Habeco lost market shares due to sluggish State capital divestment

Over the past 130 years of history with more than half a century of recovery and development, Hanoi Beer Alcohol and Beverage Joint Stock Corporation (Habeco) has become one of the leading companies in the beverage sector in Vietnam with their famous product line such as Hanoi beer, Truc Bach beer, Hanoi Beer Premium etc.

Nevertheless, Habeco seems lost in a saturated beer market with a growth rate of only seven percent per year, a point at which a market is no longer generating new demand for a firm's products, at the same time competing with major brewers like Heineken, Sabeco and other foreign brewers which have effective marketing and sale policies.

In the shareholders meeting this year, Habeco announced extremely poor business results. Sales of the Habeco reached 479 million liters, a decrease of nine percent. While their net revenue remained unchanged at $333 million, their post-tax profit only reached $28,8 million, a decrease of 32 percent.

Habeco's sales volume also declined from 18.9 percent in 2016 to 16.2 percent in 2017, mainly due to the weak consumption of the red label Hanoi beer bottle 420ml, Habeco's traditional product.

Habeco's products are also less diversified than their competitors. The beer market in Vietnam is increasingly fragmented with many product lines such as high-end beer, medium and popular beer along with some other beers. For ambitious brewing enterprises that wish to expand nationwide, the presence of each product line is very important.

Additionally, Habeco's distribution and marketing strategy is weaker than its competitors. Although owning 16.2 percent of the country market share in terms of consumption, Habeco is still considered as a local beer brand when their consumption and distribution are still limited.

In contrast, Sabeco, with its extensive advertising and distribution network, is selling well in the Central Region - Central Highlands as well as throughout the South with over 50 percent of market share in both markets. Thanks to its marketing strategy, Sabeco has developed in recent years leading to a faster growth in sales.

Moreover, Sabeco's distribution network in the North is also growing and they have reached more than 10 percent of market share in the North.

As a result, Habeco seems to be in a losing position even in its own local market since Habeco's market share has fallen from 20 percent in 2015 to just 16.2 percent by the end of 2017.

HSC forecasted that Habeco's market share may fall even further to 15.3 percent in 2018, as there are no specific strategies to counter the aggression of other breweries.

The decline in Habeco's business activity is partly due to the fact that Habeco's management has not had much motivation to run the business since Habeco is on the list of withdrawal of all state capital, so the plans to develop Habeco brand are stalled as they have to wait for the new unit to take over.

According to the Ministry of Industry and Trade, Habeco's representative offices of State owners, Habeco is still seeking strategic partners to withdraw some or all of its 81.79 percent of State's stake in the company. However, it does not seem to be progressing well.

Carlsberg, Habeco's largest foreign shareholder is supposed to be the most potential investor in the divestment plan turns out not to be.

Particularly, by the end of 2016, this Danish group held a 17 percent stake in Habeco and desired to raise its stake to over 61 percent. At times, Habeco's stock price has continuously increased to VND170,000 ($7.45) per share leading Habeco to believe that Carlsberg would buy the company's shares at the market price, similar to the way Thailand Beverage Pcl had done with Sabeco.

However, as time goes by, the expectation of an impressive business divestment is lessen. Signs from Carlsberg show that the business is not willing to buy Habeco at all costs.

Chief Executive Officer of Carlsberg Vietnam, Tayfun Uner said that Habeco's share price on the stock exchange UPCoM, at that time did not reflect the real value of Habeco due to speculative buying, when purchasing is done purely from the point of view of taking advantage of a speculated rise in price of the share and the firm’s poor liquidity.

Do Thang Hai, Deputy Minister of the Ministry of Industry and Trade, said that the biggest obstacle in the divestment at Habeco is their commitment to Carlsberg stated in their signed contract, in which favouring Carlsberg to buy State's shares at Habeco before anyone else.

However, unable to reach agreement on selling price, the State capital withdrawal at Habeco is facing the risk of prolonging. In the case of failing to find a common ground, the State may consider seeking another strategic partner. 

Habeco's biggest problem is that the longer the time, the greater the risk of competition especially when Habeco's business results are showing signs of deterioration, gradually being left behind by other competitors such as Sabeco and Heineken in the war of gaining market share.