Drink makers vie for market share

An employee of Tan Hiep Phat Co bottles beverages. — VNA/VNS Photo Chi Tuong

 HCM CITY (VNS)— The beverage market continues to be a highly promising market, reflected by the increase in the number of recent investments from major domestic and foreign enterprises.

According to market research company Nielsen Viet Nam, the local beverage industry recorded a growth rate of 17 per cent last year, despite difficult economic times that caused many other kinds of companies to struggle.

Tran Quy Thanh, chairman of Tan Hiep Phat Beverage Group, said Viet Nam's annual per capita consumption of soft drinks rose sharply in recent years, from three litres in 2007 to 23 litres at present.

However, consumption in the country remains half that of the Philippines.

With rising income levels, Vietnamese are spending more on food and drinks, Thanh told Thoi Bao Kinh Doanh (Business Times) newspaper.

"This means that the market still has big room for companies to develop," he added.

Muhtar A. Kent, chairman and CEO of the Coca Cola Company, said that soft-drink consumption in Viet Nam was about a quarter of the global average.

He said that beverage companies were jumping into the market because per-capita purchasing power had risen to about US$3,500 per year and the middle class was continuing to grow at a fairly fast rate.

Viet Nam remains an attractive market for the beverage industry, with PepsiCo holding a firm foothold in fast-food and beverage areas, according to Umran Beba, president of Pepsico's Asia Pacific Region.

Both foreign and local enterprises have developed new strategies to grab more market share.

The Tan Hiep Phat Beverage Group, for instance, is investing VND4 trillion ($192.12 million) to build two new plants in Quang Nam and Ha Nam provinces.

Coca Cola also plans to invest an additional $300 million in the Vietnamese soft drink market by 2015.

In addition, PepsiCo Viet Nam has agreed to form a joint venture with Japan's Suntory Holding Ltd under which Suntory would buy a 51 per cent stake in PepsiCo's Vietnamese beverage business.

The deal is an important part of PepsiCo's long-term strategy in Viet Nam.

Fierce competition

Coca Cola and PepsiCo still hold the largest share of the Vietnamese beverage market, totalling about 60 per cent.

In 2009, Coca Cola pumped an additional $200 million into Viet Nam, while PepsiCo, not wanting to play second fiddle to its rival, injected $250 million.

With its recent investment of $300 million, Coca Cola will be able to improve the effectiveness of its three plants that operate in Viet Nam, and further develop its brand names and expand its retail system.

For PepsiCo, its joint venture with Suntory is expected to enable it to enhance its already well-known brand name and expand its influence in the Asian market.

Since it is impossible to compete with foreign giants Coca Cola and PepsiCo in the carbonated drink market, domestic beverage companies have chosen to focus on non-carbonated drink products.

Vietnamese consumers prefer non-carbonated water and drinks such as Tan Hiep Phat, Vinasoy, Vinh Hao and Sapuwa.

In the first six months of this year, turnover for many kinds of non-carbonated drinks rose sharply, including energy drinks (up 27 per cent), green tea and bottled water (up 23 per cent).

Tan Hiep Phat is one of the biggest producers of non-carbonated drinks. It holds a 53 per cent market share for bottled water and herbal tea drinks, according to London-based Euromonitor International Ltd, which provides market-research and business-intelligence reports and data.

The company has invested in two new plants that will continue to produce 40 kinds of products and will also introduce several new products, including beer, wine, noodles, spaghetti and instant food. 

Source: VNS