In a widely anticipated blow to Vietnam’s brewing industry, the country’s National Assembly has approved a plan to progressively raise excise taxes on beer in the coming 5 years.

The tax rate on beer, which is currently 65%, will be increased by 5% annually from 2026 to reach 90% in 2031.

Beer isn’t the only affected beverage in the law changes: other drinks with less than 20% ABV will see a phased increase from 35% tax currently to 60% in 2031, while some sugar-sweetened beverages will see a tax increase too.

The government has presented the changes as designed to “curb alcohol consumption”, while the WHO has said that the tax hikes on beer would “contribute to a happier and healthier country”.

Discussions about raising the Special Consumption Tax (SCT) have been on-going for some time, with a previous proposal to increase as high as 100% by 2030.

Vietnam had previously been a success story for both craft and mainstream commercial breweries, with consumption growing and bucking global trends of declines.

However, a combination of strict drink driving laws, declining consumer spending amidst a darker economic picture and the COVID pandemic saw the beer industry hit hard.

Breweries have seen revenue and profits significantly impacted post-COVID, with widespread closures of on-trade venues and the disappearance of many smaller breweries in the market.

The impact was even more pronounced on global players, with Heineken closing one of its six production facilities in Vietnam.

While the recent excise tax changes will have a significant impact on beer production and consumption in Vietnam, not all players in the market are holding back on investment: Asia Brewers Network recently reported on AB InBev’s doubling of its production capacity at its brewery in Binh Duong in May.