Brewing is an interesting industry. Despite spendings on beer is deemed discretionary, the consumption of beer even enjoyed a decent growth of 0.1% in 2009, irrespective of weak economy after the global crisis. The returns of this industry are so attractive that encourage horizontal M&As to gain more power to consumers. On the other hand, after consolidation, the hefty demand for malt and hops then concentrates to a small number of brewers, rendering them the power of monopsony. Those are exact controversies around the recent largest M&A in the brewing industry: the No. 1 Brewer AB InBev acquired the 2nd largest one SABMiller (SABMiller had to spin off all its MillerCoors holdings in the U.S before the deal could be processed)

According to many researches, the elasticity of beer (and other alcohol in general) is really low and it is one of the critical basis for governments to increase excise tax on alcohol consumption. In fact, in a mature market like U.S. – the 2nd largest beer market, consumers are willing to pay higher price for premium and unique craft beers. In 2017, while total beer volume sales in the U.S. declined by 1.2%, craft beer still fared well with 5.0% growth. Now the problem for brewers is not how to stimulate the demand (the global thirst for beer seems to never be satisfied) but how to serve their customers.


The breakdown below although is not precise, it should give us a general sense of perspective how a bottle of 330ml of beer costs. Let’s agree on some definition:

a) Ingredients are all main inputs needed to produce beer like malt, hops, yeast, water.

b) Brewer’s margin is gross margin. Brewer then has to cover more expenses, such as operating expenses (SG&A), financing costs, corporate income tax (if any).

c) Likewise, distributors’ margin is gross margin also, before expenditures on transportation, storages, etc.

d) We should not cover VAT here because it is the same for all products. Instead, we’ll look at excise tax.

Here is the rough calculation based on Philipines’ San Miguel:

Component Contribution to retail price at the supermarket
Ingredients (Malt, hops, water, etc.) 9%
Direct packaging, manpower, D&A
Brewer’s margin 36%
Distributors and Retails’ margin 25%
Excise tax 30%
Price at supermarket (excluding VAT) 100%

Interestingly, material costs are not as substantial as other components in defining retail price of beer product. Many analyst reports and independent articles suggest that ingredient costs make up less than 10% of retail supermarket price. That means, changes in ingredients of malt, hops, yeasts will hurt brewers more than it does to consumers. Even when brewers successfully transfer it to consumers, it will not affect retail price as much as other factors below.

Distributors and retailers’ margin is estimated to add 25% costs to retail price, much higher than the value of materials used in brewing beer. So, it is more cost efficient for international brewers to set up manufacturing facilities where their products are consumed.

It is excise tax to make beer way more expensive when adding another 30% costs for every bottle of beer consumed. Thanks to low elasticity of beer consumption, many Government has been gradually increasing excise tax on this product. And for the reason of discouraging beer consumption, some countries like Indonesia, Malaysia impose a very high excise tax, especially ones with high ABV.

Back to brewers, in compensation for production and marketing effort, they require a high gross margin of up to 30-50%, which then makes up 25-30% retail price. In some cases, brewers even ask for 60-70% gross margin to cover high financing costs after aggressive M&As.

So, in breaking down costs of beer, we can expect the further price increase in the future following M&As and accelerating excise tax.


According to Kirin Holding report, in 2016, global beer consumption stood at 186.89bn liters, down 0.6% compared to previous year (down 2 years in a row). However, the growth is way more positive in Southeast Asia Region. During the period, the volume consumption saw growth in Vietnam (+7.4%; 2.2% market share), Philippines (+16.0%; 1.0% market share), Thailand (+1.5%, 1.0% market share), and Myanmar (+8.3%, minor share). Other spotlights can be seen in Africa region (+2.6%, 7.2% market share); Mexico (+8.4%, 4.3% market share), and India (+9.9%, 1.4% market share).

In 2010-2016 period, while global beer consumption slightly increased from 181.88bn liters to 186.89bn liters,  Vietnam, India and Mexico enjoyed CAGR of 9.1%, 7.4% and 3.7% respectively. The 3 countries were in top 15 largest markets, together accounting for 7.9% global market shares.

In the opposite direction, Ukraine and Venezuela were the worst performers. Total beer consumption in Ukraine dropped from 2.8bn liters (2010) to only 1.74bn liters (2016), equivalent to CAGR of -7.7%. Venezuela, following the crisis and hyperinflation, once the 15th largest market with 2.27bn liters consumed (2010), now no longer made it to top 25 list (below the Philippines which consumed 1.62bn liters in 2016).

By far, Asia is the largest beer market, consuming 33.9% global volume, followed by Europe (26%), Latin America (17%) and North America (14.1%). However, in Europe and North America, the demand for macrobrewing beers has come to maturity state. Instead, the momentum for such markets comes from unique craft beers. In order to enjoy sustainable organic growth, brewers may find opportunities in Africa (set aside mentioned Vietnam, India and Mexico), which enjoyed CAGR of 5% in 2010-2016 period.

Global 2016 beer market share by regions




Vietnam is the largest brew market in Southeast Asia and the 3rd largest one in Asia, following China and Japan. The market of 4.1 bn litres of beer (2016) is dominated by Sabeco in the South, Huda in the Central, Habeco in the North and Heineken for premium brands. While Sabeco and Habeco were wholly established by Vietnam, Heineken VN and Huda were once the joint-ventures of Vietnam-Heineken, Vietnam-Carlsberg respectively. However, within few years of M&As, all Sabeco, Heineken VN and Huda are now the subsidiaries of foreign brewery giants. Below is the summary of ownership of VN’s 4 largest breweries:

Vietnam Brewery

In low budget segment, Sabeco, Habeco and Huda gained its position thanks to geography advantages and their long-time influence on consumer’s taste. For premium segment, it’s one-side game of Heineken Vietnam with Tiger (40% market share) and Heineken (27% market share) brands.

Armed with 26 factories across the country and more than 32k retail-points, Sabeco has upper hands compared to other rivals in the same category. Besides, Sabeco can even move up to premium segment to gain further market-share. In fact, VN’s market leader has gained certain market recognition with its premium product of Saigon Special. But in order to compete with Heineken, Sabeco has a long way to go. We have to wait for Thai Beverage to write further story for Sabeco in the future.

And for Heineken, the company is really successful with Tiger brands in Asia market, especially SEA region. Coming to Vietnam in 1991, Heineken has survived the competition with San Miguel and Carlsberg in 1990s, early 2000s. Now Tiger beer has been around long enough to imprint its taste to consumer’s memory and it’s really hard for new rivals to change customers’ choice. In addition to that, just like Saigon, 333 beers, customers now can easily buy Tiger beer in every store they can reach. Due to consumer’s stickiness to their favorite beers, the chance to beat Heineken is to target younger customers who are more willing to taste new beers. However, the failure of Sapporo in  Vietnam market recently demonstrated that it’s always easier said than done.


Consuming 1.9bn litres of beer in 2016, Thailand made it to top 20 most-beer-consuming countries at 19th spot. Unlike Vietnam, the beer market in Thailand is dominated by 2 companies, accounting for more than 91% shares just by 3 brands, namely Leo (46%), Chang Classic (39%) and Singha (6%).

Leo and Shigha are low-budget brands owned by Boon Rawd Brewery, a private company. Interestingly,  Shingha was No.1 Thai beer in more than 6 decades since 1933, before it was dethroned by Chang in 1998.

Chang beer is also a low-budget brand owned by Thai Beverage who listed in Singapore Stock Exchange. After 20 years on the top since surpassing Singha, Chang then lost its position to Boon Rawd’s Leo in 2009.

Actually, beer is not the segment generating most revenue for Thai Beverage but spirit, which contributes more than 60% sales to the company. In focusing on consolidating its position in spirit market (claimed to gain 90% shares as of 2017), Thai Beverage partly lost track of beer business. Thai Beverage began “Vision 2020” strategy in 2014, when its beer sales hit the lowest point since listing, losing market share from 60% in 2004 to only 32%. Following the strategy, Thai Beverage re-branded Chang beer, including lowering ABV (from 6.4% to 5.5%) and changing its look to eye-catching green bottle in 2015. Thai Beverage was immediately successful with its strategy, enjoying 18% growth in beer sales and gaining 4% market shares from Boon Ward in the same year. With this pace, the road to be back on the top of Change Classic is really near.

If 91% market is for Leo, Chang and Singha, the remaining 9% shares are for other brands, including premium beers of Heineken, Asahi, San Miguel, Tiger, etc. That means, the chance is still open for higher segment.


The history of Philippines’ Brewing industry began in 1890 when  “La Fabrica de Cerveza de San Miguel” (now San Miguel Corporation – SMC) was established in Manila by Spanish businessman under a grant from Spain. In 2016, San Miguel Brewery (subsidiary of SMC) sold 1.73bn litres of beer in the Philippines, accounting for more than 93% market share.  The other brewer in the Philippines is Asia Brewery.

Phil Brewery 1
San Miguel Brewery SMB is indisputably the market leader in the Philippines, claiming to hold 90% market share since 2011. Thanks to election campaign, SMB enjoyed 16% volume growth in 2016. And for the first time, domestic sales of SMB reached more than 200 cases, equivalent to 1.7bn litres of beer, increasing market share domination to 93%. Beside its operation in the Philippines, San Miguel has its presence in Thailand, Vietnam, Indonesia, Hong Kong and China. International sales contributed 12% to total volume sales of San Miguel in 2016, a sharp decline from 17% contribution in 2014.

Compared to San Miguel Brewery, Asia Brewery is a much younger company established in 1982. Asia Brewery is notable for its brands of Beer Na Beer, Colt 45 and Brew Kettle. Recently, Asia Brewery took part in 50%-50% joint-venture with Heineken to establish AB Heineken Philippines, Inc. Asia Brewery then transferred its alcoholic beverage business to this joint-venture in Nov 2016. The new structure should be as followed:

Phil Brewery 2

After the deal, Heineken is one step further to conquer Asia Pacific market. Just like in Vietnam, we can expect Heineken to increase its share in AB HPI in the future if Asia Brewery wishes to sell its part.


Despite being the 4th most populous country in the world, Indonesia has a small market for beer due to alcohol restriction by the Muslim religion. In 2014, Indonesia even saw a sharp decline in beer consumption after 18% hike in excise tax. The catalysts for organic growth in this market is migration of non-Muslim citizens and tourism attraction. Low base of beer consumption per capita is also a catalyst.

Brewing business in Indonesia encounters many regulatory obstacles. The new excise tax regime in 2014 imposed heavily on beer with ABV higher than 5%, up to INR 33,000/litre, 2.5 times higher than one with ABV less than 5%. To further discourage beer consuming, in 2015, Indonesia banned selling beer in convenient stores.

According to Euromornitor, Multi Bintang, is the largest brewer in Indonesia, selling 140mn litres in 2016, accounting for 65% market share. Other notable market players in Indonesia are PT Bali Hai, a private company and PT. Delta Djakarta, a San Miguel Brewery’s subsidiary.

Indo Brewery

The history of Multi Bintang in Indonesia dated back to 1931, characterized by the long battle between Heineken and Government to take control of Bintang. Until 2013, Heineken was already the largest shareholders of Bintang following the ownership of Asia Pacific Brewery. And as of 2017, Heineken increased its holding at Multi Bintang up to 81.78%. Multi Bintang is famous for its Bintang beer, a localized version of Heineken beer. And in order to adapt to the Indonesian business environment, Multi Bintang continuously introduces new products of low ABV to consumers, even a kind of beer with 0% ABV.

For PT. Delta Djakarta, the company is estimated to hold 10-15% market share based on reported revenue. The brewer is notable for its Anker beer and Stout. As a subsidiary of San Miguel Brewery, PT. Delta Djakarta also sells San Miguel beer.

Despite being strictly regulated, brewing business in Indonesia is highly profitable (Multi Bintang can even enjoy 40-50% ROA and manage 80-90% dividend payout ratio). Euromornitor expected beer consumption in Indonesia could grow 8%/year in 2016-2021.


Just like in Indonesia market, Malaysia’s Government imposes high excise tax on beer and other alcohol to discourage their consumption.

The market is dominated by Heineken Malaysia and Carlsberg Malaysia. In 2017, Heineken Malaysia posted RM 1.93bn revenue compared to Carlsberg Malaysia’s RM 1.77bn. Guinness, Tiger, Carlsberg and Heineken are the top 4 famous beers in this market.

Malay Brewery

Heineken Malaysia Berhad was formerly Guinness Malaysia Berhad (GMB), a Malaysian brewer established in 1964. In 1989, following an M&A, Guinness Malaysia Berhad changed its name to Guinness Anchor Berhad (GAB) and held it until 2016 when Heineken officially held 51% ownership of  GAB.

Carlsberg Malaysia Berhad was established in 1969, few years later than GMB. Carlsberg claimed to gain 45% market share in Malaysia.

Both Heineken and Carlsberg has done terrifically in Malaysia in terms of financial performance thanks to well streamlined operation after decades of doing business and building brand-names here. In 2017, the 2 market leaders enjoyed high ROE of more than 70%. However, volume growth in Malaysia is expected to be as low as 2-3%/year due to stricter regulations. Effective from Dec 2017, minimum age for alcohol consumption increased from 18 to 21. The catalysts for Malaysia beer market is tourism and introducing more premium products.


So far, we have looked overall business context of 5 largest markets in Southeast Asia and some findings to be noted:

  • Beer (and alcohol) is a great business for brewers thanks to the stickiness of consumers for their favorite beers and the low elasticity of beer consumption.
  • Beer price is expected to increase in most markets due to increasing excise tax levied on this product.
  • The winning brand-names in each country are usually the first ones introduced in the market. Those beers have imprinted its taste into consumers’ mind long enough and are priced to be affordable to vast consumers.
  • International brewers, in order to find its position in emerging markets should either be the early birds or step-by-step partner with the leading domestic players to take advantage of their distribution channel.





    1. Hi Tin,

      Thanks for your comments . Up to this point, I’ve just pointed out brewing is a great business. My findings so far are more related to business development. I haven’t delved into details of financial performance of each brewer yet. So, it’s hard to give specific recommendation at the moment. I surely will look at some and produce reports on them later, if any :D.

      In general, I think we’ll do fine over time investing in brewers’ stocks in emerging markets considering potential growth here and hefty cash-flow generated by this business. Anyway, it’s premature to conclude now. Let’s wait for further analyses.

      Thanks once again.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.