This company is making nearly half a million dollars in Vietnam despite of poor purchasing power

Saigon Beer – Alcohol – Beverage Corporation (Sabeco – SAB) reported their lowest profit after tax in the past six quarters due to a decline in purchasing power.

This resulted in a decrease in revenue of nearly 15% in the first quarter of 2022 compared to the same period last year, despite a daily profit of over 10 billion dong (426,266 USD), which is higher than in 2020-2021 when Decree 100 was applied.

According to Sabeco’s leadership, the market weakened in the first quarter after the Lunar New Year, and consumers limited their alcohol consumption due to the impact of Decree 100. The decrease in purchasing power caused SAB’s finished goods inventory to increase by 18% to over VND 1,000 billion.

Moreover, recurrent expenses have increased, particularly financial costs, which doubled compared to the same period last year. Sabeco spent nearly 480 billion VND on advertising and promotions, which is more than a 22% increase.

A report by Vietcombank Securities (VCBS) earlier this year stated that SAB had regained most of the market share lost during the pandemic, but at the expense of increasing marketing and advertising costs.

A man drinks a bottle of Sabeco’s Saigon beer at a bar in Hanoi, Vietnam. REUTERS/Kham

Despite these challenges, Sabeco still made a profit of over 1,000 billion VND in the first quarter, which is more than 11 billion dong per day, although it decreased by nearly 19% compared to the same period last year. However, this means that Sabeco has only completed about 17% of its profit target for the year.

Sabeco’s management is optimistic about the future of Vietnam’s beer industry due to the country’s golden population structure, fast income growth, great potential of the non-alcoholic beer segment, and the potential of the export market. The company aims to increase revenue by 15% and profit by 5%, reaching more than VND 40,270 billion and VND 5,775 billion, respectively, continuing to set new peaks. However, they also anticipate challenges such as increasing raw material and fuel prices and decreasing market demand due to high inflation, among others.

The VCBS analysis team believes that marketing will play an important role in promoting beer demand in the coming time. Therefore, Sabeco will need to differentiate themselves from competitors through innovation and product improvement. Sabeco has refreshed its product portfolio by launching products with new flavors and packaging on existing brands to aim for a more premium image. Additionally, the company plans to tap into the great potential of the non-alcoholic beverage market, which is not currently in their product portfolio.

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Source: Vietnam Insider