Brewers saw lower profits in 2020 because of Covid-19, new policy

The Covid-19 outbreak and a new policy imposing heavy fines on drunk drivers hit the beer industry hard in 2020. Beer sales decreased sharply while inventories increased.

Revenue drops

Brewers saw lower profits in 2020 because of Covid-19, new policy

According to the Vietnam Beer – Alcohol – Beverage Association (VBA), beer output in 2020 decreased by 10-20 percent. While creating 200,000 direct jobs and millions of indirect jobs, and making a great contribution to the state budget annually, enterprises in the beer industry still faced big difficulties.

Nguyen Van Phung, director the Department of Tax Administration at Large Enterprises under the Ministry of Finance, said the total tax collection from VBA member enterprises was VND60 trillion in 2019. Of this, large brewers such as Heineken, Sabeco, Habeco and Carlsberg paid VND49.595 trillion, which accounted for 85 percent of total collections.

Meanwhile, by the end of October 2020, the total collection was VND39.111 trillion only.

Phung attributed the low budget collections from the beer industry to the new regulations, including Decree No 100/2019/ND-CP on administrative sanctions for road traffic and rail transport violations, applicable since January 1, 2020, and the Law on Prevention and Fighting against Negative Effects of Alcohol which imposes heavy fines on drunk drivers. The pandemic and social distancing also led to the sharp fall in demand.

Beer output in 2020 decreased by 10-20 percent. While creating 200,000 direct jobs and millions of indirect jobs, and making a great contribution to the state budget annually, enterprises in the beer industry still faced big difficulties.

The National Traffic Safety Committee reported that in the first nine months of 2020, agencies handled 3 million violations and imposed fines of VND2.5 billion, including 141,000 violations in alcohol content.

The finance report of Sabeco, the largest brewer in Vietnam, showed a sharp fall in revenue in the first nine months of 2020 compared with the same period of 2019, VND20.23 trillion vs VND28.321 trillion. The profit, dropped to VND3.4 trillion, or VND1 trillion lower than the same period of 2019.

SAB shares of Sabeco are being traded at VND182,000 per share, a decrease of 20 percent compared with early 2020. The major reasons behind the decrease, according to Sabeco, lie in Decree 100 and Covid-19.

Habeco also reported decreases in revenue in the first nine months of 2020, Its revenue was VND5.654 trillion, a decrease of 16 percent. However, its post-tax profit increased slightly to VND488 billion, because Habeco cut sale costs, including VND277 billion for ads.

Stiff competition

 

VBA reported that beer output growth has slowed down in the last three years. The growth rate was 6.8 percent in 2016-2019, while it decreased sharply in 2020.

Nguyen Van Viet, chair of VBA, said it is very difficult to exist and develop in the beer industry in Vietnam and only the best brewers can exist.

The marketing director of a beer company in HCM City admitted that the competition in the market was stiff and enterprises had to scramble for market share in every area, every restaurant, every quarter, and every month. Whether you win or lose depends heavily on marketing "know-how”.

The competition in the beer market is no longer healthy as 'dirty tricks' have been used to win over rivals.

Brewers pay big money to lure restaurant owners to break contracts they signed with other brewers and shift to sell beer of other brands. They even spread fake news about the quality of rivals’ products.

According to Viet, VBA has shouted for help to the government and ministries. However, there has been no reply.

Speaking at a forum held by the Vietnam Chamber of Commerce and Industry (VCCI) recently, Lawyer Nguyen Danh Hue from Hung Dong Law Firm proposed amending Decree 100 to rescue the industry.

Hue said the decree has unreasonable provisions that need amendment. For example, people are fined if alcohol content in blood is found, no matter how high it is. He said the unreasonable regulation has adverse impact on society, the beer industry, and state budget collections. 

Tran Thuy

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