Ownership in 36 percent of Vietnam’s largest brewing company changed hands late last week when Vietnam’s Ministry of Industry and Trade (MoIT) transferred the state ownership in Saigon Beer Alcohol Beverage Corp (Sabeco) to the State Capital Investment Corporation (SCIC). The transfer was rated with a value of more than VND 2.3 trillion (USD 99.3 million).
While Vietnam, also referred to as the Socialist Republic of Vietnam, is still a communist state with a centrally planned economy, the country has in recent years implemented economic reforms to introduce elements of the free market.
SCIC is a state-owned investment fund formed by the Communist Party of Vietnam in 2006 to invest in state enterprises. It’s stated goals as a sovereign wealth fund are to be an active shareholder in the state enterprises, to be a professional financial consultant and to earn returns that can be reinvested in the government. In 2014, the SCIC layed the foundation for a divestment process which started in 2017.
SCIC has already taken over ownership in 1,068 state-owned enterprises worth VND 21.9 trillion (USD 945.3 million). Sabeco is now the first of 14 additional companies whose share capital will be transferred to SCIC according to a decree issued by the Prime Minister in June.
The transfer of shares to SCIC is seen as an intermediate step towards a complete privatization of the company which is scheduled for the end of the year and which was announced in early July (inside.beer, 4.7.2020).
Commenting on the transfer of shares, Nguyen Duc Chi, chairman of SCIC confirmed that his company would create the best possible conditions for Sabeco to continue to grow, bringing investment efficiency to all shareholders, including state shareholders.
In December 2017, Vietnam Beverage, a subsidiary of Thai beverage company ThaiBev. bought in an auction a 53.59% stake in the state-owned brewer at a record price of USD 4.84 billion (inside.beer, 18.12.2017).The state kept a 36% stake in the company by this time to secure its interests. The remaining 10% stake in Sabeco were held by third party investors including Dutch brewer Heineken. However, Heineken started last year selling part of its shares in Sabeco to undisclosed buyers, saying the shares became redundant to Heineken after it did not succeed in the auction when Sabeco was privatized in 2017 (inside.beer, 15.11.2019).
Sabeco, like most other brewing groups suffered heavily during the height of the COVID-19 pandemic. On top, sales of alcoholic beverage were hardly hit after the government imposed severe penalties for drunk driving starting January 1 (inside.beer, 4.2.2020).
In the first 6 months of this year, Sabeco’s revenue and profit decreased by more than 30 percent year-on-year, reaching more than VND 12 trillion (USD 515 million) and VND 1.9 trillion VND (USD 82 million), respectively.
Another hit to alcohol sales is expected, when a government decree takes effect on October 15, that introduces fines for selling beer to people under 18. A decree from 2013 decree sanctioned only the sale of alcohol to underage people and not beer.
Sabeco also faces increased competition from Heineken, which already holds the number 2 position in Asia’s third-largest beer market and “aims for the No. 1 position, not only in profit but also in volume,” according to Leo Evers, managing director of Heineken Vietnam (inside.beer, 5.6.2019). Last year, San Miguel Food and Beverage (SMFB), the largest food and beverage company in the Philippines, also confirmed plans to put up a new 2 million hl brewery in Ho Chi Minh City (also commonly referred to as Saigon), Vietnam (inside.beer, 29.5.2019).