Competition in beverage market to heat up

A study by the Vietinbank Securities Company said that total revenue of the domestic soft drink industry reached VND11.87 trillion (US$561.9 million) and consumption of the industry was around 2 billion litres last year.— Photo tienphong

HA NOI (Biz Hub) — There will be stiff competition between domestic and foreign beverage firms as Viet Nam integrates further into the world beverage market, with tremendous potential for development, said experts.

According to the Viet Nam Beer, Alcohol and Beverage Association, average demand for bottled soft drinks for one Vietnamese is just three litres per year while the demand is 50 litres per year for one Filipino, reported Doanh nghiep & Thuong mai (Enterprises and Commerce) magazine under the Ministry of Industry and Commerce.

In the period of 2009-2013, with 130 producers, the industry showed growth rate at 19.35 per cent in business, including 2 million litres for exports. The growth rate is expected to reach 14.2 per cent from 2014 to 2018 with 135 producers.

The local economy has been in difficulty due to the prolonged financial crisis and customers have tightened their purse-strings. However, Viet Nam's population has reached 90 million with a majority being youth who often consume soft drinks, the company said. Therefore, this factor would attract soft drink producers to increase their investment in the local market to get a higher market share, it said.

The industry expected to produce 2.32 billion litres of soft drinks and reach $506 million in revenue for this year and by 2016, these figures are expected to reach 2.62 billion litres in output and $626 million in revenue.

The association said many Vietnamese soft drink producers have upgraded their production capacity to compete with foreign rivals. They have also focused on the product line of soft drinks that improve the health of customers and increase market share.

Meanwhile, foreign investors like Coca-cola, Pepsi and Nestle with LaVie water, have also increased their share in the business in Viet Nam, or implemented mergers and acquisition activities with local firms including Masan, Kirin Holding of Japan and Uni-President of Taiwan to increase their market shares in Viet Nam, the association said.

Deputy Minister of Industry and Trade Ho Thi Kim Thoa said the local beverage industry is facing many challenges at present, including a lack of protectionist policies from the State due to integration into the regional and world markets. So, the local enterprises should improve products and reduce prices to compete with foreign competitors.

She said the Trans Pacific Partnership (TPP) agreement that is expected to be signed in the near future would bring numerous opportunities to export soft drink products to markets under TPP and join the global value chain for local enterprises. She also called for more investment in the beverage industry.

But the TPP will also pose challenges to local producers who compete with foreign rivals, Thoa said.

Deputy Chairman of the Association of HCM City Enterprises, Pham Ngoc Hung said the beverage industry should learn from Vietnamese washing-powder and toothpaste producers who were swallowed up by well-known international firms. The local firms should plan on staying and actively developing their existing market shares.

Nguyen Quang Anh, Customer Director of the Neo Advertising Company, said the local beverage market has not seen prominent companies mainly due to the poor workforce and financial inability.

To have Vietnamese trade marks on the local beverage market, the local firms should find specific products and have the right trade mark strategy, he said. — VNS