Drink driving laws, rising input prices, and a consumer tax hike have hit beer sector hard
Vietnam’s beer industry reported a significant downturn in its financial performance last year, with double-digit declines in revenue and profits, according to a report by the Vietnam Beer-Alcohol-Beverages Association (VBA).
According to the VBA, the country’s beer industry will have declined by about 11% in revenue and 23% in pre-tax profit in 2023.
Major industry players such as Saigon Beer-Alcohol-Beverage Corporation (Sabeco) and Hanoi Beer-Alcohol-Beverage Corporation (Habeco) experienced severe financial setbacks, according to the report. Sabeco’s post-tax profits dropped by 23%, while Habeco’s profits plunged 30% compared to the previous year.
A major contributor to the decline is the country’s strict drink-driving laws, says the VBA. Currently, Vietnam prohibits people from having any amount of alcohol in their bloodstream when driving, which has led to a decrease in consumption and in the production, import, and distribution of beer in the country. Penalties are also stiff, and can include a fine of up to VND40 million (US$1,640) with a two-year licence suspension. Those who cause accidents while intoxicated also face criminal charges.
While the VBA said it supports the Vietnamese government’s initiative to control alcohol levels, it criticises the extent of the policy’s implementation which has severely affected the operational capacity of restaurants and tourist locations.
Further exacerbating the problem is decreased consumer spending post-COVID-19; and rising costs for raw materials such as malt, rice, and cans, which have forced businesses to increase prices, according to Nguyen Duy Hung, Vice President of the VBA, speaking at an industry event last month.
Furthermore, these economic and regulatory pressures also coincide with potential changes to the country’s special consumption tax, as proposed by the Ministry of Finance, which will raise excise taxes further on alcoholic beverages. Current tax rates are set at 65% for beer.
To mitigate the impact on the sector, the VBA has proposed a gradual implementation of these tax increases, suggesting that the Special Consumption Tax Law should not be amended until 2025, to give the industry a breathing space to adjust.
