One of Vietnam's biggest beer brewers has changed its target segment to maintain its leading position in the market.
The Saigon Beer-Alcohol-Beverage JSC (Sabeco) announced a change to its brands, including Saigon Export and Saigon Lager, and the launch of a new premium brand, Saigon Gold, in September. Sabeco Chairman Phan Dang Tuat said that besides Saigon Gold the company plans to launch another super-premium brand and “I expect the premium brands will compete with their rivals and gain market share in the high-end segment,” he said.
The reason behind these moves is that Sabeco’s market share is in decline and being threatened by foreign beer brands. It has reported steady growth in recent years but then saw its volume in the first half of this year fall by 0.5 per cent. Its market share declined from 46.7 per cent in 2013 to 45.5 per cent in the first quarter of this year. Total profits fell by 9.3 per cent in 2013 though production volume growth was 10.3 per cent against 2012. Sales of 333 and Saigon Export, which have contributed significantly to Sabeco’s revenue and growth annually, fell sharply. For years the Vietnamese beer giant’s brands have been popular in the middle segment.
Meanwhile, Heineken, considered a rival, is chasing Sabeco in terms of market share. Insiders said that the foreign brewer has a small market share but its products have higher commercial value than Sabeco’s. In the last couple of years Heineken only recorded half of Sabeco’s production volume but its profits were nearly equal. The gap in consumption volume between the two brands is gradually narrowing.
According to Mr. Vo Van Quang, a local marketing expert, Heineken focuses on the premium segment while Sabeco’s products are in low-middle segment. Heineken is hot on Sabeco’s heels in terms of consumption volume. Its production capacity will be 1.4 billion liters by 2105 while Sabeco will produce nearly 1.4 billion liters this year and targets 2 billion liters by 2015. Mr. Michel de Carvalho, owner of Heineken, predicted that Vietnam will become the largest consumption market in the world by 2015 so that the Number 1 position could secured by the foreign giant. Sabeco received an offer from Heineken to be a strategic partner but chose to remain a rival.
The decision makes some sense. Beer brands, especially foreign ones, are focusing on the premium segment, which accounts for 7 per cent of the total share. Mr. Nguyen Duc Son, Brand Strategy Director at Richard Moore Associates, said: “Brands take advantage of experience and financial capacity, and Sabeco, known as a mainstream brand, has jumped into the premium segment because it is able to do so.”
But this will not be enough for the Vietnamese brewer to beat its rival. According to Mr. Son, Sabeco developing products in the premium segment requires the brewer adopt sound brand portfolio management. “This management will determine its success,” he said. Sabeco recently launched a TV commercial for 333 after changing to premium packaging, but Mr. Son believes it would be better if it used a TV commercial to promote a new brand in the premium segment rather than an existing brand like 333, based on the theory of brand positioning and rules on brand portfolio management. “The brand being successful in the mainstream segment could be an obstacle when moving to the premium segment,” he said. Meanwhile, the competitive pressure from international brands is truly challenging. Some large foreign names like Fosters, BGI, Laser and San Miguel targeted premium products over the last few years and failed, and so withdrew from the market.
Insiders also said that Sabeco is applying a “flanking” strategy, which is a defensive tool to harass its rival’s segment and protect its target segment. Mr. Son said that this could be a logical step to take. But the question is what brands Sabeco will choose to spearhead its “flanking” attack on other premium brands. The principle when applying this strategy is that it must not affect other segments, assuming failure. “So we’ll have to wait and see,” he said.