Habeco experiencing ups and downs to transform itself on the uptrend

By Tran Dung - Viet Hung - Jul 01, 2018 | 08:47 AM GMT+7

TheLEADERProduct diversification and distribution system expansion will be the main focus of Habeco in the near future, only when these matters are resolved, the company may have a chance to rise in the brewery industry.

Over the past 130 years of history alongside the ups and downs of the capital, Hanoi Beer Alcohol and Beverage Joint Stock Corporation (Habeco) is one of most popular beer company in Vietnam with their famous product line such as Hanoi beer, Truc Bach beer, Hanoi Beer Premium, etc.

Hanoi Beer has long been a cultural feature of the capital's workers

In its finest moment in 2014, Habeco held nearly 55 per cent of the beer market share in the North, with its main products being 450ml red label Hanoi beer, beer can. In that particular year, the company's consolidated revenue was $430 million while its post-tax profit achieved $44 million.

Nevertheless, the business outcomes of Habeco have been worsened over the years. While, the majority of Habeco’s previous customers are getting older making beer consumption lessen, younger generation does not show much affection towards Habeco’s products.

In the shareholders meeting this year, Habeco announced extremely poor business results. While their net revenue remained unchanged at $330 million, their post-tax profit only reached $28,5 million, a decrease of 32 percent.

According to the assessment of several institutions such as Ho Chi Minh Securities Corporation (HSC) and AC Nielsen, a global marketing research firm, Habeco is struggling on its own playground due to the limitation in product diversification and distribution channel expansion, leading to difficulty in attracting the major segment of beer consumption, i.e the youth lives in high income urban area.

Habeco's CEO, Ngo Que Lam also acknowledged that the company is having problem attracting younger consumers due to the lack of proper measures to counter the aggression of its domestic as well as foreign rivals such as Sabeco, Heineken, Budweiser or Sapporo.

Particularly in the case of Sabeco, with the right marketing policies towards the new consumer segment together with a widespread distribution system, Sabeco currently holds about 10 per cent of market share in the North and is expanding their business to the mountainous areas in the North.

Meanwhile, Habeco’s strategy to maintain their market share did not seem to payoff. Despite holding nearly 20 per cent of market share, Habeco is still considered as a local beer brand operating only around the North.

Difficulties keep piling up when the divestment plan of Habeco does not seem to be progressing well. Carlsberg, Habeco's largest foreign shareholder supposed to be the most potential investor in the divestment plan turns out not to be.

According to Lam, it is obvious that Carlsberg is craving for Habeco but only wants to pay a cheap price for it, while Habeco would never agree to be undersold.

Betting on a farther future, Habeco has been carrying out a reform, starting with the change of key human resources.

Recently, Habeco announced that Tran Dinh Thanh will be the representative of the Ministry of Industry and Trade holding 41.79 per cent of state capital in Habeco, becoming Habeco's Chairman replacing Do Xuan Ha in the period from 2018 to 2023.

Furthermore, putting Ngo Que Lam in the position of CEO as a replacement for Nguyen Hong Linh, and also represents 40 per cent of the state capital for Habeco in the next five years.

Nowadays, a product with good quality, refined taste and beautiful design is not enough, it needs to have a "soul", an intangible value to allure consumers.

Especially with younger generation, food and drink do not simply satisfy the daily needs but also act as means to provide value.

Habeco is aiming to do just that by targeting young entrepreneurs, startups customer segment through campaigns that fund for start-ups, technology, marketing, communications, etc.

In addition, Habeco also strengthens its presence in social activities. Recently, Habeco was the main sponsor of the event honoring U23 Vietnam.

Habeco also sponsors community programs such as cleaning up the sea from Sam Son to Vung Tau held by the Ministry of Culture, Sports and Tourism. Forthcoming, Habeco will launch campaigns to promote responsible drinking and avoid alcohol abuse.

These activities can be seen as Habeco's effort to ingratiate the younger consumers.

It is difficult to say if Habeco’s efforts are going to make a difference as brand promotion through community programs is not a new concept, especially in the brewery industry.

Improving distribution channel is one of Habeco's main focuses

Habeco will also focus on improving their distribution system. At present, Habeco has 100 distributors nationwide, and these distributors will be aided through sales policies such as shipping support, sales support for Tier 2 and Tier 3 agents, staff support, equipment support, etc.

Supporting the distribution channel will also be the focus of Habeco's disbursements in the coming period, only when the distribution system is strengthen, Habeco can then use it as a base to compete with other rivals, especially in the field of bottle beer.

Habeco also aims to develop a cultural space for beer consumers to promote Hanoi beer brand, which is expected to launch in 2019, according to Lam.

The activities of cultural building and brand promotion will hardly deliver immediate business result. Habeco might even lose a substantial initial investment amount.

Nevertheless, Sabeco has proven that a state-owned enterprise with a long-term vision will succeed. It is now Habeco's chance to follow the same path.