Deals an option as Heineken eyes expansion in Vietnam

HANOI • Heineken has 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 South-east 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 more than US$6 billion (S$8.5 billion) in its two major brewers - the 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 per cent.

Mr Frans Eusman, head of Heineken's operations in Asia, said 2016 had been "spectacular" and that Vietnamese growth would continue, though a shorter Chinese New Year holiday could temper that. The Tet holiday, Vietnam's new year celebration, began yesterday and runs to Feb 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 Mr 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," Mr Eusman told Reuters, 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 prices 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 (S$6.92) apiece but has touched 226,300 dong; Habeco has touched 225,800 dong from a 39,000-dong starting price - prompting Carls- berg, in talks to buy more shares, to dismiss the rise as speculative.

Mr Eusman declined to comment on the matter, saying: "I don't think there is a clear-cut, formalised divestment process."

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

Heineken also owns 43 per cent of India's largest brewer, United Breweries - a stake it could raise, Mr Eusman said.

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

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 27, 2017, with the headline 'Deals an option as Heineken eyes expansion in Vietnam'. Print Edition | Subscribe