Beer is flowing in the East

The Boeing 747 may have needed to refuel just for him. His teammates were cheering him on as he knocked them back. Boon carried on and on. He was coherent when the flight landed, but not ready to open the batting.

Australians have been drinking a lot less beer since Boon’s heyday. In 1989, the average Australian drank nine litres of beer-based alcohol per annum. Today, the figure is just three litres.

What has driven the decline? People are more health-conscious. Binge drinking in the air or on the ground is much rarer. There are limits on drinking and driving.

Australia is not alone. Beer drinking has shrunk in the rest of the West. Covid-19 has accelerated the trend. Beer consumption per capita has fallen by about 20% in the last five years in the US.

See also: Old Chang Kee: A snack stock too tasty to ignore

Germany is the home of Oktoberfest. This is a festival where maidens serve giant glasses of beer. Its attendance has plummeted.

In Asia, the party is just getting started. Vietnam has emerged as a symbol of the region’s beer boom, with Ho Chi Minh City now hailed as Southeast Asia’s happy hour capital. The country ranks among the world’s top 10 beer-consuming nations.

This is no mean feat. Its GDP per capita is just US$4,000 ($5,141), which is about 5% of Australia’s. Tiger Beer flows through the veins of Hanoi’s old town like motorbikes at rush hour.

See also: Relight my fire: F&B players feel the withering heat

Vietnam’s breweries, such as Sabeco and Habeco, are seeing growth at over 12% per year. International giants like Heineken are expanding their tank farms.

In India, beer is shaking off its colonial-era hangover. Spirits are still the dominant form of liquor. But beer consumption is rising at over 6% CAGR. Urban youth are rapidly shifting from whisky to wheat beer, with brands like Bira 91 and Kingfisher holding a strong grip on this growing market. New breweries are sprouting across Bangalore and Gurgaon, which are India’s tech centres.

China remains the world’s largest beer market by volume. The country drinks more beer than the US and Germany combined. The average Tsingtao has a blander flavour compared to German brands. But it sells, and volumes are immense.

What is driving the beer flow in the East? Asia’s youth population dwarfs that of the ageing West. Disposable incomes are rising. Also, social taboos around alcohol are loosening. Western-style pubs, like Harry’s, with a prominent spot at Boat Quay, are opening in cities that didn’t even have electricity grids two decades ago. A cold beer is now an aspiration for many Asians.

The beer may be fizzy, but the valuations of the brewers are not. Budweiser, which is one of China’s top beer producers, is at half the valuation of American brewers like Heineken. The market seems to have ignored the Eastern beer boom.

Thai Beverages dominates the Thai spirits industry. The buzz in the stock is in its beer business. It is the dominant beer player in Vietnam and Thailand. Thai Beverage produces the Chang brand, which is sold in distinctive green bottles. In Vietnam, the beer business consists of the investment in Sabeco.

Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends

Thai Beverage has now revived plans to unleash its beer potential. Its beer segment has not got its due recognition. The company plans to spin off its beer segment through a separate listing on SGX.

The beer segment has been branded Beer Co. The IPO may raise US$2 billion at a valuation of US$10 billion. The clincher for the stock may be its dividend yield, which is almost 7%. It could be even higher if the IPO takes place.

Hanoi and Bangkok are raising a glass to the good times. Habits have changed in the West since Boon’s heroics in 1989. In the East, it’s still happy hour.

Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era