final group project microeconomics topic beer industry 2

Current context of the beer market in Vietnam and around the world 4 1.3.. And similarto wine, beer was produced around 7,000 years BC in Mesopotamia, present-day Iran.Before the term "

NATIONAL ECONOMICS UNIVERSITY

NEU BUSINESS SCHOOL

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FINAL GROUP PROJECT MICROECONOMICS

TOPIC: BEER INDUSTRY

Group: 6

Class: EBBA 15.2

Course: 65

Hà Nội- 12/2023

NATIONAL ECONOMICS UNIVERSITY

BUSINESS SCHOOL - E-BBA & E-BDB

PROGRAM

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FINAL GROUP PROJECT TEAM 6

Choose a commodity that is produced in Vietnam

1 Is the industry the commodity is in, closer to pure competition or

monopoly? Explain your reasoning

2 Explain the main factors that have affected the supply and the demand of the commodity chosen over the last years

Students: 1 Vũ Anh Đức - 11230049

2 Trần Thị Minh Chân - 11230028

3 Lê Huy Hoàng - 11230070

4 Nguyễn Thành Vinh - 11230167

5 Nguyễn Bùi Trâm Anh - 11230010

1.2 Current context of the beer market in Vietnam and around the world 4 1.3 Factors affect beer market 4

B, Barriers to entering the industry 5

For centuries, beer was the favorite drink in many ancient towns on an international scale The specific quality of beer lies in its connect ability which links a person with a particular culture and people from different areas all over the world Over time, beer becomes a local product with global reach and relevance The largest brewing companies have developed and converted into global multinationals The beer market is typical of strong growth in emerging economies, including Vietnam While producing and transporting the beer people are interested in, the activities of the beer industry sustain significant amounts of GDP, jobs, and government revenue in economies around the globe Enjoying a cold glass of “bia hoi", a type of draught beer, on the street stalls has become an iconic and communal part of the Vietnamese drinking culture, especially

in summer Because of the popularity of this beverage, Vietnam has become one of the largest beer-consuming nations worldwide Considering the potential development of the beer sector, this industry is projected to develop substantially over the course of the predicted period Therefore, Group 6 chose the Beer market to be the topic of our final Microeconomics group projects

The following final group project is the result, contribution and effort of the whole group We have tried to research and filter the most accurate and novel information about the industry and products we choose Because we don't have much experience and haven't had many opportunities for practical experience, our work certainly has many shortcomings and weaknesses We hope to receive feedback and support from macro lecturer Tran Thi Hong Viet so that we can improve and develop our project even better

1.1 What is beer market?

Beer, generally speaking, is an alcoholic beverage produced by the fermentation of sugars suspended in a liquid medium and it is not distilled after fermentation The unfermented sugar solution obtained from the soaking process is called beer wort or

"brew water"

Beer is one of the oldest human beverages When grains were first grown for food thousands of years ago, dating back to at least the 5th millennium BC and recorded in the ancient texts of ancient Egypt and Mesopotamia There are also many interesting stories surrounding it It is said that by chance, when the rice grains were wet and fermented, this process created a very delicious drink From there the first beer was discovered However, thanks to chemical testing of ancient ceramic pots, it was discovered that beer was invented independently among civilizations around the world And similar

to wine, beer was produced around 7,000 years BC in Mesopotamia, present-day Iran Before the term "beer" appeared, people still called it "beor"

A 6,000-year-old painting by the Sumerians in Mesopotamia is believed to be the oldest evidence of beer, as it depicts people drinking a drink from a barrel There are even some surviving barley beer recipes in the Sumerian Epic of Gilgamesh (3,900 years old)

It can be seen that in the ancient Western world, especially in Egypt and Mesopotamia, beer became essential

There is an interesting origin of beer, the story goes that beer was invented by a poor patient who once accidentally put hard bread in a glass of water to soften it to eat, but he forgot it until a few days later At that time, the bread fermented in the cup Because he was so hungry, he still tried to eat it and felt ecstatic because of the yeast A few days later, he was cured Realizing the miracle that this drink brings, he persistently experimented with the desire to create a cure to help the medical industry

However, due to its long existence, the origin of beer may just be oral stories or guesses based on archaeological traces

Types of beer: Beer is becoming more and more diverse in form and type Beer is different, each type has its own flavor and characteristics.

Ale: This is a type of beer produced by floating fermentation, and it is usually fermented

at a higher temperature than lager beer (15-23°C, 60-75°F).

Lager beer: This is the most consumed beer in the world Lager originates from Central Europe, lager beer yeast is a type of submerged fermentation.

Natural fermentation: To make this beer, people often use wild yeast instead of cultured yeast.

Mixed beer: Also known as hybrid beer, a beer with a blend of both ale and lager.

1.2 Current context of the beer market in Vietnam and around the world

Vietnam’s market:

Before 2019, Vietnam was in the top 1 in beer consumption in Southeast Asia and even top 9 worldwide However, in recent shares with the press, major beer manufacturers such as Heineken and Carlsberg all recorded a significant decrease in sales

World’s market:

According to our latest study, the global Beer market size was valued at USD 142880 million in 2022 and is forecast to be a readjusted size of USD 136310 million by 2029 with a CAGR of -0.7(Percent) during the review period The influence of COVID-19 and the Russia-Ukraine War were considered while estimating market sizes(1)

1.3 Factors affect beer market:

Recently, we can see that there is a decrease in the consumption of beer There are many factors affecting the market, including: Price, Consumer’s income, Government policy, Production technology, Supplier’s expectation, Number of consumers,… These elements will have a significant impact on both consumer demand and business supply Specifically, consumer demand will be directly impacted by income, preferences, and expectations; the market's supply of goods will be impacted by selling prices, technology, human resources, and government regulations

Question 1 Is the industry the commodity is in, closer to pure competition or :

monopoly? Explain your reasoning

The Vietnamese beer market is structured as an oligopolistic market.

A, Market share

In 2021, Heineken, Sabeco, Carlsberg and Habeco account for more than 90% of the market share of Vietnam's beer industry Of these, Heineken and Sabeco alone have a total market share of 78.3% After a long period of being affected by the Covid 19 pandemic and the State's management policies, the beer industry's business activities suffered heavy losses Revenue of the entire beverage industry in 2020 decreased by 16% compared to 2019

Currently, the Russia-Ukraine conflict is causing a global supply chain crisis This exacerbates difficulties for the beverage industry when: fuel prices increase sharply and raw material prices skyrocket However, according to Euromonitor's assessment: From

2023, beer market consumption is expected to return to pre-Covid-19 levels

B, Barriers to entering the industry

1.1 Business regulations and policies

Regulations and policies related to beer production, sales and advertising can create barriers to the development of the beer market Tax regulations, licensing, permitting processes and quality control can create significant challenges and costs for beer producers and traders

1.2 Brand competition and market share are fierce

Competition from imported beer brands is also an obstacle Famous beer brands from abroad often have resources and recognition from customers, making it difficult for domestic brewers to access and compete in the market

1.3 Restrictions on distribution channels and advertising content

Beer distribution and marketing also presents some challenges Especially when reaching rural or remote areas, distribution and marketing become difficult This can limit market expansion and reaching potential customers

2 Consumer reaction – Research on Vietnam beer market

2.1.Trend of consuming low alcohol beer

A report from Nielsen said: After stabilizing a career, the next important goal of Vietnamese people is health

Nearly 80% of consumers today have a need for healthy products Not too surprisingly, the issue of food hygiene and safety in our country is also in an alarming

state Consumers show concern when consuming products that serve the essential needs

of eating and drinking

Vietnamese consumers' health concerns create a new trend

That is consuming non-alcoholic beverages For the beer market, this is beer produced with alcohol extraction and separation technologies The strong point is that the beer flavor is still retained This beer is now popular around the world Consumers are also diverse

Target customers are mainly women They like to drink beer but don't want to get too drunk and harm their health and beauty This solution will remove barriers from Decree 100 on health and traffic safety, non-alcoholic beer is a promising product of Vietnam's beer industry Especially this segment is currently quite young Therefore, exploitation opportunities will expand for many businesses in the near future

2.2.The emergence of the "premiumization" trend

Vietnam is no exception to this general trend in the world According to Eurominitor International: Vietnam's beer industry growth has slowed down with CARG for the period 2020 - 2025 remaining at 6%

With the increase in income levels and awareness of the harmful effects of alcohol and beer, consumers tend to shift their habits to using safe drinks with guaranteed quality origins Besides that, there is the mentality of "loving foreigners" Always believe that foreign products are better than domestic products Leading to increased consumption of imported beer The need to express one's position and affirm one's personal brand is also

a common trend Beer and alcohol are one of the convenient items for users to prove their

"class" to relationships and the community

C, Non-price competition

In a difficult market context, Sabeco leaders believe that competition will become more fierce among manufacturers to gain market share For example, despite the difficult business situation in 2020, Heineken Vietnam still launched Bia Viet Two months later, Sabeco launched Lac Viet Beer product in the same segment After that, Heineken's youth beer product lines and Sabeco's Saigon Chill appeared on the market Another player, Carlsberg, is no less competitive when seeking to expand the distribution system

of Huda beer products in the North…

But competition is not just about products and markets Since the end of 2019, rumors of Chinese investors buying Sabeco shares or rumors of ThaiBev wanting to withdraw capital from Sabeco have continued to spread Although denied by the Ministry

of Industry and Trade and businesses, this information has caused Sabeco to lose market share in some localities Unfair competition was even raised once again when some agents reported being "threatened" by Heineken VN sales staff to cut off sponsorship if they sold or displayed Sabeco beer According to a recent conclusion of the Department

of Competition and Consumer Protection (Ministry of Industry and Trade), there is a phenomenon of Heineken VN sales staff asking agents to limit the sale or display of Sabeco beer products Although up to now, Heineken VN has confirmed that the company does not have this policy or direct employees to implement it, but according to the Department of Competition and Consumer Protection, through work, some agents confirmed that in fact there is The phenomenon of Heineken VN sales staff asking agents

to implement this restriction but without official written notice It can be seen that competition in the beer market has reached its peak and many Businesses don't even hesitate to use every "trick" to gain market share

The competition is increasingly fierce as Habeco's owner's market share is also threatened by Sabeco's encroachment into the North According to information from the business, Sabeco has improved its market share since the third quarter of 2021 thanks to

its widespread distribution network in areas not too heavily affected by the Covid-19 epidemic such as the Northern rural areas

Instead of trying to compete in the high-end segment, Sabeco focuses on developing its core segment This is a more reasonable and wiser strategy, because the popular segment still has the highest sales volume in the market Sabeco still has outstanding advantages in terms of brand, production scale and distribution system compared to competitor Habeco in this segment

Since 2018, after changing key management, Sabeco's new marketing strategy aims to spend more effectively on advertising and promotional activities, instead of spending more

Question 2: Explain the main factors that have affected the supply and the demand

of the commodity chosen over the last years.

1 Factors affect supply:

1.1 The price factor effect

Price is the main factor that directly affects product supply The amount for which

a product is offered depends on what people are willing to pay for it, i.e its price This is the most important thing that affects product availability Following supply rule, when

price increase, producers will want to produce more to maximise profits and vice versa This change in price is called price fluctuation

Revenue in the Beer market amounts to USD 1,523.0 million by 2023 The market

is expected to grow annually by 3.03% (CAGR 2023-2028)

Comparing globally, the majority of revenue is generated in the United States ($74,730 million by 2023)

Relative to total population figures, a per capita revenue of $15.41 is generated in 2023

In the Beer market, the volume is expected to amount to 1,351.0 million L by

2028 The Beer market is expected to have a volume growth of -3.0% by 2024 The average volume per person in the Beer market is expected to reach 13.02L by 2023

2.1.1 Input prices

Input prices play an important role in a company’s supply Input includes the type, quantity, and cost of raw materials, labor, devices, and technology that can directly affect the supply of a company’s products The more inputs available with low cost, the more products can be made This would escalate the supply of a product in the market This will decrease its production cost and increase its profit margin

Vietnamese craft beer recipes have developed in all aspects thanks to the country's geographical advantages Vietnam has many spices and fruits that are widely used in craft beer recipes, from passion fruit, sugar beets, and lemongrass to cocoa and coffee This means Vietnamese brewers will be less dependent on imported ingredients, reduce input costs, and have more competitive prices Using local products has set Vietnamese craft brewers apart from competitors in other regions

The price of production raw materials is forecasted to continue to rise significantly, having an impact on profits Some essential ingredients used in typical beer production, such as filtration aid powder, are predicted to climb by approximately 25%, and hops, rice, and sugar by 10%, 4%, and 8% respectively In particular, malt, an input raw material that accounts for a large portion of production costs, is projected to grow by nearly 60% compared to the average purchase price in 2022