Last updated November 25th, 2018.
Heineken, one of the world’s largest brewing companies, is back in the Burmese market 20 years after its first attempt. The country’s former military rulers condemned and sanctioned them.
Now they’re challenged to expand into a market with intense competition but incredible potential (or so they say).
They’re also racing with competitor Carlsberg. Being the third and fourth largest brewers in the world by sales respectively, the fight is intense.
Heineken opened a manufacturing site last Sunday. This emphasizes tension as Carlsberg opened its own site just 2 months earlier. Brewers around the world have their eyes on Myanmar as it turns from a no-go zone into a coveted new market.
Roland Primez, Heineken’s president for Asia Pacific, said it’s very clear there’s huge potential for growth in the Myanmar beer industry. He wasn’t surprised by all the international players looking at the market.
Myanmar is attractive because of its youthful population. As both companies’ sales slag in European markets, global expansion is now more important for Heineken and Carlsberg than ever.
A nation of more than 50 million people and rising fast, Myanmar’s alcoholic beverage sector will be huge.
Competition Fierce in Myanmar Beer Industry
However, the two European brewers also face big challenges which won’t be easy to overcome.
“Breaking into a market in which the incumbent is a state-owned monopoly is difficult and can be expensive,” says Javier Gonzalez Lastra, an analyst at Berenberg.
“Heineken should prepare to make losses initially to make money over the long term, because Myanmar has huge growth potential.”
Indeed, Myanmar Brewery has a very strong presence in the market with a market share of around 80%. It now manufactures at the site Heineken left behind during its earlier tenure. It’s 45% owned by state investment firm Union of Myanmar Economic Holdings.
The locals’ consumption habits will also prove a challenge. Heineken estimates the average Burmese person only drinks 3 liters of beer annually. This isn’t even a 10th of the figure in Vietnam.
Heineken’s expects this habit will change though. Their brewery sites near Yangon have the capacity to produce almost 2 liters per person for each of the country’s more than 53 million people.
Carlsberg and Heineken have both shifted their focus from Eastern Europe to Asia. They operate through joint ventures with local partners.
Given that locals earn just a few dollars a day and local beers cost 50 cents on average, Heineken and Carlsberg’s ambitious plans will pay off in 3 to 6 years. They believe the long term prospects are worth the wait.
Competition in the Myanmar beer industry looks tough, but battling in Asia is nothing new to European brewers. Heineken had problems winning control over Asia Pacific Breweries in the past.
Likewise, Carlsberg’s joint venture in Thailand with ThaiBev ended acrimoniously in 2005.
“It’s not the first time for us that we face this kind of leading company and competitors,” says Heineken’s Mr Pirmez. “It will be tough – but fair.”
InvestAsian will continue keeping an eye on the Myanmar beer industry, along with other sectors in this rapidly growing frontier market.
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