Medium-term challenges for SAB

While the beer market has not yet fully regained positive growth momentum, SAB has its own story supporting its business results and stock prices.

Consumption Trends

A variety of factors are expected to improve SAB's business results between now and the end of 2024. Its adaptability in reacting to Decree 100/2019, which penalizes drivers who are intoxicated, is the first of these. It is generally assumed that this regulation will continue to limit the quantity of alcohol that can be drunk in dining establishments. However, beer companies are broadening their marketing strategies to boost sales outside of restaurants.

In line with new trends, SAB has chosen to embrace e-commerce while large rivals like Heineken concentrate on creating non-alcoholic beverages. In November 2023, the business opened an online store on Shopee Mall, and since then, it has seen steadily increasing growth in this channel.

Plans for marketing, however, should be in line with the items. Further democratization of the product and low prices are necessary to boost sales through mainstream channels that appeal to younger people.

Nevertheless, SAB's foray into well-known channels shows how quickly it can adjust. Over time, it is anticipated that this channel will increase access and generate income. Furthermore, there are anticipations of possible modifications to Decree 100/2019, of which a draft is currently being reviewed for more pragmatic changes.

Additionally, in traditional distribution channels, SAB’s leadership reported gaining market share in the first nine months of 2024, particularly in rural areas (especially in the North), with an increased number of distribution points and revenue per distribution point.

Furthermore, seasonal consumption trends during festive periods are stimulating demand, giving SAB room to grow beer sales volumes.

Challenges Ahead

SAB currently owns a 22.7% share in the Saigon-Binh Tay Beer Group Joint Stock Company (Sabibeco, UPCoM: SBB), which it hopes to acquire. By January 2025, SAB's leadership anticipates that this transaction will be finalized, boosting its ownership of Sabibeco from 22.7% to 65.9%.

Vietcap predicts that after consolidation, SAB will: (1) quickly reap financial gains; and (2) take advantage of Sabibeco's extra production capacity. It might take some time to realize cost synergies from the deal, though.

The anticipated SCT raise presents a medium-term risk for SAB and will be a considerable problem beyond 2025, even though the beer business appears to be rebounding.

Two options for raising the SCT have been put out by the Ministry of Finance. Option 1 would increase the SCT rate by 5% a year until 2030, from 65% to 70% in 2026. Option 1 has been promoted by SAB and the Vietnam Beer-Alcohol-Beverage Association (VBA). Regardless of which option is chosen, it has pledged to pass the expense on to customers.

In 2026, the SCT rate would rise from 65% to 80% under Option 2, then by 5% year until 2030. SAB is more at risk in this situation.

Experts believe that either option would diminish the added value of the beer industry, including SAB, which operates 26 breweries nationwide.