VIETNAM – Heineken has announced its decision to temporarily suspend operations at its brewery in Quang Nam, central Vietnam, due to decreasing demand and shifting consumption patterns.
This brewery, the smallest of Heineken’s six facilities in Vietnam, will halt production as the company seeks to adapt to changing market conditions.
In a statement, Heineken explained that this move is part of a broader strategy to optimize brewing and business activities.
“To remain adaptive and agile in response to and in anticipation of changing market dynamics, we have decided to optimise our brewing and business activities,” the company said.
Heineken aims to achieve efficiency and economies of scale, allowing continued investment in Vietnam’s market and support for its workforce and business operations.
The Dutch brewer, which began its operations in Vietnam in 1991, noted that the country’s economic slowdown has significantly impacted beer demand.
Furthermore, the strict enforcement of Decree 100, a law imposing severe penalties on drunk driving, has led to a shift in consumer habits, reducing alcohol consumption.
Beer sales in Vietnam fell double-digits in 2023, and the market has continued to decline at a mid-single-digit rate year-to-date in 2024.
Despite these challenges, Heineken reported a mid-teens increase in underlying revenue in Vietnam for the first quarter of the year, driven by volume growth in the low-teens and the effects of lapping destocking from the previous year.
However, for 2023 overall, Heineken’s revenue in Vietnam declined organically in the low twenties, impacted by destocking and a shift in demand toward more mainstream brands.
Compounding the issue, Vietnam’s government is considering raising the consumption tax on alcoholic beverages to 100% by 2030. The tax, which currently stands at 65 percent, applies to luxury goods and non-essential items, including beer and strong liquor. This proposed tax hike could further strain the beer market in Vietnam.
Concurrently, Heineken East Africa Imports and Company Limited has approached the Kenyan Supreme Court seeking a stay of execution of a judgment that ordered them to pay Maxam Limited Kes1.7 billion (US$13.13M) shillings.
Kevin Santry, a director at Heineken, stated in an affidavit that the Court of Appeal’s judgment could disrupt the entire beer industry by fundamentally altering the commercial relationships between manufacturers and distributors.
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