Government to put Saigon Beer and Hanoi Beer on block

In this case it’s see and believe. Too often we were told that the Vietnamese government would sell its controlling stake in the country’s brewers Sabeco and Habeco and nothing came of it.

This time, however, the sales announcement which was posted on a government website at the end of August 2016, could become fact. Media say it’s the growing budget deficit which might force the leadership to accelerate a plan to reduce holdings in state-owned firms.

According to Southeast Asian media, the Vietnamese government plans to sell its entire 89.59 percent stake in Sabeco for USD 1.8 billion and its 82 percent holding in Habeco for USD 400 million. Sabeco will be sold in two tranches in 2016 and 2017, while Habeco will be divested this year.

Vietnam, which needs billions of dollars in infrastructure investments, has seen state revenue drop this year with plunging oil prices and a drought that has hurt agricultural production. The budget deficit for 2016 may exceed the planned ratio of 4.95 percent of gross domestic product, it was reported.

Vietnam’s plan to slash holdings in companies dates back to the 1990s as a way to spur economic growth. But the government’s privatisation plan has often fallen short of its target. In 2015, only 289 state-owned companies were selling stakes compared with a goal of 514. Obviously, there are many party bigwigs who would like to stall the privatisation process since it would mean that they will lose positions and influence.

The government intends to sell its Sabeco and Habeco stakes in auctions, media say. Vietnam will offer a 53.59 percent stake in Sabeco this year before its listing, and the remainder in 2017. Prime Minister Nguyen Xuan Phuc was quoted as saying on 29 August 2016 that the listings of Sabeco and Habeco must be done prior to their sales. That could put the sale of Habeco this year into serious doubt.

Vietnam’s beer-swilling culture has made Sabeco and Habeco among the government’s most-treasured assets. Beer consumption jumped about 40 percent between 2010 and 2015. Vietnamese are expected to consume more than 40 million hl beer this year, up from 38.8 million hl in 2015, according to Euromonitor.

The country’s thirst for beer has long attracted interest from foreign companies. Only in 2015 did Thai Beverage make an offer for Sabeco which valued the whole company at USD 2.5 billion. The offer was rejected on the grounds that it undervalued Sabeco. In 2008 Heineken bought a 5 percent stake in Sabeco and

Danish Carlsberg has held a minority stake in Habeco since 2008.

Although their core markets lie in the south (Sabeco) and the north (Habeco) of the country respectively, the two state-owned brewers have trespassed on each other’s territories in recent years. The up-coming sale of Habeco may have prompted the cash-strapped Carlsberg to sell a brewery in southern Vietnam to Heineken in July 2016 to better defend its northern stronghold.

The transaction value was not disclosed.

Sabeco is the country’s leading brewer with a market share of perhaps 40 percent, followed by Heineken, Habeco and Carlsberg with 20 percent each, according to Nguyen Van Viet, Chairman of the Vietnam Beer Association.