A recent report released by BMI highlighted that Myanmar alcoholic drinks segment is largely untapped, and the recent economic liberalisation will lead to robust growth in the country’s beverage segment with new investments coming from overseas.
Alcoholic drink consumption in Myanmar is expected to pick up, albeit from a low base, due to rising disposable incomes and favourable demographics. BMI projected that consumers in Myanmar are likely to benefit from strong economic growth on the back of continued market liberalisation with real GDP growth to pick up to 6.8% in 2018 /2019 (April-March), up from 6.3% in 2017/2018 period.
Myanmar’s latest revised laws i.e. the New Companies Act which had gone into effect from August 2018, enables foreigners to hold up to 35% stake in local companies, and businesses with foreign stakes of more than 35% will be considered as foreign companies. This revised law is certainly beneficial to foreign investments particularly in the alcoholic beverage segment.
BMI reported that the latest company to enter the market is Singapore-based Yoma Strategic Holdings which announced a joint-venture company with Pernod Ricard to produce and distribute whisky in Myanmar. Although the financial terms of the deal have not been disclosed, the deal was estimated to be the largest in Myanmar's beverage sector.
Myanmar’s alcoholic drinks segment is still in the nascent stages of development as the country has one of the lowest alcohol consumption levels in Southeast Asia, lower than its CLMV counterparts in Cambodia, Laos and Vietnam. Myanmar’s consumption of alcoholic drinks per capita is projected to reach just 6 litres per capita in 2018 , compared to the much higher 35 litres, 65.9 litres and 89.6 litres per capita in Cambodia, Vietnam and Laos respectively. This low level of alcohol consumption can be attributed to conservative attitudes held by Buddhists, Hindus and Muslims in the country and the lack of formal retail channels in the alcoholic drinks sector. (See Chart 1.0)
BMI noted considerable opportunities in Myanmar's alcoholic drinks segment due to rising incomes and a large young adult population which will lend support to alcohol consumption. Myanmar’s GDP is expected to grow significantly from US$1,482 in 2018 to US$2,298 in 2022. This will support higher spending for non-essential items like alcoholic drinks. In addition, Myanmar’s young adults which comprised a third of the population will be the key target consumers.
Within the alcoholic drinks category, beer is the ‘alcohol of choice’ among consumers as they now have numerous domestic and regional choices such as Myanmar Beer, Mandalay Beer, Thailand’s Singha Beer, Singapore-based Tiger Beer as well as other local brands.
Although beer is forecast to remain the alcohol of choice till 2022, BMI noted growing demand for spirits in Myanmar as disposable incomes rise. BMI forecast spirits consumption to grow by an average 8.9% annually between 2018 and 2022, stronger than the pickup in demand for wine which will average 8.7% in the same period. The greatest share in spirits imported is in the whiskies segment, which saw the value of imports pick up considerably from US$9.4 million in 2016 to US$68.8 million in 2017. Meanwhile, other top imported categories were vodka and liqueurs and cordials which reached US$1.9 million and US$1.1 million in imported value in 2017.
Despite the huge opportunity in Myanmar market, foreign investors looking to tap this market must also be aware of the huge business risk operating in this country. Due to political uncertainties as a result of armed conflicts between government forces and ethnic minority groups, as well as high-profile violence in the Rakhine state against the minority Rohingya, Myanmar has one of the highest risk to do business in Asia. Based on a BMI study, Myanmar scores 57.9 out of 100 in the ranking for Short Term Political Risks, with 100 being the lowest risk and 0 highest risk. This is much lower than Asia’s average score of 68.