This article was initially published in the December/January issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
From beer to sake and even an inaugural whisky festival, Ho Chi Minh City is fast becoming one of Asia’s biggest craft drinks markets. With investment knocking at the door, it’s also one of the world’s most exciting F&B markets. Millie Milliken reports.
Vietnam is one of the most popular destinations for tourists looking for an authentic, cultural – and often chaotic – good time. Ho Chi Minh City (or HCMC, formerly, and still commonly, known as Saigon) is its thriving financial centre. With a burgeoning craft beer market, a number of firsts (including its first sake brewery) and the potential of billions of US dollars to be invested in the not-too-distant future, it’s a market to keep an eye on, especially when it comes to drinks.
The scene
HCMC (and, indeed, the rest of Vietnam) has a storied recent history. After the founding of French Indochina (Vietnam became a French colony in 1877), Saigon was made its capital in 1859. When the French were ousted by an independence movement led by Ho Chi Minh in 1954 and the country was split in half, the city became the capital of South Vietnam and remained so until the fall of Saigon in 1975 at the end of the Vietnam War. A year later, it was renamed Ho Chi Minh City after the man who had led North Vietnam to victory, its capital city status shifting to Hanoi.
HCMC is Vietnam’s largest city (followed by Hanoi) with a population of about 9m and is broken down into 16 urban and five rural districts. Resplendent with French colonial architecture, it is a city on the up. In the early 1990s, it began a modernisation and expansion project in a bid to recover from the war. Huge development is still underway in the city right now, with hotels, apartment blocks and commercial buildings being built to further its economic growth, which has been gaining traction. According to news agency VietnamPlus, HCMC has “plans … to be developed into the nation’s largest economic hub for tourism, industrial services and high-tech agriculture by 2040, with a focus on climate change adaptation”.
Vietnam is a popular destination for tourists, with more than 8m visiting every year. As well as being attracted to HCMC’s numerous landmarks, museums and colourful street life, they’re usually there for the food and, more recently, drinks. Local delicacies include bánh mì (a baguette filled with paté, pork or chicken, pickled salad and chilli), bún bò huế (spicy beef noodle soup) and pho, the county’s most famous noodle soup. Coffee shops are popular among locals and street iced beer culture (bia hơi) is found on practically every pedestrian street. Tourists across the country spend on average 23.7% of their budget on food and drink, according to Vietnam Briefing.
Key trends
It’s worth mentioning that Vietnam has an ever-growing middle-class population. PwC forecasts that by 2030, it will hit the 95m mark, over double the services group’s 44m prediction for 2020. That means more disposable income and, with 40% of the population expected to live in cities by 2040 (HCMC is forecast to have 13m-14m people by 2040 and 16m by 2060), the urban F&B sector will benefit from a younger, well-paid local consumer.
When it comes to drinks, beer is king – Vietnam is South East Asia’s biggest beer market. In HCMC, the craft brewery scene is sizeable and includes BiaCraft Artisan Ales, which boasts ‘the most extensive collection of craft beers in Vietnam’, and three branches of the Belgian craft beer chain Belgo. One of the most noticeable trends is the shift towards the consumption of no- & low-alcohol beer, such as Heineken 0.0 and Sagota Alcohol-Free Beer from HCMC-based Sabeco, Vietnam’s largest brewer and the first in the country to introduce a non-alcoholic beer.
HCMC’s cocktail scene is also on the up. This year, Stir, run by bartender Lâm Đức Anh, hit the ‘Asia Top 100 Bars’ list and there are new bars moving in too: Nha Trang’s Hybrid has opened its second bar in the city recently, buoyed by its 2021 position at 96 on Asia’s ’50 Best Bars’ list, while ASMR has brought cocktail culture to District 2. Young Vietnamese are beginning to see bartending as a possible career and, in turn, cocktail education is becoming more practiced.
Vietnam also hosted its first whisky/whiskey festival in 2022 – the Vietnam Whisky & Cocktail Festival took place in June at the InterContinental Saigon. Good timing as IWSR Drinks Market Analysis predicts that the whisky/whiskey market in Vietnam will grow by 26% from current sales of US$304m to reach 605,000 cases worth US$440m by 2025. Scotch was strongly represented at last year’s festival (from The Macallan and Glenmorangie to The Balvenie and Bruichladdich), as well Irish, American and Japanese whisky/whiskey brands.
International players
International brands coming into HCMC are, of course, far-reaching. In 2019, Heineken launched its Heineken Silver in Vietnam, while Carlsberg’s relaunch of Huda was also a big success with local consumers. That said, Heineken reported lower sales than expected after the country’s Covid-19 lockdowns.
In 2020, the Scotch Whisky Association welcomed the announcement of a UK-Vietnam free trade agreement that allowed for the gradual elimination of the 45% import tariff in Vietnam – a move that means Scotch can capitalise on the rising interest in the category. Other more niche categories are also being embraced. Between 2014 and 2019, IWSR Drinks Market Analysis data showed soju volumes rising at a CAGR of 20% to 30% (Vietnam isn’t the only South-East Asia country experiencing huge interest in soju: In nearby Indonesia, volumes rose at a CAGR of 80% over the same period.)
Local players
As previously mentioned, beer – more specifically, craft beer – is huge business in HCMC. The city has around 12 breweries (Heart of Darkness, Pasteur Street Brewing, Tê Tê TapHouse, to name a few) and local brews are sold and drunk vastly across the city (it’s good to see the adoption of local brands in Vietnam, which isn’t always the case, as domestic consumers often eschew home brands in favour of imports). HCMC has even branched into cidermaking with Saigon Cider launching in 2021 – perhaps a nod to locals’ sweeter palates.
The city has also gained its first sake brewery, Mùa Craft Sake. HCMC is known for having a strong Japanese restaurant scene, so the opening of Mùa is viewed as an exciting new offering. With craft becoming more popular, Mùa is cashing in on the trend and has partnered with Heiwa Shuzo, an award-winning Japanese sake brewery, to deliver on quality. It also takes advantage of Vietnam’s huge supply of rice and is doing interesting things with local fruit infusions.
Vietnam is also building up an impressive roster of spirits, many of which are produced elsewhere in the country, mainly Hanoi, where Vietnam’s first whisky is distilled. HCMC-based premium gin Saigon Baigur, made from some of the country’s most fragrant botanicals including Buddha’s hand and lotus flower, debuted in 2018. The city’s distillers are also embracing a rise in the love of rum, with cane juice rum being popular – a nod to the French culture that still pervades.
Challenges and opportunities
The Covid-19 pandemic affected Vietnam’s economy, but the damage has been limited. When the pandemic broke in 2020, the country immediately shut its borders and was successful in suppressing the virus in the first year (the Government’s actions were globally recognised as world-leading). In 2021, the Delta variant took hold and the country only reopened to tourists in March last year.
In the first quarter of 2020, according to a report by McKinsey, Vietnam’s GDP growth was at its lowest level since 2010, although still in positive territory at 3.8%. With exports and tourism severely affected, domestic consumption has been (and is expected to continue to be) critical to hold the economy together. The first three months of last year were promising. According to the country’s General Statistics Office, revenue generated in the catering and accommodation services sector reached VND124.4tn (US$50.1m). The figure represents a year-on-year increase, although 1.8% lower than in the first quarter of 2019.
From a drinks perspective, the market in Vietnam is strong. for average per-capita alcohol consumption, the country currently ranks as second in South East Asia and third in Asia overall. According to the World Health Organization’s 2018 Global Report, average alcohol consumption per adult in Vietnam stood at 8.3 litres – 6.4 litres higher than the world average. Alcohol tax is also very low in Vietnam (around 30% in retail), so drinks are cheap.
It will be HCMC’s future development, however, that will bring the biggest opportunities in years to come. In the first eight months of 2022, the city topped Vietnam in foreign direct investment attraction, in the region of US$2.71bn. The IWSR has also projected that Vietnam will be in the top ten growth markets between 2019 and 2024.
The future, while immediately challenging, is looking exceedingly bright.
This article was initially published in the December/January issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
