INDUSTRIES

Beer and wine industry enterprises grapple with challenges from Decree 100 and soaring raw material prices

Domestic beer industry enterprises have reported numerous difficulties, including high prices for imported raw materials, weakened consumer demand due to reduced discretionary spending, and the need to strengthen advertising, promotions and discount policies to boost sales and protect their market share.

01202418145035 beer 1 | FDI Việt Nam
The economic downturn has had a negative effect on businesses in the beer and alcohol industry. — Photo courtesy of laodong.vn

HÀ NỘI — Enterprises in the beer and wine industry are currently facing significant challenges due to the impact of Decree 100’s strict drink driving penalties and the rising prices of raw materials.

The economic downturn has had a negative effect on businesses in the beer and alcohol industry, leading to a decline in their financial performance. These businesses have also experienced a decline in their stock prices. Since the beginning of 2023, they have been grappling with reduced consumption as well as the repercussions of Decree 100.

Domestic beer industry enterprises have reported numerous difficulties, including high prices for imported raw materials, weakened consumer demand due to reduced discretionary spending, and the need to strengthen advertising, promotions and discount policies to boost sales and protect their market share.

Furthermore, these enterprises face tough competition from imported beers and foreign beer brands owned by multinational corporations. Importing companies enjoy substantial support from their foreign parent corporations in terms of expertise, financial resources, human resources, technology, raw materials, and brand development and maintenance.

The Việt Nam Beer – Alcohol – Beverage Association (VBA) has stated that the beer industry was severely affected by the prolonged social distancing measures imposed during the COVID-19 pandemic, as well as by specialised management policies and Decree 100. This decree imposes heavy sanctions for driving with a high concentration of alcohol in the blood or breath, thereby impacting the industry.

These factors have caused significant damage to the production and business activities of beverage enterprises. The consumption market has contracted by 20-30 per cent, and the overall revenue of the beverage industry has dropped by as much as 16 per cent compared to 2019. Additionally, the ongoing Russia-Ukraine conflict has triggered a crisis in the global supply chain, further exacerbating the challenges faced by the beverage industry and leading to soaring raw material prices, as reported by the VBA.

Moreover, domestic beer businesses have expressed concerns about the proposed amendment to the Law on Special Consumption Tax by the Ministry of Finance. The proposed changes, including alterations to the tax calculation method and adjustment of the special consumption tax rate for alcohol and beer, are expected to create additional difficulties for businesses.

Hà Nội Alcohol and Beverage Joint Stock Company (Halico), the owner of the Hà Nội vodka brand, has been grappling with consecutive losses for nearly nine years. In the fourth quarter of 2023, Halico’s financial report indicated a slight decrease of 6.5 per cent in net revenue compared to the same period in the previous year, amounting to over VNĐ32 billion. However, the company still reported an after-tax loss of VNĐ4.2 billion, extending its loss streak to 27 consecutive quarters since the second quarter of 2017.

Throughout 2023, the owner of the Hà Nội Vodka brand recorded a net revenue of over VNĐ100 billion, marking a 10 per cent decline compared to the same period in 2022. However, Halico’s losses during this period amounted to just over VNĐ10 billion, a decrease from over VNĐ12.4 billion recorded in the same period of 2023.

The decrease in losses primarily resulted from a nearly VNĐ10 billion reduction in the cost of goods sold in fiscal year 2023 compared to the previous year, totalling VNĐ72.6 billion. Additionally, the company recorded a profit of nearly VNĐ232 million during the same period, in contrast to a loss of VNĐ748 million reported the previous year.

As of December 31, 2023, Halico’s total assets reached nearly VNĐ376 billion, showing a minimal difference compared to the beginning of the year. Notably, inventory increased by over 35 per cent during the same period, amounting to VNĐ98.5 billion, which accounted for more than 26 per cent of total assets. Enterprises are required to allocate provisions for inventory devaluation, exceeding VNĐ19 billion.

By the end of December 2023, the outstanding debt of the company amounted to VNĐ20.1 billion, all short-term debts. On the stock market, Halico’s HNR shares have witnessed few transactions. As of January 15, 2024, the stock price stands at VNĐ12,000 per share, reflecting a decrease of over 62 per cent since its listing.

Similarly, the fourth-quarter 2023 financial report of Hà Nội – Hải Dương Beer Joint Stock Company (HAD) also paints a less optimistic financial picture. The company reported a loss of over VNĐ1.2 billion during this period.

In 2023, HAD recorded an after-tax profit of VNĐ6 billion, representing a nearly 43 per cent decline compared to the previous year. Despite an increase in net revenue, the business suffered a loss in the last quarter of 2023 and experienced a significant drop in profits throughout the year due to the higher costs of goods sold and selling expenses.

Previously, the financial report of Saigon Beer – Alcohol – Beverage Corporation (Sabeco or SAB) for the third quarter of 2023 also displayed a less favourable financial performance. The company attained net revenue of over VNĐ7.4 trillion during this period, indicating a decline of over 14 per cent compared to the same period. Sabeco’s revenue from financial activities increased by 31.3 per cent to over VNĐ373 billion, mainly due to higher interest income from bank deposits.

Sabeco reported an aftertax profit of VNĐ1.07 trillion, a 23 per cent decrease compared to the same period in the previous year. This marks the fourth consecutive quarter of declining revenue for Sabeco.

However, the company still maintained profits of over VNĐ1 trillion. Sabeco attributed the lower business results to fierce competition, reduced consumer demand due to economic instability, and increased costs of raw materials.

Despite these challenges, sales and administrative costs did not decrease significantly. In the first nine months of the year, Sabeco’s net revenue reached VNĐ21.9 trillion, down 12 per cent compared to the same period in the previous year, and the profit after tax amounted to VNĐ3.28 trillion, down 25 per cent over the same period.

The Hà Nội Beer-Alcohol-Beverage JSC (Habeco), on the other hand, recorded a net revenue of VNĐ2.26 trillion in the same period, a 7 per cent decrease compared to the previous year. The company implemented cost reduction measures for staff, raw materials, loading and unloading transportation.

However, after deducting expenses, Habeco reported a 54 per cent decrease in profit, amounting to only VNĐ106.7 billion. Cumulatively, in the first three quarters of the year, Habeco’s net revenue reached VNĐ5.5 trillion, a slight decrease of 7 per cent. The company reported a profit of VNĐ291 billion, down 38 per cent from the same period.

The Ministry of Industry and Trade’s report on industrial production and commercial activities stated that domestic beer production in the first nine months of 2023 increased significantly, reaching an estimated 369.2 million litres, a 6.6 per cent increase compared to the same period in the previous year.

The total beer output of all types during this period reached 3,405 million litres, a slight increase of 0.2 per cent over the same period in 2022. However, the report also highlighted that the beer industry continues to face difficulties due to high input prices of raw materials such as malt and sugar, which affects the profitability of businesses in the industry.

Theo Vietnamnews