Abstract

Saigon Beer – Alcohol – Beverage Corporation (Sabeco) has been known as one of the most
ancient corporation of Vietnam. With that history, Sabeco achieves many awards and has a
certain position in customers’ life. Therefore, this report is going to mention some important and
highlight information of Sabeco including background, history, vision, mision, core values,
development rate, financial statement, market share, industry information, competitors, company
portfolio. Moreover, the most crucial and interesting part of this report are problems that Sabeco
has been facing with and how Sabeco solve those problems.

General Information

Company name: SAIGON BEER – ALCOHOL – BEVERAGE CORPORATION

Trading name: SAIGON BEER – ALCOHOL – BEVERAGE CORPORATION (SABECO)

The corporation's brand consists of a dragon and the word SABECO as shown below:

The product brand name consists of the word "BIA" written on the top and the word "SAIGON"
under the printed letters as shown below:
Business Registration Number: 0300583659

Charter capital: VND 6,412,811,860,000

Address: Headquarters: Số 6, Hai Bà Trưng, Ben Nghe Ward, District 1, HCMC

Transaction Office: 72 Le Thanh Ton, Ben Nghe Ward, District 1, HCMC

Tel: (08) 3829 4083 - Fax: (08) 3829 6856

Website: www.sabeco.com.vn

www.biasaigon.com.vn

Email: sabeco@sabeco.com.vn

Stock information:

Listed

Sabeco is approved by the Ho Chi Minh Stock Exchange listed from November 25, 2016
according to Decision No. 470 / QDSGDHCM dated November 25, 2016

Type of stock: Common stock

Stock code: SAB

Face value: VND 278, 000 / share

Number of shares: 641,281,186 shares

First trading date: December 6, 2016

History of Sabeco

Vietnamese consumers are familiar with the brand Saigon Beer (or Bia Saigon) of Saigon Beer-
Alcohol-Beverage Corporation (Sabeco). In 2017, Saigon Beer has been over 142-year original
history, 40-year brand building and development. Since that 142 milestone, the yellow beer
bubbles flow has continuously kept up the future way, always made Vietnamese proud of their
products.     

The unique taste of Saigon Beer is the inspiring taste combined with the spirit of Saigonese’s
generosity and the rich of the Southern land, making it an indispensable part of everyday life.
With 2 bottles of 610 ml Larue bottle and 330 ml bottle of beer in the first takeover period. Until
now, Saigon beer has developed 8 types of products such as Saigon Lager 450 bottle, Saigon
Export Beer bottle, Saigon Special bottle, Saigon Lager 355 bottle, 333 Premium, 333 beer can,
Saigon Special can, Saigon Lager can.

From a small production of 21.5 million liters in 1977, after 39 years of development, by

2016, Saigon Beer has achieved 1.59 billion liters of output, striving to achieve 1.66 billion liters
til 2017.  Although the market has appeared many famous beer brands in the world, Saigon
Beer is still Vietnam's leading beer market in Vietnam, on the way to conquer the markets such
as Germany, the US, Japan, Netherlands and so on.

At every time recalling Saigon Beer’s history, the first memorable image, the first thinking that
is reminded was Saigon Beer - Nguyen Chi Thanh Factory. Going back in time, we will learn the
reason why Saigon Beer - Nguyen Chi Thanh Factory was used to be considered as "the historic
cradle of Saigon Beer Company".

No one knows this started from when but the name "Sai Gon Nguyen Chi Thanh" already
became as familiar as the way we often call our relatives’ names. Saigon Beer – Nguyen Chi
Thanh factory at first was a little and an old French workshop since 1875 belonged to BGI
Brewery. After the revolution of Southern Vietnam, the factory was managed by the Southern
Brewery Company and renamed itself as BSG Factory in 1977 and then officially named as
Saigon Beer Company in 1993.
One of the initial things that create the speciality of this factory is its prime location. Saigon Beer
– Nguyen Chi Thanh Brewery is one of the very few factories located in the heart of Saigon
ancient city which has been existing until now when Saigon becomes a bustling Ho Chi Minh
City, the most modern city in this country. If you walk around the city center, it is easy to find
out the French colonial architectures; however, the architecture of a factory is not many, and
Saigon Beer – Nguyen Chi Thanh factory is one of the rare vestiges. From the outside, the
factory still retains its own ancient architecture style on walls, gates, reliefs, door frames,
handrails made by bronze etc. which are all designed sophisticatedly and handled durably. 

There is an interesting thing that after many changes year-by-year the gate of Saigon Beer
Company has been still being maintained and utilized until today - like a symbol of the factory
particularly and as a historical witness of Saigon Beer generally - it is like the illustration of Ben
Thanh market at the ancient and modern Saigon! Behind that door, on that land, those are value
factors that built up the strong foundation for Saigon Beer. Gradually, from that place, the Saigon
Beer’s products day-by-day have been formed and touched the heart of consumers gently,
elegantly but also firmly like its own name.

Business lines and operating location

Brand position

Bia Saigon is the most long-standing brand, leading the beer industry in Vietnam market with
143 years of history and 43 years of brand building and development. Saigon Beer products,
which carry traditional values and represent the history and people of Vietnam, are known and
supported by many generations of consumer. Products of SABECO have been gradually winning
over millions of beer drinkers in the world and have been available in more than 30 countries
around the world with increasing popularity.

Production System

With 25 breweries and 1 brewery under construction, SABECO is easy to access and bring
products to consumers in the fastest and most efficient manner. The production system is
considered a fundamental factor and a competitive advantage compared to competitors. Saigon
Beer breweries are equipped with synchronous machinery and equipment with modern
production technology, imported from manufacturers of specialized equipment for beer industry
in the world such as Krones AG and KHS, integrated with high-automation production
management system, which helps reduce energy consumption and support effective production
management. Most of Saigon Beer breweries are all certified to ISO 9001:2015 (Quality
Management System), ISO 14001:2015 (Environmental Management System), ISO 22000:2005
(Food Safety Management System) and HACCP (Hazard analysis and critical point control
system during the production).

Technology and Product Quality

Define technology and technique as the fundamental factor in its competitive and development
strategy. SABECO promulgates and applies a closed and highly automated production process,
managed by a technical team including highly experienced technological and equipment
engineers and Brew Masters who are trained to improve their skills in leading brewing countries
such as Germany and USA. Besides, SABECO also issues and commits the highest quality
policy for all its products, managed by the quality management system with modern testing
equipment and strict monitoring processes from raw materials (under the standards issued by
SABECO, imported from reputable and major suppliers in the world and regularly updated as
regulated) to the finished products before reaching consumers.

Distribution System

SABECO has a widely spread distribution around the world. Nowadays, SABECO’s products
can be found in Africa (Equatorial Guinea, Gabon, Cameroon, Ghana, Republic of Congo,
Benin, Liberia, Sierra Leone), The Americas (USA, Canada, Panama, Cuba), Asian (Laos,
China, Taiwan, Japan, Hong Kong, South Korea, Thailand, Singapore, Bahrain, Israel), Europe
(France, the Netherlands, the UK, Sweden, Switzerland, Russia, Denmark, Spain, Czech
Republic, Austria, Italy, Germany, Romania), and The Oceania (Australia, New Zealand,
Kiribati). Moreover, in home country, SABECO has 25 subsidiaries and 19 associates and joint
ventures.

Vision
SEBACO aims to develop itself to become the leading beverage group in Vietnam, having firm
foothold in regional and international market by 2025.

Mission

SEBACO wants to bring Vietnam beverage industry to a new height in the international market.
In order to do so, SEBACO aims to develop Vietnam beverage industry to World standards but
still appreciate Vietnamese cuisine culture. Moreover, SEBACO wants to advance the life
quality through the provision of high quality, safe and healthy beverage products and bring the
essential benefits to its shareholders, customers, partners, employees and society.

Core Values

1. Traditional brand: The superiority of a traditional brand is built and confirmed over time.
Customers have many choices and be well taken care of the services. SABECO has become a
“top of mind” in the hearts of customers.

2. Social Responsibility: The development of social responsibility is the tradition of SABECO.

We provide the society safe and useful products, and we always wish to share and take
responsibility for social work and environmental protection with practical action.

3. Cooperation for Mutual Benefits: We build "mutually beneficial" partnerships as the basis for
sustainable development. We develop appropriate policies for long cooperation to partner.

4. Sticking: Sticking to a friendly, sharing environment. Where people are empowered to learn,
create and contribute to the joy of success.

5. Continuous improvement: We are not satisfied with present and are always dreaming of rising,
learning, creating, and innovating to meet constantly changing needs. Continuous learning,
creativity and innovation is our style.

Financial statements and the market share of Sabeco

Market share

Beer is a subject of high special consumption tax in Vietnam, but it is also a potential market for
beer companies because beer consumption increases year by year. “Thanks to the fast food
culture and urban process, beer consumption in Vietnam is expected to reach the highest growth
rate in the period 2016-2021,” Euromonitor's report on the beer market Asia-Pacific region said.
Besides, based on the research done by Euromonitor International, Vietnam is the third largest
alcohol consumption market in Asia, behind only China and Japan. In addition, sales of beer in
Vietnam increased steadily over the years; especially 6.6% is the number for 6 consecutive years,
from 2010 to 2018, far exceeding the global growth of 0.2%. While many countries around the
world, the beer and liquor industry is in a saturated state; however, in the country where people
favor this drink as Vietnam, the consumption increases with each year and is considered to be
hard to show signs of decline in the coming time.

A report by Ban Viet Securities Joint Stock Company (VCSC) shows that more than 90% of
Vietnam's beer market share is in the hands of four major producers Sabeco, Habeco, Heineken
and Carlsberg. While most international brands joining later have not found a foothold in this
fierce competitive marketplace as Sapporo, Budweiser, etc.

Currently, Sabeco owns 24 breweries, of which 20 are in operation and 4 are expected to operate
in the near future, reaching an annual capacity of 1.8 billion liters of beer. Sabeco's beer
consumption in 2015 was 1.5 billion liters, accounting for 40% of the market share. Sabeco
became the "giant" in the market thanks to the establishment and consolidation of many
breweries, especially in the South. The extensive factory network is a competitive advantage that
helps Sabeco distribute its products more effectively than competitors. Sabeco has two iconic
and traditional beer brands in Vietnam, "Saigon Beer" and "333". In addition, Sabeco is
promoting the Saigon Special brand, which is also known as short Saigon because of its low
bottle design. Furthermore, Sabeco is fighting for Habeco's market share in the North. In the
North only, Sabeco's market share increased from 10% in 2014 to 15.5% in the first 6 months of
2016, while Habeco also decreased its market share from 55% to 50%. In the next two-year
period, the market share of Sabeco continued to increase slightly by 0.9%, from 40% to 40,9%,
in 2015 and 2016. In 2018, Sabeco is still leading the market share which its number accounts
43% of the beer consumption market. Thus, taking the advantage of becoming a leader in its
brewing industry, Sabeco has made huge amount of profits.

Financial statistics

According to website cophieu68.com, which is a prestigious website special in analyzing

statistics of securities data, during the last 5 years from 2014 to 2018, the net profit of Sabeco has
a tendency to grow dramatically. According to a report by Ban Viet Securities Company VCSC,
Vietnam's beer industry recorded a compound growth of 5.7% in the past 5 years and a forecast
of 5% / year growth until 2022.
At the end of the year 2017, Thai billionaire Charoen Sirivadhanabhakdi poured nearly five
billion US dollars, taking control of Sabeco, Vietnam's largest beer company, stirring up the
regional market. The acquisition of a beer brand with a thickness from 1875 attracted attention in
Vietnamese and international media not only because of its high value but also changing the
market share of beer industry in Southeast Asia. Therefore, Vietnam's largest M&A (Mergers
and Acquisitions) deal in history has also become a highlight of the M&A wave aimed at
businesses operating in Vietnam such as Big C, Metro Cash & Carry. However, different from
the peaceful move when the Thai wave took over many domestic companies, Sabeco's new boss,
who stood at the 87th position according to Forbes' list of 2019 world billionaires, seems quite
decisive when restructuring the company whereas Sabeco has just been listed in the Forbes
Vietnam's 50 best listed companies in 2019. After a year of changing hands, in 2018, Sabeco
revenue reached nearly 36 trillion dong, up more than 5% compared to the previous year. On the
contrary, the company's EAT (Earnings After Tax) is 4,403 billion dong, down by 11%. The
Sabeco executive board explained in the recent general meeting of shareholders that the price of
raw materials increased significantly and the special consumption tax changed. The 144-year-old
beer company is still at the top position of the domestic beer market with more than 40% of the
beer market share in the country.

At the end of the trading session on August 13, Sabeco's (SAB) price increased by 0.95% to
VND 277,000 / share. In the last 3 months, SAB stock price has increased by 8.89% and
increased to 31.45% after 52 weeks while the VN-Index, which shows the fluctuation in stock
price, has dropped significantly. The highest price in the past 52 weeks of SAB reached 289,000
VND / share as of July 12, 2019. According to experts, in general, Sabeco's share price has
recovered significantly in 2019 thanks to the company's restructuring policy. Although in the
first year (2018), when Thai billionaire took over and operated the Corporation, Sabeco's EAT
(Earnings After Tax) decreased in comparison to the previous period, but by 2019, Sabeco's
business situation has improved. In the first three months of 2019, Saigon Beer - Alcohol -
Beverage Joint Stock Company (Sabeco) earned VND 9,337 billion in revenue, an increase of
19% over the same period in 2018 and is the highest level in the first quarter of the year of this
business. The reason Sabeco explained was due to the increase in sales volume and the increase
in beer price in 2019. The company recorded a gross profit of VND 2,191 billion. Positive signs
from ThaiBev's restructuring in Sabeco are clearly shown in the business results during the first 6
months of 2019 with positive growth. Specifically, Sabeco achieved a net revenue of VND
18,425 billion, an increase of 8.5% over the same period in 2018 and an after-tax profit of VND
2,820 billion, an increase of 15.2%. Initially, Sabeco has set the target of VND 38,871 billion in
net revenue, up 7.52% compared to 2018 and with this result, Sabeco has completed 47.4% of
the revenue plan and 59.8% of the profit plan for the whole year 2019.
Industry

In the past few years, Vietnam’s beers industry is asserted to have an outstanding growth. Based
on the numbers given by Hanoitimes, Vietnam ranked top in the Southeast Asia and third in Asia
in terms of beer volume consumed in 2017, only behind Japan and China, proving to be a
promising land for both local and foreign brewers, Zing News reported.

In detail, according to Vietnam Briefing papers, they mentions that according to the Ministry of
Industry and Trade, Vietnam has consumed 3.92 billion liters of alcoholic beverages in 2016 and
was ranked 16th amongst the largest alcoholic beverage consuming countries in the world. Based
on Hanoitimes, in 2017, around 305 million liters of spirits and nearly 4.1 billion liters of beer
were consumed, making an average consumption of 42 liters of beer per capita. As mentioned by
BrandsVietnam, Vietnamese consumers consumes 4,2 billion liters of beer in 2018, increased
5% compared to 2017. Despite the fact that our income per head still stays on the low rate
compared to Thailand or Singapore, our consumption ranks top one in the South East Asia
market. Further in the future, big beer companies in Vietnam are looking forwarding to double or
triple this number in the next 10 years’ future.

Thanks to Vietnamese Investment Reviews, we have a better view on the total consumption
beers in Vietnam and how the “beers cake” in shared among big and small players.

On the other hands, beside amazing numbers and good income, Vietnam’s beers industry still are
now fighting some of the problems that can cause big impact on this industry. The Vietnamese
beer market is now almost exclusively in the hands of foreign giants. Vietnamese brands are
gradually disappearing. In many cases, after establishing a joint venture with a domestic
company, the foreign partner bought out its domestic partner, turning the entity into a foreign
business. Sapporo is a prime example for this. After buying 29 per cent stake of Vinataba at
Sapporo Vietnam Ltd. in 2015, the company officially became a wholly-owned subsidiary of
Sapporo International Inc. (Sapporo Holdings Ltd. – Japan). The company is actively investing
in building its brand and currently ranks third in Ho Chi Minh City after Sabeco and Heineken,
as reported by CafeF. According to Euromonitor, the Japanese brewery owned about 1.7 per cent
of the domestic beer market in 2017. Carlsberg has been following the same strategy in Vietnam.
It entered the market through a joint venture with Vietnamese partners to establish Hue Brewery
Ltd., the owner of the Huda trademark since 1994. However, after nearly two decades, Carlsberg
officially paid VND1.875 trillion ($81.52 million) in the end of 2011 to buy 50 per cent of the
shares from the Thua Thien-Hue People’s Committee, thereby acquiring 100 per cent at Hue
Huda beer.

Last but not least is the consumer behavior toward beers in Vietnam, based on Vietnamese
Investment Reviews, we have a wider view on this area. As can be concluded from the graph
below, it is easy to assert that by living on each different area, it generates different drinking
style and consumption. This is also one of the key research techniques for big players to studying
further more with a view to maximize the customers’ satisfaction.

Competitors
This is a big market; it is undoubted to say that this market will be shared among giant
companies. Based on Vnbrewers, there are 6 key players in this game, first and foremost is
Sabeco, then come to Habeco, Heineken, Carlsberg, Sapporo and then Masan. Again based on
Vietnamese Investment Review and Baomoi and BaoViet Securities, we have three following
graph to measure the competition in beers industry in Vietnam.
As seen in the graph, we can see that this market is divided significantly. The larger share always
includes Habeco, Sabeco. Because these brands aim at the people at the average income and their
prices consider much easier to approach.

Based on VIR and its competitor’s graph, Heineken’s major beer brands include Heineken,
Tiger, Larue, and Amstel, which owned nearly 22 per cent of the Vietnamese beer market in
2017. In particular, Heineken holds the high-end segment in hand with about 67 per cent of the
market share, 40 per cent of which belongs to the Tiger brand and 27 per cent to the Heineken
brand. Being number one in the high-end segment helps Heineken earn billions of dollars in
annual profit, although the firm is not the largest beer company in Vietnam. Currently the
company owns five factories, three of which are in the south and two in central Vietnam, which
are the two key markets of the company. Danish brewery Carlsberg, after taking over Hue
Brewery Ltd., holds the fourth largest market share. According to the company, each of its
customers in Vietnam consume up to 34.5 litres beer per year. Habeco is currently the third in
the market. Carlsberg's ownership at Habeco amounts to nearly 4 per cent of the Vietnamese beer
market. Especially, since becoming a strategic shareholder at Habeco, the firm has repeatedly
expressed its desire to raise its ownership to over 51 per cent. The company also said to be
working with the Ministry of Industry and Trade to negotiate the deal, according to cafeF.

Company Portfolio

Up to date, SABECO has total six products, which five of those are from Beers section and the
only soft drink from beverage section called
“Sa xi Chuong Duong”.

First and foremost comes to the “Sai Gon

Gold”, based on Sabeco. Saigon Gold is the
finest and most exquisite product of Saigon
Beer, created by the world's leading
technology experts, along with a
traditionally production process by brewing
masters with over 142 years experience of Sai Gon Beer. Saigon
Gold has a rich aroma and the freshness of the special strains of
hops, to create a unique flavor. Beside the carefully in selecting ingredients, the element that
makes the delicate taste of Saigon Gold beer is the strict preservation of the purified brewed
yeast that has a distinct characteristic.

The second is more well-known called “Saigon Special”, based on Sabeco, Saigon Special Beer
with 100% Malt content (no rice) is produced with the most advanced & modern technology,
using the traditional long fermentation process that creates its delicious taste and differentiates it
from all the other beers in the market. Saigon Special is a unique kind of beer adressing young,
dynamic and successful consumers.
The third one called with a familiar name “333 Export”, based on
Sabeco, the 333 brand is the undisputed leader in the Vietnamese
canned beer market. Furthermore, 333 canned beer is the
bestselling Vietnamese beer brand in the world, exported to 18
countries. The bottled 333 Beer Premium has been available since
June 2010.

The fourth one called “Saigon Export”, based on Sabeco, Saigon Export
has been the most popular beer in Vietnam for many years. Its character
embodies the Saigonese spirit –charming and traditional, natural but with
a liberal flavor. A strong brown bottle wrapped in a luxurious metallic
label delivers an unforgettable experience.

The final one from beers called “Saigon Lager”, based on Sabeco,
having been available on the market since 1992; Saigon Lager is
the preferred beer for millions of Vietnamese beer lovers. Produced
through the world's most advanced modern technology system and
supervised by skillful brewers, Saigon Lager delivers fresh,
charming and pure Vietnamese taste.

The first and only not beers that Sabeco currently serving called “Saxi Chuong Duong”.

Problems and Solutions

Material risks
Malt and houblon are agricultural products directly affected by the weather and the crop.
Particularly, the hot dry weather in Europe in Quarter 3 of 2017 affected the quantity of houblon
while Australian malt crop yields decreased by 39% compared to the previous crop. Aluminum
prices increased due to China’s policy of suspending production plants that pollute the
environment, resulting in a significant reduction in aluminum production. In addition, the
suspension of polluting factories forced customers to buy raw materials from the countries other
than China, which increased the prices. The main raw materials account for a large proportion in
the structure of product prices and depend on the supply of foreign markets. Due to the increase
in USD exchange rate, the production costs have increased.

To limit the negative impacts of fluctuating material prices, SABECO has actively sought
solutions to reduce material costs such as coordinating with companies in the system to conduct
the joint procurement and prioritize to buy the maximum number from common suppliers
between SABECO and companies in the system to achieve good prices, ensure the quality
stability and minimize the risk of errors in the production and business process that incur costs.
Moreover, SABECO also test and put into use new packaging which would help save cost and
protect environment and try to diversify suppliers and find additional supply sources from other
regions to reduce cost and minimize risks from other factors.

Problems: SABECO VS HEINEKEN

Heineken is currently the beer company that holds the 2nd beer market share in Vietnam, just
behind Sabeco (Saigon Beer), though, Heineken focuses on the higher-end segment so it has a
better profit margin. The Dutch brewer in March launched a new version of its Heineken lager
and is expanding its reach into suburban and rural areas with its mid-tier Tiger brand and lower-
priced Larue and Bivina beers. The push outside its stronghold of cities in the south has been
driven by a doubling of Heineken’s Vietnam sales force over the past three years and takes aim
at territory commanded by Sabeco, a former state-owned brewer now controlled by ThaiBev.
“We aim for the No. 1 position, not only in profit but also in volume,” Heineken Vietnam
managing director Leo Evers told Reuters in an interview. Heineken, Vietnam’s No. 2 brewer,
declined to provide sales team numbers but said it had about 3,500 workers in the country.
Vietnam, Asia’s third-largest beer consumer after China and Japan, has seen beer volumes climb
by an average 6.6% for the last six years compared to an increase of just 0.2% for consumption
globally, according to market research firm Euromonitor International. That growth plus its
population of nearly 100 million and beer’s 95% share of alcohol consumption make it an
alluring market for brewers. Heineken’s Vietnam sales have jumped by double-digit percentages
in the past four years and Vietnam is the second whose second-largest source of profit after
Mexico. Analysts estimate Vietnam accounted for over 10% of the 3.87 billion euros ($4.3
billion) Heineken made in operating income before one-off items last year. Growth has been
mainly driven by Tiger, a popular Asian lager it acquired when it took full ownership of Asia
Pacific Breweries in 2012. Heineken’s overall market share has since risen to 31% from 20% in
2013, at the expense of smaller brewers in the country, according to data analytics firm Global
Data. Also seeking to shore up sales at the higher-end of the market, the Dutch brewer has
launched Heineken Silver, the first country-specific variant of its namesake beer since Heineken
Light was introduced in the United States in 2006. Designed for local palates, the new beer is
less bitter and has 4% alcohol content compared to 5% for standard Heineken. It is priced around
5% more than the standard version and both are sold at a premium of about 40% or more over
low-end beers. The company said it was too soon to say whether it might market Heineken Silver
outside Vietnam.

Solutions

Sabeco is in turn keen to forge into the mid-tier segment dominated by Tiger - a strategy it hopes
will help lift its market share toward a goal of 50% from 40% now. But the brewer acknowledges
it has work to do in differentiating its beers better. Its brands, which include Saigon Lager,
Saigon Export and 333 Export, are “all over the place”, Neo Gim Siong Bennett told Reuters.
One of three former Heineken executives brought in by ThaiBev, he became Sabeco’s general
director in August. Since ThaiBev took control, the Saigon beer brand has become a shirt
sponsor for English premier league soccer side Leicester City and the brewer has sought to ally
itself to Vietnam’s national soccer team, holding public screenings of matches including its final
victory in the Southeast Asian championship. It also organized a “Pride of Vietnam” gala with
soccer and pop stars and held its largest ever promotion, an “under-the-cap” competition that
gave away eight Mercedes cars. By comparison, Heineken is a sponsor of the Champions
League, Europe’s premier soccer club competition and of Formula One, which will hold a Grand
Prix in Vietnam for the first time next year. Sabeco’s main challenger to Tiger is Saigon Special,
selling at about 30% more than its other products and rebranded in a green bottle. Sabeco parent
ThaiBev used a similar strategy with its Chang beer in 2014, boosting the beer’s market share in
Thailand from below 30% to above 40% in two years. “It’s our flagship product,” Neo said of
Saigon Special. “We have to be close to the number one, Tiger, or exceed it.” While noting that
taking on Heineken will not be easy, Neo said the company is becoming a more professional and
efficient competitor.

Marco Problem

The process of increasing the stock price

Saigon Beer - Alcohol - Beverage Joint Stock Corporation (Sabeco, stock code: SAB) has
released its consolidated financial statements for the second quarter of 2017 showing that, in the
last period, the "big boss" beer industry reached the revenue of 8,307 billion Dong, up over 9%
over the same period. However, the cost of goods sold increased sharply to 17.6% and accounted
for more than 77% of net revenue; Therefore, Sabeco's sales and service gross profit in the
second quarter was only VND 1,887.2 billion, down 12.4% compared to the same period last
year. Summarizing the business operation in the second quarter, Sabeco recorded a profit before
tax of VND 1,534.6 billion, down 12.7%. Consolidated net profit reached VND 1,237 billion,
equal to 88% of the same period of 2016. In the first 6 months, Sabeco saw a profit before tax of
2,983 billion dong (down slightly from the same period) and after tax profit of 2,425 billion dong
(up from the same period due to the increase in the deferred corporate income tax expense).
Notably, in the first half of this year, Sabeco's selling and administrative expenses increased
significantly compared to the first 6 months of 2016. Specifically, selling expenses increased
nearly 1.5 times to 1,502.5. VND billion, of which advertising, marketing and supporting costs
alone amounted to VND 790.3 billion, up nearly 73% over the same period last year (equivalent
to VND 4.4 billion each day); in addition, general and administration expenses also increased by
60% to 347.9 billion dong. The profit achieved in the first 6 months brought Sabeco's
undistributed after-tax profit on June 30, 2017 to VND 6,089.8 billion compared with the
number of VND 3,852.9 billion at the beginning of the year. Recently, Sabeco announced an
extraordinary document of its general meeting of shareholders, in which, the Board of Directors
of the company is expected to submit to the General Meeting of Shareholders for approval the
dividend payment plan in cash, at 35% (higher than the dividend rate. in 2016 is 30%),
equivalent to VND 2,244 billion. According to the financial statement, on June 30, 2017, Sabeco
has 5,091.8 billion dong of cash and cash equivalents (nearly 1.5 times higher than the beginning
of the year), in which, this enterprise is sending 1,049.4 billion bank. In 2017, SAB shares of
Sabeco is one of the most expensive stocks on the market with the market price up to 235,500
VND / share, 13% higher than the time of 1 month ago and 81% higher than the recovery
compared to the new listing. Sabeco's capitalization is very large, reaching VND 151,022 billion.

After ThaiBev

In 2018

2018 is the first year that Sabeco has operated as an executive and manager of Thai shareholders
and owners, however, the business results here are quite slow compared to expectations. Saigon
Beer - Alcohol - Beverage Joint Stock Corporation (Sabeco) has just released its fourth quarter
and 2018 financial statements with negative growth in the first year of business under their
management - Thai owner. In the fourth quarter of 2018 only, Sabeco recorded a slight decrease
in revenue over the same period to VND 10,406 billion. Meanwhile, the increase in the cost of
goods made the company's gross profit fell by 11% to only VND 2,184 billion. The main reason
for the increase in cost of goods sold in the last quarter was due to a sharp increase in input
prices and Sabeco and the domestic beer and wine industry were under pressure from the Special
Consumption Tax increasing from 60% to 65% in 2018. The highlight of the company is the
reduction in operating and management costs, but the cost of sales increased by more than 7%.
Along with the decline in gross profit, the company's profit before tax dropped by 27% to only
VND 1,133 billion. Profit rate also decreased to 21% from 23.4% in the previous period.
Accumulated in 2018, this enterprise earned more than VND 36,000 billion in revenue, a slight
increase of 5% compared to the previous year. In particular, the increase in revenue mainly
focused on beer and packaging materials, while the remaining segments including beverage and
wine declined. As a result, Sabeco earned a profit before tax of VND 5,387 billion, down 11%
over the same period. Profit after tax also decreased, equivalent to only VND 4,400 billion.
Thus, despite exceeding the target set in the middle of the year, the profit achieved this year of
the company has grown negative with the previous year. This is also the first year this business
target of Sabeco has gone back after 6 consecutive years of increase. Especially, this report of
Sabeco also said that last year, the company had to pay tax and other payable amounts of VND
9,650 billion. By the end of 2018, the company had closed a total of 9,681 billion in taxes and
other payments to the state; of which, more than 70% was the excise tax on alcoholic beverages.
Since this tax increased to 65% last year, the revenue only increased slightly but the special
consumption tax of Sabeco increased significantly compared to the previous year.

Restructure the management style through the most successful government’s divestment
deals
In the beginning, it is true to say that as a company stayed in the market for almost 140 years,
which means a life of Sabeco is the combination of 2 normal people life, just for beers business.
Hence, the power of the company as well as its reputation is out of questions.

While dominating the market by acquiring 40% percent of the market, Sabeco , however, is
judged by the professor as not making a good profit compared to other players , especially
Heineken. In the interview released on NhandanTV, the Deputy head in charge of
macroeconomic policy board from the government said that now currently Sabeco had a giant
asset which raises the question that whether have maximizing it or not, or if not, can partners
from the more developing country will support us? Therefore, with a view to both gaining profits
and preserving the brand of the nation, it is important and economical to make a deal with the
investors, supporters from outside. In other words, it right on time for Sabeco to privatized their
business.

Thanks to the enhancement on the processing, the deal is closed within a short period of time.
Immediately, the government gains 5 billion dollars, turning out Sabeco is one the most
successful Divestment deals among the government’s companies. This turns out to be a win-win
situation, it is also fixed the open-economy of Vietnam. This means that the government
currently should decrease their control over private companies by divestments. This is an
outstanding move from the government in this situation.

In 2019

Noted by Ban Viet Securities (VCSC), Sabeco's gross profit margin during the period mainly
improved thanks to the increase in selling prices in March/2019 for the 333 and Saigon Special
product lines; at the same time, saving costs in packaging, transportation as well as increasing
the allocation of output to the breweries controlled by the Company. Recall, one of Sabeco's
strategies for 2019 in addition to continuing to promote sales, will increase the selling price in
some brands, but at that time the management did not share specifically.

Many people predict that Sabeco will increase prices with Saigon Special products, which
compete directly with Tiger when the brand price is about 10% lower than Tiger. This is in the
context that Sabeco's position continues to be negatively affected by the information that rival
Heineken has begun to increase its penetration into secondary and tertiary cities / provinces with
the Larue product line, besides Tiger.Vietnam's beer market in recent years has been considered
quite attractive when the consumption per capita is quite high compared to other countries in the
region, explaining the phenomenon of more and more foreign brands joining and sharing.
Despite maintaining a leading position with a dense distribution system, Sabeco is still
significantly affected by competitive pressure when its position continues to weaken, especially
before the rise of Heineken (with Tiger brand) in the high-end and near high-end segments. In
2018, Sabeco accounted for about 43% of the domestic beer market share, down from the 45%
market share when it peaked in 2015. After returning to Thaibev, Sabeco's market share is
recovering again, the new owner also raised the ambition to push the figure will rise to 45% or
even higher by 2021.

Changing key personnel in marketing, supply chain, etc; Thaibev is going into the restructuring
process in the second year of taking over - Clearer brand positioning including image and price
segment. Without hastily promoting exports, not gaining market share with price competition,
Thaibev chose to invest heavily in marketing, increase sales through advertising and promotion
effectively. In particular, Sabeco's marketing activities are expected to focus on large-scale
projects, instead of implementing small-scale events. The work is gradually bringing positive
signs; the profit margin of the 2 consecutive quarters improved well, even in the second quarter,
Sabeco's profit set a new value record. Not only business, SAB shares on the market also
continuously broke the peak, currently trading around 280,900 VND / share, up more than 40%
after only 1 year.
On the other hand, in distribution activities Sabeco also aggressively reduced the quantity and
duration of inventory; In contrast to the action of pushing goods into the distribution system at
the end of the previous year. The benefits gained, according to Sabeco's management, will ensure
fresher products come to consumers, thus promoting consumption while helping the company to
release some working capital. Particularly in the second quarter of 2019, Sabeco revenue
decreased by 1% compared to the same period last year because the Company continued to
actively reduce inventories at the distributor level in order to prepare for the rebranding
campaign in July and August. In addition, inventories at the distributor level in the second
quarter of 2018 were also relatively high. In 2019, Sabeco aims to achieve VND 38,871 billion
in net revenue, up 7.52% compared to 2018. Profit after tax is estimated at VND 4,717 billion,
up 6.66%; The Company expects to increase production by 6.3% while the overall growth of the
market is only about 5%.

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