Vietnam: Habeco’s profits shrink 4 years in a row

Hanoi Beer Alcohol and Beverage Corp (Habeco) has reported shrinking profits for 2018 – now the fourth year in a row. Profit before tax of North Vietnam’s leading brewer fell by 23.3 percent in 2018 to VNĐ667 billion (US$29 million) and has therefore more than halved in the last four years, when the figure was VNĐ1,443 (US$62 million). The brewing company that is minority-owned by Danish Carlsberg group also missed its ambitious plans, which were VNĐ 955.4 billion (US$ 42 million) in 2018 (, 10.1.2018).

Total sales for 2018 amounted to VNĐ9,388 billion (US$ 403), a decrease of nearly 5 percent compared to the year before.

The reason is that the low-cost beer segment, in which Habeco is strong in, is in a steady decline whereas other more premium oriented producers such as Heineken, Sabeco, which is now a part of ThaiBev, or other international brewers gain ground. Sabeco, which was formerly a brewing company from the south of the country has opened in recent years also a production facility in the north with a capacity of 5 to 6 million hectoliters which is about the current production of Habeco.

This eats into the market share of the last state-owned brewery which is based - as the name suggests - in Vietnams capital. Habeco's market share has decreased from nearly 20 percent in 2010 to 18 percent by the end of 2017. While the total beer market in Vietnam is booming the share of the low-cost segment has decreased from 14 percent to 8 percent in the last seven years. Moreover, competition in the low-end segment is fierce and margins are on the decline.

Despite a production capacity of nearly 9 million hectoliters, Habeco plans to sell only 6.32 million hectoliters in 2019, according to a statement by Habeco’s new CEO Tran Dinh Thanh in January.

In the meantime, the privatization of Habeco is dragging on due to internal problems of the state-owned company and special provisions of the contract with Carlsberg which holds already a 17.51% stake in the company and casts an eye on at least 51% of the shares of Habeco (, 8.9.2017).

Earlier in 2018 a state audit report pointed out a series of management errors and violations of management regulations. The report also found financial irregularities such as not well documented bank debts, incorrect financial statements and unclear expenses. As a consequence Vietnam’s Minister of Industry and Trade Tran Tuan Anh said in September that Habeco “executed a series of key personnel changes at Habeco“ in the last time. "The first and most important factor is still the human factor. The head is very important not only to be responsible before the law but also to have effective business investment strategies as well as to overcome problems,” he said.

In December, Vietnam’s Ministry of Finance removed a foreign ownership cap of 49 percent (, 6.12.2018), which had been introduced in the run-up to the privatization to prevent a sale of the “crown jewels” of Vietnam’s industry to foreign investors (, 1.8.2017). With the new decree the ministry officially allows a maximum 100 percent foreign ownership rate in former state-owned companies.

It is believed, that this move will also help Carlsberg to acquire the majority in Habeco in which the state still holds a controlling stake of nearly 82 percent.

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