a disconnect and Vietnamese could not see themselves or their values in the brand.  

There were many gaffs in this campaign, some of which resulted from poor interpretation of what could have been good ideas.  Examples of the latter include plastic sampling glasses (not premium), free popcorn (consumed by kids at the movies) and foreign promotional girls.  Bearing in mind that the large beer drinking establishments are frequented almost exclusively by men and their expectations of the women who work there may not be entirely honourable, it was unfortunate that the PG’s were extremely large from a Vietnamese perspective and spoke not a single word of Vietnamese.

All in all, big spend, big flop.   As this was SABMiller’s second failure in the market, this probably seriously dented their credibility with the trade.

And many other brands still continue to struggle, including Budweiser (ABInbev),  Saigon Special (Sabeco), Carlsberg, San Miguel, Gambrinus (SABMiller) and of course poor old Zorok (SABMiller).

Kiddies time with Zorok beer

Carlsberg & San Miguel, despite being in the market since 1993 and 1994 respectively (compared with 1991 for Heineken) have never really made a connection with consumers with their eponymous brands.

Even APB, who have been pretty good at managing and growing their brands in Vietnam have had their lemons, including Amber stout (2003 – 2008) and Bivina (1997 – still going but …).

The good news!

Vietnam is a very large and profitable market if you can get the brand right.

APB dominates the premium beer occasion primarily with Heineken but also, to a lesser extent, with Tiger.  In fact, although APB had a turnover just short of S$3 billion in 2011, almost half their profit came from Vietnam alone!

There is real opportunity and a fundamental change is occurring in the Vietnam beer market.  For the first time we can see the Vietnamese consumer actively choosing brands other than their one or two mainstays.

In mainstream, Larue seems to have leveraged the APB / VBL distribution system and generated enormous trial through its recent UTC promotion. 

In premium, Sapporo seems to be on the right track.  It has created awareness, premium identity and some high visibility distribution.  Its performance during Tet 2013 will be a key indicator of its long-term success.

In super-premium, Corona has been patient, persistent and appears to have carved out a profitable niche.

Once the concept of choice appears in the mind of the consumer, the opportunity for new brands becomes enormous. 

Would you like to be part of this growth?

Please feel free to contact us for more information. 

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