With one of the highest beer consumption rates in the world, foreign brands are scrambling to get a slice of this lucrative market.

In a busy street-side restaurant in Ho Chi Minh City, a couple of friends lean back in their small plastic chairs. They’ve just finished dinner and the beer is flowing. In a country that has one of the highest beer consumption rates in the world, it’s a common sight.

“I always drink Bia Saigon,” one explains. “I’d never drink Bia Ha Noi. I’m from Saigon!”

The local beer market in Vietnam is parochial, to say the least. Ask Hanoians what they prefer to drink and you’d get the same answer, only reversed: Bia Ha Noi. In terms of regional patterns though, beer drinkers in the north have a greater appetite for a tipple than in the south. In 2009, the region consumed more than one billion litres of the golden nectar, accounting for more than 50% of the whole country’s consumption.

Defying domestic economic difficulties, last year proved a good one for breweries. Domestic beer consumption surged 8.7% in the first seven months against the same period in 2010 to about 1.7 billion litres. The big winners were Vietnamese beer producers Sabeco ( aka Saigon Beer– Alcohol–Beverage Joint Stock Corporation) and state-owned Habeco (Hanoi Beer Company), which accounted for more than 65% of the industry’s output between January and July. Sabeco sold 1.088 billion litres of its Saigon and other beers in 2010, a figure it expects to rise to two billion by 2015.

With an annual growth rate of 15%, foreign brands are scrambling to break their way into the lucrative market that consumed 2.7 billion litres in 2010.

Both Heineken and Tiger have breweries in the country and enjoy a good market presence in the premium sector – which accounts for 20% of the market – that’s expanded from exclusive high-end brands to the tipple of choice for many of the nations’ growing army of middle-income earners. Heineken sold 200m litres in Vietnam in 2010, making it its third-largest market out of 170 worldwide behind the United States and France. The Dutch beer company projects Vietnam will jump to second place this year and could possibly steal top spot by 2015.

Meanwhile, after 18 years operating in the country, Danish Carlsberg has ambitious plans to become the leading brewery group in Vietnam. A joint venture between Carlsberg and Habeco, the second-biggest brewery in the country, and other investments in Southeast Asia Brewery and Hue Brewery are expected to create a firm foothold in the country for the company that had an annual growth rate in beers sales of about 20%.

“Vietnam’s economy is growing stronger, and despite recent macro-economic challenges such as high inflation and devaluation of the Vietnamese dong, we are confident the economy will continue to expand in the short as well as in the long term,” Henrik Andersen, CEO of Carlsberg Indochina told the Danish Embassy in August last year.

It hasn’t been easy sailing for other international brands, however. Both Miller and Budweiser have struggled to gain a presence in the north of the country; with 75% of drinkers consuming local beer, market entry is tough.

Establishing brand presence is difficult in Vietnam for many reasons. The country’s north-south divide dictates different marketing strategies for the two cultures: Southerners are more receptive to trying new things such as foreign beer while their northern counterparts are traditionally more conservative, preferring to stick to what they know. The catch? Drinkers in the south have little brand loyalty and are easily swayed by multiple promotions whilst Hanoians, once won over, exude great brand loyalty. Thus planning marketing strategies can be difficult.

“When you launch, it’s very easy to reach a peak but very hard to stay there,” said Xavier Codron, who worked on the launch of Budweiser, which has experienced distribution problems.

US brewer Molson Coors’s first attempt to sell Coors Light Beer in Vietnam in 2006 failed. In 2010, it paired up with a new partner and returned, hoping its second foray would be more successful.

“Robust macroeconomic fundamentals, a hugely attractive demographic profile and a rapid inflow of sector investment combine to make this a highly dynamic market,” according to an All Business report issued last year.

Codron agrees. He said Vietnam has “huge potential. There is room for everybody. In the next ten years, 17 million people will enter the market”. ϒ