Business | Heineken says deals an option as it eyes growth in Vietnam
A bottle of Heineken beer is seen in ice. Photo: Reuters/Matthew Lee
A bottle of Heineken beer is seen in ice. Photo: Reuters/Matthew Lee

Heineken says deals an option as it eyes growth in Vietnam

Brewing giant is keen to expand in young beer-loving economy that is company's second most profitable market globally

January 26, 2017 1:38 PM (UTC+8)

Heineken NV said it will consider deals to expand its presence in Vietnam – a young, beer-loving economy that is already its second-most profitable market globally – as the southeast Asian country loosens its grip on state-run brewers.

Vietnam, where Heineken sells Tiger and Larue beer as well as its eponymous brew, is a global hot spot for the industry, due to a youthful population and beer-drinking culture, making it a battleground for global brewers trying to offset mature economies with newer markets.

Adding to investor enthusiasm, the government is in the process of selling stakes worth over US$6 billion in its two major brewers, Ho Chi Minh City-based Sabeco, the market leader known for its Bia Saigon and 333 beers, and Habeco in the north, of which Carlsberg owns 17.5%.

Frans Eusman, head of Heineken’s operations in Asia, said 2016 had been “spectacular” and Vietnamese growth would continue, though a shorter Lunar New Year holiday could temper that. The Tet holiday, Vietnam’s new year celebration, begins on Thursday and runs to February 1.

Heineken, holding roughly a fifth of the Vietnamese market after 25 years in the country, bought the Vung Tau brewery in south Vietnam from Carlsberg last year to expand brewing capacity, and Eusman said it is eyeing a push into the north to enlarge its footprint.

Growth could be organic, or through deals, he said.

“Vietnam is exceptional because alcohol consumption is focused on beer,” he said, contrasting it with countries such as India, where the alcohol-consuming minority drinks spirits.

“The privatisation of Sabeco and Habeco will potentially lead to change and opportunities within the Vietnamese beer market and we are following these developments closely,” he said, declining to comment on Heineken’s interest.

The price of both Sabeco and Habeco shares have soared since they began trading as part of a complex state sale process, due to a small free float. Sabeco listed at 110,000 dong (US$4.87), but has touched 226,300 dong; Habeco has touched 225,800 dong from a 39,000 dong starting price – prompting Carlsberg, in talks to buy more shares, to dismiss the rise as speculative.

Eusman declined to comment on the matter.

“I don’t think there is a clear cut, formalised divestment process,” Eusman said.

Elsewhere in Asia, Heineken is growing in new markets like Myanmar, and expanding newer products such as non-alcoholic beer and cider, popular with sweet-toothed Asian drinkers.

Heineken also owns 43% of India’s largest brewer, United Breweries Ltd – a stake it could raise, Eusman said.

Heineken initially acquired 37.5% of United Breweries in 2008 through its takeover of Scottish & Newcastle Ltd. It later raised its holding.

“If shares are brought to the market and offered to us, of course we would consider buying them,” said Eusman.

“But we are not obsessively trying to take control.”

The second-largest shareholder in United Breweries is tycoon Vijay Mallya, who is wanted by authorities in India for questioning and left the country last year. He was charged with fraud earlier this month.

Reuters reported last year that Heineken would likely ask Mallya to step down from the board, as a prelude to raising its stake above 50%. Eusman declined to comment.

Comments