HANOI: With Japanese Sapporo in Sapporo Vietnam (SVL) joint venture buying 29 percent of SVL stake from the Vietnamese partner, the Vietnamese beer market is heating up.
Analysts believe that more and more merger and acquisition (M&A) deals in the brewery sector would be made this year and next year, because the government has once again urged state-owned enterprises (SOEs) to divest its holdings from non-core business fields. This means that SOEs will have to accelerate the sale of shares they are holding in brewery companies.
While most investors are eyeing Sabeco, the largest brewery in Vietnam, which is being owned by a lot of SOEs, Sapporo has taken necessary steps to acquire SVL after buying the 29 percent of stake held by Vinataba, a Vietnamese tobacco manufacturer. After the deal, SVL has operated as a 100 percent foreign owned enterprise for one month.
Analysts noted that SVL, after five years of operation in Vietnam, is still in the early stage of development and it still cannot make profit. However, Sapporo International still accepted to buy Vinataba’s capital contribution in the joint venture at $8.28 million, according to Nikkei. The former Vietnamese partner in the joint venture confirmed that it could make profit from the capital contribution deal.
The analysts said the Sapporo’s deal is ‘predictable’, because Vietnam is believed to be the largest beer market in South East Asia. Meanwhile, the demand for the products in Sapporo’s home country, Japan, has decreased because of the aging population.
After acquiring SVL, Sapporo plans to boost sales by expanding SVL sale network which has been mostly developed in HCM City, according to Nikkei. Sapporo Premium, an SVL product, is now sold at 4,000 restaurants and shops in Vietnam.
Once Sapporo expands the distribution network in Hanoi in the north and Da Nang in the central region, the product would be available at 7,000 restaurants and shops by February 2016.
A survey conducted by Sapporo found that the middle class in Vietnam will increase by 2-3 times in the next 10 years, which means that more Vietnamese would be able to afford Sapporo’s high-end beer products.
Also according to Nikkei, SVL’s sales in 2014 increased by 34 percent compared to 2013. This explains why Sapporo decided to spend more money to raise the Long An brewery from 40 million liters per annum to 100 million liters in more years before the capacity would reach 150 million liters by 2019.
Sapporo Vietnam is the only brewery in the region which has exported products to South East Asian countries, South Korea and Australia. The brewery hopes to bring 50 percent of overseas sales to the Japanese group in the time to come.
