Key highlights:
– The Vietnamese beverage market is an industry with great growth potential, expected to reach 11.41 billion USD by 2028.
– This is also a highly competitive industry led by foreign enterprises. However, the shift in consumer behavior is an opportunity for enterprises to change their position in the market.
Vietnam Beverage Market
The Beverage industry is an economic and technical sector that contributes significantly to the socio-economic development of Vietnam, including enterprises producing and trading Beer, Wine, and Soft Drinks. According to the Vietnam Beer, Wine and Beverage Association (VBA), the Beverage industry accounts for 4.5% of the service production and business sector, contributing about 60,000 billion VND to the annual budget, creating jobs for millions of workers, meeting domestic consumption needs as well as export in the context of economic integration.
The Vietnamese beverage industry recorded a growth rate of 8.4% per year in the period 2015 – 2019 (according to Euromonitor). However, the impact of COVID-19 has affected all business sectors, including the service sector and the consumption of non-essential products. According to the General Statistics Office, in 2020, the beverage consumption market decreased by 20% – 30%, the industry’s revenue decreased sharply by 17% compared to 2019, and the average profit of businesses in the industry also decreased sharply by nearly 95%.
Overview of Vietnam’s non-alcoholic beverage market
A report from the Ministry of Industry and Trade shows that on average, Vietnamese people consume 23 liters of soft drinks per year, lower than the world average of 40 liters/year. This shows that the potential of Vietnam’s beverage market is still very large. According to Nielsen Vietnam, in 2023, the revenue of Vietnam’s beverage industry will reach 8.25 billion USD, with the two giants occupying the leading market share in the non-alcoholic beverage industry, Suntory Pepsico (SPVB) and Coca-Cola, both accounting for more than 60% of the market share.
The beverage market includes main product lines such as: carbonated soft drinks, mineral water, fruit juice and tea, sports and functional drinks. Carbonated soft drinks account for the largest proportion. Next is mineral water, this product line is growing rapidly as consumers increasingly pay attention to health. Fruit juices and bottled teas also saw good growth, especially those with natural ingredients and no sugar. Finally, sports and functional drinks also saw growth, but because they cater to a younger, urban customer base, their market share was smaller.
In terms of age and gender, the main consumer group is 18-35 years old, especially for carbonated soft drinks and bottled teas. However, women tend to be health conscious, so they prefer low-sugar products with natural ingredients, such as fruit juices and teas. In terms of income, people with high incomes tend to prefer high-quality products, imported or branded from abroad. In terms of geography, due to the urban lifestyle that requires convenience and speed, Ho Chi Minh City and Hanoi are the two cities with the largest proportion of bottled soft drink consumption in the country.
Consumption trends
As consumers’ understanding increases, so does their concern about the health effects of beverage products. Currently, the preference for healthy beverage products includes factors such as low calories, sugar-free, and organic ingredients. According to a survey by market research company Cimigo, Vietnamese consumers are interested in factors related to beverages including: reducing the risk of disease (58%), increasing resistance (52%), improving cardiovascular health (50%), improving the digestive system (44%), improving mood and mental health (52%)…
In addition to paying attention to product ingredients, consumers are also interested in the value of contributing to the community such as environmentally friendly packaging, saving energy, or implementing social charity projects of the company.
This has driven product innovation as well as increased marketing strategy and packaging costs for leading companies. Specifically, to meet the environmental friendliness factor, Aseptic filling technology was born and gradually replaced PET bottling technology (hot filling) and aluminum canning. The technology completely destroys microorganisms and helps drinks have a shelf life of 12 months without preservatives, helping to maintain the intact nutritional composition and flavor of the product. In Vietnam, Tan Hiep Phat is a pioneer in applying this technology from the early days of production and is also the largest customer of GEA (the unit that created Aseptic technology) in Southeast Asia.
Outstanding businesses and brands in the Vietnamese beverage market
1. Domestic businesses
There are many Vietnamese businesses participating in the non-alcoholic beverage industry, but only a few have enough potential to compete with foreign businesses such as: Tan Hiep Phat, Vinamilk, …
Tan Hiep Phat (THP)
Tan Hiep Phat started in the beverage industry in 1994. Initially, the company’s strategic product was laser beer but it did not bring success. In 2001, the energy drink product Number 1 helped the company make a splash in the market. After that, THP continued to launch products that many Vietnamese people know such as: 0-degree green tea, Dr Thanh herbal tea, Soya soy milk, …
Although it is a leading domestic company, THP’s revenue is still small compared to other foreign-invested giants. Analyzing THP’s financial situation, in 2022, THP’s revenue reached VND 3.8 trillion, an increase of 16.6% compared to 2021 but not more than the revenue of 2022. In terms of profit, the company’s profit reached VND 980 billion in 2020 but gradually decreased in the next 2 years. By 2022, it only reached VND 500 billion.
Vinamilk
Established in 1976, Vinamilk is a state-owned enterprise. Vinamilk’s main products are dairy products, but it also has a line of soft drinks. The most famous is the Vfresh fruit juice line.
In 2021, Vinamilk entered into a joint venture with Kido to create the Vibev Joint Venture. Vibev launched its first product line called Oh Fresh including: Oh Fresh fresh corn milk and Oh Fresh fresh green bean milk. Initially, Vibev was expected to successfully regain market share from giants like SPVB or Coca-Cola thanks to the support from large companies like Vinamilk and Kido. However, after only one year of operation, the Vibev joint venture disbanded.
2. Foreign enterprises
The Vietnamese beverage market is a potential market. However, foreign enterprises are the ones dominating the market. Notable foreign brands in Vietnam include Coca-Cola, Suntory-PepsiCo (SVPB), Nestlé, Universal Robina.
Coca-Cola
After 20 years of development, Coca-Cola has become a major brand in the Vietnamese market after a long period of joint ventures and partnerships with Vietnamese partners. Coca-Cola Indochina’s first joint venture was with Vinafimex Agriculture and Food Company, headquartered in the North. In January 1998, Coca-Cola continued to cooperate with Da Nang Beverage Company.
In October 1998, after the Vietnamese Government opened the door, allowing the Joint Venture Company to become 100% foreign-owned. Coca-Cola’s Joint Ventures are 100% owned by Coca-Cola Indochina. After fully owning the joint ventures in the South, Da Nang, Hanoi, the three Coca-Cola Beverage Companies merged into Coca-Cola Vietnam, headquartered in Thu Duc District – Ho Chi Minh City.
Famous Coca-Cola products in Vietnam include: Coca-Cola, Coca-Cola Light, Coke Zero, Sprite, Fanta, Dasani, Aquarius, Fuzetea+, and Schweppes. In 2022, Coca-Cola achieved revenue of 11.1 trillion VND and profit of more than 680 billion VND.
Suntory-Pepsico Vietnam (SPVB)
Pepsico entered the Vietnamese market through a joint venture with International Beverage Company (IBC) in 1994. In April 2013, the Suntory Pepsico Vietnam alliance was established as a combination of Suntory Holdings Limited and Pepsico Inc. SPVB is a 100% foreign-owned company with its main product lines being non-alcoholic beverages and mineral water.
SPVB has been the leading company in the Vietnamese beverage industry since entering the market. Its leading position is maintained thanks to the combined strength of Suntory and Pepsico in production and distribution. SPVB’s main products are carbonated drinks, fruit juices, bottled water and sports drinks such as: Aquafina mineral water, Pepsi, 7Up, TEA+, Revive, Sting,…
Analyzing SPVB’s financial situation, SPVB’s revenue in 2020 reached more than VND 17.2 trillion and VND 23.7 trillion in 2022. SPVB’s after-tax profit also increased with revenue, reaching VND 2.5 trillion and VND 3 trillion in 2020 and 2022, respectively.
URC Vietnam
URC entered the Vietnamese market in 2003 and currently has 5 factories in Binh Duong, Quang Ngai and Hanoi. URC’s outstanding beverage products in Vietnam include: C2 Green Tea, Red Dragon Energy Drink,…
Analyzing URC’s financial situation, in terms of revenue, URC has had steady revenue growth in 3 years from 2020 (VND 5.3 trillion), 2021 (VND 5.4 trillion), 2022 (VND 6.7 trillion). However, the brand’s after-tax profit has gradually decreased over the years. Although reaching VND 490 billion in 2020, in 2021, profit decreased by 50.8% and continued to decrease by 16.8% in 2022, reaching more than VND 200 billion.
Challenges and opportunities of the Vietnamese beverage market
In addition to researching consumer trends, businesses in the Vietnamese beverage sector also need to pay attention to challenges and opportunities to best exploit their development potential in the market.
Challenges
– Changes in legislation: The Ministries of Health and Finance are proposing to impose special consumption tax on beverages with sugar content above 5g/100ml, in order to help reduce the contribution to obesity and non-communicable diseases.
– The Vietnamese beverage market is a highly competitive market between both domestic and foreign enterprises. This can lead to huge costs for marketing campaigns.
– Changes in consumer behavior as consumers prefer healthier and more environmentally friendly products, putting pressure on changing product strategies and packaging technology.
Opportunities
– Vietnamese people’s income has increased rapidly, increasing by 30 – 40% in the past 10 years, averaging nearly 4,000 USD/person/year in 2021, ranking 5th out of 9 countries forecast to have the largest number of people joining the middle class in 2024 with 4 million people, and expected to increase to 23.2 million people by 2030.
– Vietnam is currently in the golden population period with the majority of young people. According to UNFPA’s report, in 2023, Vietnam will have the highest proportion of young people in the country’s history, with 21.1% of the total population being adolescents aged 10 – 24. This is considered a potential opportunity for the Vietnamese beverage market.
– Healthy products as consumers are increasingly concerned about health.
– Urbanization leads to the demand and convenience of ready-to-drink (RTD) products.
– The development of modern retail channels: convenience stores and e-commerce, making it easier to reach customers and saving costs.
– Instead of competing at home, domestic businesses can expand to the world when they meet the standards of “difficult” markets such as the US, Japan, Korea, etc.
With favorable factors as present, Statista predicts that the Vietnamese beverage market will reach a revenue of 11.41 billion USD by 2028, corresponding to a growth rate of 6.62%/year.
About Interfresh
We are one of the pioneers in the natural beverage industry in the Vietnamese market. We are proud to bring quality products to customers in all foreign markets. Committed to providing the fastest and highest quality products and services.
We provide OEM/ODM services, free product packaging design, and free samples for customers with the mindset of putting product quality first and bringing the Vietnamese beverage brand to foreign markets.