Heineken has announced plans to temporarily close one of its breweries in Vietnam due to declining beer demand. The facility, located in Quang Nam province, is the smallest of Heineken's six breweries in the country and has been in operation since 2007. This decision follows a period of significant challenges for the beer industry in Vietnam, exacerbated by the economic impacts of the COVID-19 pandemic and stricter drink-driving laws.
Beer sales in Vietnam experienced a double-digit decline in 2023 and have continued to fall at a mid-single-digit rate in 2024. Despite these challenges, Heineken reported an increase in underlying revenue in Vietnam in the first quarter of the year, driven by volume growth and overcoming last year's destocking.
Adding to the industry's pressures, the Vietnamese government is considering raising the consumption tax on alcoholic beverages. The current tax rate of 65% on luxury goods and non-essential items, including beer and strong liquor, may increase to 70-80% by 2026 and potentially reach 90-100% by 2030.
According to a document submitted by Heineken to provincial authorities, the economic slowdown has weakened consumer confidence and demand, particularly affecting the beer sector. Vietnam's strict enforcement of Decree 100, which imposes severe penalties on drink-driving and enforces a zero alcohol limit for drivers, has also led to a notable decline in beer consumption as consumers change their drinking habits.
Heineken stated that the temporary closure is part of a strategic move to remain adaptive and agile in response to changing market dynamics. The company aims to optimize its brewing and business activities, seeking efficiency and economies of scale to streamline operations. This approach will allow Heineken to continue investing in and unlocking growth in the Vietnamese market while supporting its overall workforce and sustaining business operations and the value chain.
Heineken has assured that some of the affected workers from the Quang Nam brewery will be relocated to other sites where feasible. The company remains committed to supporting its workforce and sustaining its business operations in Vietnam despite the challenging market conditions.
Heineken Vietnam is a joint venture between Heineken and Saigon Trading Group. Since opening its first brewery in Ho Chi Minh City in 1991, Heineken Vietnam has expanded to operate six factories across the country, employing 3,000 people.
