In an effort to make a dent in Vietnam’s debt, the national government is making moves to privatize the country’s two largest state-owned beer producers, and now regional and international brewers are hoping to tap into the nation’s beer market.
According to Nikkei Asian Review, the Vietnamese government currently owns an 89.6% stake in the Saigon Beer Alcohol Beverage Corp (Sabeco) and an 82% stake in the Hanoi Beer Alcohol Beverage Corp (Habeco). Both are major players in the country’s beer industry, accounting for 60% of the market share.
However with government officials set to lift the foreign-ownership cap on several state-owned enterprises (SOEs), all this is set to change, as the Vietnamese government stands to make as much as US$7 billion by selling off shares of several SOEs, reports VnExpress. This could bring in some much-needed funding, as the Vietnamese government reportedly exceeded its budget again in June of this year and is edging ever closer to the country’s debt limit, which stands at 65% of the national GDP.
By the end of this year, Vietnamese officials hope to sell off their entire stake in Habeco, while the government will offload 53.6% of its stake in Sabeco this year before parting with the remaining 36% in 2017.
As a result of these sales, Japanese and European brewers are eyeing Vietnam’s lucrative beer market. According to Kirin Brewery data, the country ranks 11th in beer consumption worldwide, reports Nikkei, and ranks third in Asia behind only China and Japan. In the first four months of 2016 alone, Vietnamese drinkers downed a billion liters of beer.
In fact, several Japanese beer companies, including Kirin, Asahi Group Holdings and Sapporo Breweries, have expressed interest in both Sabeco and Habeco. While Kirin is looking to expand further into Southeast Asia after acquiring Myanmar’s largest brewery last year, its competitor Asahi aims to catch up with investment in Vietnamese companies. Meanwhile, Sapporo is eager to get involved in managing both Sabeco and Habeco to ensure further expansion of its own Vietnamese sales.
Nikkei also reports that Belgium’s Anheuser-Bush InBev, the world’s largest brewer, is contemplating the acquisition of the two Vietnamese brands at the same time that Denmark’s Carlsberg is aiming for a 20% stake in Habeco.
In August, Carlsberg won a strategic partnership with Habeco to acquire a 10% stake in the company for roughly US$400 million, reports VnExpress. The firm now accounts for almost 11% of Vietnam’s market share, ranking fourth in the nation’s beer market.
Regional competitors are also paying attention to this acquisition opportunity. According to VnExpress, Thai Beverage PCL, too, has expressed interest in buying Sabeco shares for US$2 million.
With ample interest in both Sabeco and Habeco, the issue now lies in the transparency of each firm’s privatization. Divestments from SOEs like Sabeco and Habeco have the potential to bring in billions of dollars in revenue for the Vietnamese government. However, as VnExpress explains, the government must provide more information for foreign investors about each company, especially as it plans to have both Sabeco and Habeco go public before officially divesting.
In addition, the cost of acquiring either one or both companies is a concern for Japanese investors who, according to Nikkei, have recently spent billions of yen to acquire international breweries around the world and, therefore, must take careful consideration of their strategies and financial conditions. Moving forward, there is a possibility that the three Japanese investors could form a consortium in order to gain stakes in the two Vietnamese breweries as a group.
[Photo via Nguoi-Viet]
