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INDUSTRY COVERAGE
Total food consumption and growth
Source: Euromonitor International
Per capita disposable income & expenditure
Source: Euromonitor International
Food staples sector performance
Source: Bloomberg
Recently released 2013 macroeconomic data indicates GDP growth was
5.42% with curbed inflation, a strong inflow of overseas remittances and
FDI and the prospects of a relatively stable Vietnam dong. Along with the
economic recovery, the country’s golden demographic structure, rapid
urbanization, rising disposable income and iddle class as well as mass
retail network present the impetus for rising domestic consumption
power and continued economic growth.
In 2012, Nielsen ranked Vietnam as the most rapidly growing fast-moving
consumer goods (FMCG) consumption country in Asia with a rate of
24.3%, followed by India (18.3%) and China (14.6%). In 2013, Vietnam’s
FMCG experienced a stagnant growth due to consumers becoming more
and more prudent in the context of an unstable economy. Even so,
consumer confidence index was still on the rise and hit its highest level of
98 within the last two years in Q4 2013.
As of 2013, Vietnam’s food and beverage (F&B) consumption was
USD42.8 billion, accounted for 40.5% of total consumption and posted a
remarkable CAGR of 11% over the period 2010-2013. We believe the F&B
sector will continue to deliver double-digit annual growth during the
period 2014-2018. Amongst our focused F&B categories, dairy possesses
the strongest momentum to enter into a growth phase while other
categories including seafood, noodles, sauces and dressing condiments,
confectionery and bakery, alcoholic drinks, soft drinks and hot drinks are
reaching maturity with a slower growth pace.
Given the growing appetite for emerging market-based assets of global
investors such as Kohlberg Kravis Roberts (KKR) and Texas Pacific Group
(TPG) and the consolidation tendency among local players, we predict a
blooming of M&A activities in the F&B sector will be on-going in the
medium- to long-term.
Given the facts that: (1) the sector outperformed the VN-Index (22.8% vs
8% in the latest 12 months); (2) the sector’s ROA (8.4%) and ROE (18.8%)
in 2013 were attractive; (3) the local peers were trading at cheaper prices
(PE 19.1x) relative to regional peers (PE 20.3x) and; (4) the availability of
some stocks exposed strong fundamentals and still cheaper values than
the sector multiples (VNM, KDC, VCF, MPC), we propose a
recommendation to contemplate accumulation of F&B stocks in
the medium to long term. Also, due to its nature as a defensive sector
which is essential for living, F&B stocks continue to remain a fundamental
component of a balanced investment portfolio.
Please see important disclosure information at the end of this report
14.5% 15.3%
10.7%
8.3% 7.3% 7.9%
10.0%
12.3%
14.8%
0%
5%
10%
15%
20%
0
20
40
60
80
Food consumption (USD bn)
7.0% 6.8%
6.7%
6.6% 6.5%
6.0%
6.5%
7.0%
-
500
1,000
1,500
2010 2011 2012 2013 2014F
Annual Disposable Income (USD)
Consumer Expenditure (USD)
Saving ratio (%)
-10
-5
0
5
10
15
20
25
30
35
40
45
05/13 08/13 11/13 02/14 05/14
Food staples VNINDEX
VIETNAM FOOD & BEVERAGE INDUSTRY June 2014
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CONTENS
CONSUMPTION MACRO DRIVERS ........................................................................................................... 3
Further GDP growth while inflation being curbed ............................................................................................................. 3
Robust inflow of overseas remittances and FDI ................................................................................................................ 4
Golden demographic structure ............................................................................................................................................ 4
Rapid urbanization and lowest unemployment rate ......................................................................................................... 5
Disposable income and spending: slow but solid growth ................................................................................................ 5
Emerging middle income earners ....................................................................................................................................... 6
Tax reduced and extended ................................................................................................................................................... 7
High density of retail outlets ................................................................................................................................................ 7
CONSUMER CONFIDENCE ....................................................................................................................... 8
Vietnam the fastest growing FMCG market in 2012 .......................................................................................................... 8
Growth more sluggish in 2013 ............................................................................................................................................ 8
Consumer confidence index still on the rise ...................................................................................................................... 8
Health is among consumer’s top concerns ...................................................................................................................... 10
Demand for more in-home enjoyment and more value in one product ....................................................................... 11
Buy more on promotion and switch to local brands in response to price increases ................................................... 11
Women are in control of spending decisions .................................................................................................................. 11
Advertising continues to influence buying decisions...................................................................................................... 12
Online purchasing is not common yet, but online behaviors herald significant potential .......................................... 12
FOOD AND BEVERAGE .......................................................................................................................... 14
PRICING MECHANISM ........................................................................................................................... 17
Determination of price ........................................................................................................................................................ 17
Price administration ............................................................................................................................................................ 17
FOOD ..................................................................................................................................................... 19
Food supply chain ........................................................................................................................................................... 19
Tax and duties on food ................................................................................................................................................... 20
Impacts of TPP on food .................................................................................................................................................. 20
Potential of focused categories ..................................................................................................................................... 21
SEAFOOD ............................................................................................................................................................................. 21
DAIRY ................................................................................................................................................................................... 25
NOODLES ............................................................................................................................................................................ 31
SAUCES AND DRESSING CONDIMENTS ......................................................................................................................... 32
CONFECTIONERY ............................................................................................................................................................... 34
BAKERY MARKET ............................................................................................................................................................... 37
BEVERAGES .......................................................................................................................................... 39
Beverage categories breakdown ................................................................................................................................... 39
Beverage distribution channels ..................................................................................................................................... 39
Tax and duties on beverages ......................................................................................................................................... 40
Impacts of TPP on beverages ........................................................................................................................................ 40
ALCOHOLIC DRINKS ........................................................................................................................................................... 41
SOFT DRINKS ...................................................................................................................................................................... 43
HOT DRINKS ........................................................................................................................................................................ 45
F&B STOCKS ON THE EXCHANGES ...................................................................................................... 48
CONCLUSION ........................................................................................................................................ 53
APPENDIX- M&A ACTIVITIES ................................................................................................................ 54
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CONSUMPTION MACRO DRIVERS
Further GDP growth while inflation being curbed
Vietnam has managed to retain its GDP growth apace at 5.42% in 2013, up from
5.03% in 2012, its lowest rate in the last 10 years. Meanwhile, inflation continued to
curb from a peak of 18.1% in 2011 to 6.04% last year. Among other sectors with rising
consumer price index (CPI) such as utilities, pharmacy and healthcare, food
frequently presented a negative CPI on a quarterly basis, a key factor that held back
the overall inflation rate. In Q1 2014, the GDP increased by 4.96%, slightly faster than
in the year-earlier quarter. In March 2014, CPI was negative 0.44%, the lowest rate in
5 years (relative to previous month and year-earlier month) and in 13 years (relative
to year-earlier December).
GDP Growth versus Inflation Neighbor countries GDP Growth (%)
Source: Vietnam GSO, ADB Source: Vietnam GSO
Month on month CPI (%)
Source: Vietnam GSO
We expect the GDP to maintain its growth pace while inflation remains under control
due to the government’s continuously improving measures on monetary and fiscal
policies, as well as measurable progress with banking system reforms. The gradual
economic recovery in the US and EU, two primary trade partners of Vietnam, is also
another factor taken into account. The Asian Development Bank (ADB) projected
Vietnam’s GDP growth to rise slightly to 5.6% in 2014 and edging up further to 5.8%
in 2015. While the Philippines and Indonesia were leading the pace, Vietnam still
remarkably outpaced Malaysia, Singapore and Hong Kong with their 2013 GDP
growth of 4.7%, 3.7% and 2.9%, respectively.
7.7 8.4 8.2 8.5 6.2 5.3 6.8 5.9 5.0 5.4 5.6 5.8
9.5 8.4
6.6
12.6
19.9
6.5
11.8
18.1
6.8 6.0 6.2 6.6
0
5
10
15
20
25
0
5
10
15
20
GDP growth (%) Inflation (%)
6.8 6.2
5.0 5.6
1.3
6.4 7.2
5.8 5.4 4.7
3.7 2.9
2012 2013
-2
0
2
4
6
8Overall
Foods
Beverage & Cigarette
Apparels
Home Appliances
Pharmacy & Healthcare
Vietnam’s economy continued to
recover with further GDP growth,
along with curbed inflation, strong
capital inflows and a stable
exchange rate.
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Robust inflow of overseas remittances and FDI
Capital inflows from overseas remittances recorded consistent growth during the
period 2005-2013 with CAGR of 14.2% and reached USD11 billion in last year. Also,
the country mobilized USD11.5 billion in disbursed foreign direct investments (FDI) in
2013, a 10% increase, while committed FDI was USD21.6 billion, a significant increase
of 55% since 2012. These figures reflect rising confidence of overseas Vietnamese
and foreign investors in Vietnam’s macro economy that enjoys a stable local
currency and, which in turn, stimulates domestic consumption.
Oversea remittance
Source: BMI, EIU
Golden demographic structure
Being the third largest population among South East Asia (SEA) countries with 90
million people as of 2013, Vietnam possesses a young population (68% or 60.7
million under aged 40) and an abundant work force (76% or 68.2 million aged 15-60).
Since 2007, the population grew stably at about 1% or 1 million people every year.
People aged 15-39 with 40.1 million or 45.2% of the population represents the highly
concentrated segment of the aging pyramid, indicating young people are the key
growth driver of the consumer goods sector.
Average population and growth People aging pyramid, 2013
Source: Vietnam GSO Source: Vietnam GSO
According to the United Nations Population Fund (UNFPA), Vietnam has recently
entered into a period of ‘golden demographic structure’. A country has a ‘golden
demographic structure’ when for every two working people or more, there is only
one dependent person. This ratio of Vietnam is now 3:1 while 30 years ago it was 1:1.
Two thirds of the burden, so to speak, has been unloaded and this, no doubt, will
certainly accelerate consumption. Further, the golden period is expected to last for
3.8
5.2
6.7 8
7.2 8.2
9
10.5 11
7.2
8.6 9.4 8.9
7.8 8 7.4 7.5
6.25
2005 2006 2007 2008 2009 2010 2011 2012 2013
Remittance (USD bn) Remittance to GDP (%)
81.4 82.4 83.3 84.2 85.1 86.0 86.9 87.8 88.8 89.7
1.2 1.2
1.1
1.1 1.1 1.1 1.1 1.0 1.1 1.1
1.0
1.0
1.1
1.1
1.2
1.2
1.3
76
78
80
82
84
86
88
90
92
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Population (mn) Population growth (%) -6000 -4000 -2000 0 2000 4000 6000
0-4 yrs
10-14 yrs
20-24 yrs
30-34 yrs
40-44 yrs
50-54 yrs
60-64 yrs
70-74 yrs
Female
Male
68% of the population is under aged
40 and has an abundant work force.
The dependent population rateis 3:1
www.VPBS.com.vn Page | 5
the next 30-35 years (UNFPA). The demographic structure presents the impetus for
rising local consumption power and continued economic growth. It leads to
significant trends in consumer goods market structure from bigger demand for
convenience goods, age-panel focused goods, brand equity, product quality and
health safety to business consolidation of market players.
Rapid urbanization and lowest unemployment rate
From 2000, the urbanization rate rapidly rose 8.3 percentage points (ppts) and
reached 33.4% in 2013. Urban residents contributed 51.3% of the country’s GDP in
the year. The urbanization rate is expected to become the majority by 2040 (UNESCO,
2011). Further, with an unemployment rate of 2.2% as of the end of 2013, Vietnam
was one of the countries enjoying the lowest unemployment rate in the world.
Disposable income and spending: slow but solid growth
Despite the economic slowdown, per capita annual disposable income still posted a
double-digit CAGR of 11.1% between 2010 and 2013, recorded at USD1,259 in 2013.
Per capita consumer expenditures expanded slightly higher, by a CAGR of 11.2%
during the same period to reach USD1,176. Vietnam consumers spent 40.5% of their
expenditures on food and beverage in 2013. The savings ratio saw a slow decline
since 2010 from 7% to 6.5% in 2013. While low savings is supposed to boost
spending, it probably induces volatility in consumption upon fluctuations of
disposable incomes and market price. Also, the relative low current incomes caused
Vietnamese consumers to spend mostly for non-discretionary products. But the
demand for discretionary goods promises to increase as disposable incomes
increase over time.
Per capita annual disposable income (USD) Per capita consumer expenditure (USD)
Source: Euromonitor International Source: Euromonitor International
Saving ratio (%)
Source: Euromonitor International
1,090 1,262 1,399 1,507 1,607
918 1,059 1,169 1,259 1,343
12.8%
15.3%
10.4%
7.6% 6.7%
0%
5%
10%
15%
20%
-
500
1,000
1,500
2,000
2010 2011 2012 2013 2014F
Annual Gross Income (USD)
Annual Disposable Income (USD)
Annual Disposable income Growth (%)
854 987 1,091 1,176
1,256 358 409 446 476 506
14.1% 15.5%
10.6%
7.8% 6.8%
0%
5%
10%
15%
20%
-
500
1,000
1,500
2010 2011 2012 2013 2014F
Consumer Expenditure (USD)
Consumer Expenditure on F&B (USD)
Consumer expenditure growth (%)
918 1,059 1,169 1,259 1,343
854 987 1,091 1,176 1,256
7.0%
6.8%
6.7%
6.6% 6.5%
6.2%
6.4%
6.6%
6.8%
7.0%
-
500
1,000
1,500
2010 2011 2012 2013 2014F
Annual
Disposable
Income (USD)
Consumer
Expenditure
(USD)
Saving ratio (%)
Annual disposable income
reached USD1,259 per capita,
11.1% CAGR during 2010-2013.
Vietnam consumers spent
40.5% of their expenditures on
food and beverage.
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However, due to retained concerns about the pace of gradual macroeconomic
recovery, the consumers continue to exercise prudence with their purchasing
decisions. As such, annual growth in per capita disposable income and consumer
expenditure is prudently projected to keep growing but at a slower pace in 2014 at
6.7% and 6.8%, respectively.
Emerging middle income earners
Within the social class distribution in 2012, class C accounted for the biggest share of
38% of the work force (25.9 million people). It was followed by class D which made
up 25% of the total earners (17.1 million people). The age band of 20-24 represents
for the class D, while those aged 35-39 mainly occupy class C. Since class C and D
represent almost two thirds of the work force, low-to-middle income earners are
dominant among Vietnamese consumers. Notably, there was a positive movement in
the structure of income earners among the social classes over the period of 2010-
2012. Specifically, class C experienced an escalation in proportion from 27% (2010) to
32% (2011) and 38% (2012). Class B saw a rise of 7 ppts up to 21% while Class A had
an increase of 2 ppts up to 6%. Conversely, Class D descended 9 ppts to 25%, Class C
observed a decrease of 6 ppts and class E housed 8% of the work force. According to
the OECD, there will be a big rise in the number of Vietnam’s middle class
consumers, implying a higher standard of living along with demand for diversified
products and services. The middle class, consisting of 25.9 million people,
significantly contributed 47.5% or USD46 billion to the country’s total consumption in
2012. By 2020, the consumption of this class is dramatically forecasted to be worth
USD310 billion (6.7 times growth) by the OECD.
Age composition of social class, 2012
Source: Euromonitor International
Composition of social class
Source: OECD
The social classes are classified based on gross monthly income band (VND) as follows:
Class F Class E Class D Class C Class B Class A
0 -
1,499,999
1,500,000 -
2,999,999
3,000,000 -
4,499,999
4,500,000 -
7,499,999
7,500,000 -
14,999,999
>=
15,000,000
4.6% 15.1% 19.8% 23.5% 24% 24.7% 25.3% 24.5% 24% 21.7% 19% 8%
17.4% 20.2%
21.2% 21% 21.3% 22.7% 23% 23.5% 22.3% 20%
11.4%
21% 21.3%
20.3% 21.7% 21.7% 20% 20.4% 19.2% 20% 25%
25%
25.5% 20.7% 18% 18.3% 16% 15.7% 15.4% 15% 17.5% 15.5% 51%
21% 18% 17% 15% 16.3% 16.3% 16.7% 18.3% 18.5% 20.5%
0%
20%
40%
60%
80%
100%
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
E
D
C
B
A
2%
9%
27%
39%
20%
3% 4%
14%
32% 34%
14%
2% 6%
21%
38%
25%
8% 2%
Class A Class B Class C Class D Class E Class F
2010 2011 2012
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Tax reduced and extended
In 2013, taxation has been eased also to support domestic consumption and
economic growth. Therein, SMEs, small- and medium-sized enterprises (with less
than 200 labors and revenue below VND20 billion) and agriculture products
manufacturers (with more than 300 labors) were entitled to 6 months extension
period for CIT and VAT payments. SMEs also benefited from a favorable CIT of 20%
from July 1, 2013. Moreover, general CIT has been reduced to 22% from Jan 1, 2014
and will be cut further to 20% from Jan 1, 2016.
In addition, by raising monthly personal allowances (from VND4 million to VND9
million) and dependent allowance (from VND1.6 million to VND3.6 million per
dependent), there was more savings for personal income tax (PIT) which directly
support consumers’ disposable income and spending.
High density of retail outlets
Vietnam possesses a dense retail network, widely spread throughout the country,
including 424 supermarkets, 23 hypermarkets, 365 mini-marts and almost 779,000 of
traditional markets and small private shops. . While supermarkets and hypermarkets
account for the majority, the convenience store model is still in its infancy.
Grocery outlets are dominant with more than 636,000 units. The number of retail
outlets is reported to have increased every year at a rate of 1.2% during the period of
2009 through 2013. Also, existing prominent retailers and wholesalers such as
Saigon Coop, Big C, and Metro Cash & Carry have committed themselves to further
expansion not only in big cities but also in many provinces. The continuous growth
and expansion of mass retail outlets strongly encourages consumer purchasing and
increases consumption value.
Retail outlets by categories (units)
Source: Euromonitor International
609,359 619,674 624,274 631,208 636,158
133,835 138,271 141,475 142,110 143,613
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2009 2010 2011 2012 2013
Grocery outlets Non-grocery outlets
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CONSUMER CONFIDENCE
Vietnam the fastest growing FMCG market in 2012
In 2012, Nielsen, the global market leader in consumer panels, ranked Vietnam as the
most rapid growing FMCG (fast-moving consumer goods) consumption country in
Asia with a rate of 24.3%, followed by India (18.3%) and China (14.6%). In a recent
research report published by Kantar Worldpanel, Vietnam households’ annual
spending on FMCG in 2013 was USD668 with annual purchasing frequency of 166
times, preceded only by Malaysia with that of USD969 on spending and 108
purchasing trips. Households in the Philippines, Thailand and Indonesia followed
with lower average FMCG annual spending of USD632, USD624 and USD475,
respectively.
FMCG market dynamics, 2012 Annual household FMCG spending, 2013
Source: Nielsen Source: Kantar Worldpanel
Growth more sluggish in 2013
According to reports by Kantar Worldpanel and Nielsen, there was a slow-down in
growth of the FMCG market since Q4 2012. Two-digit growth was difficult to sustain
from Q1 2013 and a negative volume change of 2.6% in Q3 2013 even dragged the
FMCG growth down to only 0.3% in Q3 2013 from 14% in Q1 2013. The consumption
index reflecting a quick deceleration as consumers become more cautious when
making purchases in the context of economic instability
FMCG growth q-o-q
Source: Nielsen, Kantar Worldpanel, TNS
Consumer confidence index still on the rise
8.7% 9.2% 5.8% 4.9% 4.6% 3.7%
1.1%
2.3%
15.6% 9.1%
8.8% 8.3% 6.5% 7.2% 3.6%
1.6%
24.3%
18.3%
14.6% 13.2%
11.1% 10.9%
4.7% 3.9%
Unit value change (%) Volume change (%) Nominal growth (%)969
668 632 624
475
108 166
346
215
414
4.5 4.6
5
3.6 4
0
1
2
3
4
5
6
0
200
400
600
800
1,000
1,200
Malaysia Vietnam Philippines Thailand Indonesia
Avg household spent / yr on FMCG (USD)
Annual purchase frequently FMCG (times)
Avg household size (members)
12.8 14.6 15.5 14.7 12.9 10.0 7.2 4.3 3 3 2.9
5.9 5.8 4.4 6.5 12.2 16.8 20.4 14 11 5.4
(2.6)
18.7 20.4 19.9 21.2 25.1 26.8 27.6
18.3 14
8.4 0.3
Q1.2011 Q2.2011 Q3.2011 Q4.2011 Q1.2012 Q2.2012 Q3.2012 Q4.2012 Q1.2013 Q2.2013 Q3.2013
Unit value change (%) Volume change (%) Nominal growth (%)
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According to a Nielsen survey conducted in Q4 2013, the Consumer Confidence Index
(CCI) of Vietnam rose to 98 in Q4 2013, 10 points higher than the year-earlier quarter
and hit its highest level in the last two years. The index also crossed over the global
CCI of 94. Relative to its neighbor countries, Vietnam recorded an index rise in the
last two quarters of 2013, second only to Indonesia, while other regional peers
experienced a reduction in pace over the same period. Consequently, purchasing
power plummeted; however, it is expected to continuously grow over the coming
quarters.
Indonesia enjoys the highest levels of consumer confidence worldwide with a CCI of
124, 30 points higher than the global index. The Philippines and Thailand
experienced a decrease yet remained in the top 10 of CCI countries with 114 (-4
points) and 109 (-3 points), respectively. Malaysia edged downwards three points to
98 and Singapore was at 97 (-1 point). South East Asia (SEA) consumers have more
confidence than other worldwide areas thanks to robust growth of middle-income
earners and faith in their ability to achieve economic recovery in the foreseeable
future.
Neighborhoods CCI
Source: Nielsen
Top 10 CCI nations Q4 2013
Source: Nielsen
Note: UAE – United Arab Emirates
122 118 115
96 107
95
124 121 114
95 103
95
120 118 112
97 101 98
124 114 109
98 98 97
Indonesia Philippines Thailand Vietnam Malaysia Singapore
Q1.2013 Q2.2013 Q2.20132 Q4.2013
124 115 114 111 110 110 109 107 104 100
Vietnam’s consumer
confidence index in Q4.2013 hit
its highest level of 98 in the last
two years.
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CONSUMER BEHAVIORS By conducting a survey in July 2013 with 700 respondents online and offline
throughout the country based upon age, gender and area, Nielsen was able to
identify the recent influences and impacts on consumers’ decisions and behaviors.
The study is helpful to market players in their efforts to determine the best ways to
deliver proper messages and promote products to consumers.
Health is among consumer’s top concerns
Following concerns about economic uncertainty and job security, consumers in
Vietnam view health as their third priority of consideration. When questioned about
daily activities to stay healthy, people’s responses of ‘eat and drink in moderation’
comprised the majority of the survey population (78%), followed by ‘eating fresh or
natural food’ (47%) and ’physical exercise’ (46%). While consideration of ‘nutrition’
captures the fourth position (41%), people also noted the importance of ‘keeping
one’s mind relaxed’ as another path to well-being.
Understanding factors that influence shoppers’ buying decisions about nutritional
food helps producers tailor their message and content on product labels and
successfully achieve brand salience. As such, communicating sufficient nutritional
ingredients on healthy products was the consumers’ first element of consideration
which occupies more than one third of total participants. Reduced risk of diseases
and product affordability were the next two influencing aspects with 25% and 23%,
respectively. A product stamped with the approval by health professionals was also
on the cart of 8% of sample shoppers.
Consumers’ worries Activities to stay healthy
Source: Nielsen Source: Nielsen
Consideration of purchase nutritional food
Source: Nielsen
19%
19%
11%
11%
8%
9%
5%
2%
3%
14%
7%
12%
12%
11%
8%
9%
6%
3%
The economy
Job security
Health
Increasing utility bills
Increasing food prices
Work/life balance
Increasing fuel prices
Parents' welfare…
Debts
Biggest concern Second biggest concern
78%
47%
46%
41%
35%
Eat / drink in moderation
Eat fresh / natural food
Physical exercise
Consider the meal's
nutrition
Keep mind relaxed
36%
25%
23%
8% 8% Sufficient nutritional ingredients
Reduced risk of disease
Affordable
Approved by health professionals
Others
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Demand for more in-home enjoyment and more value in one
product
Since out-of-home entertainment comes in at the top of the list for spending cuts,
people then switched to products with messages about in-home enjoyment such as
CocaCola – ‘big bottle for family’, Maggi oyster sauce – ‘tasty and bright as
restaurant’ (Masan), Rejoice – ‘bring spa to home’ and Comfort – ‘spa at home’
(Unilever).
Also, by timely capturing the consumers’ trend to seek more value in one product,
manufacturers have launched a new series of multi-functional products from
ProBeauty – ‘yogurt with collagen’ (Vinamilk), Knorr – ‘all-in-one new multiple spices’
(Unilever), Number One – ‘beverage with vitamin’ (Tan Hiep Phat), Nutri tasty-
healthy – ‘nutritional beverage’ (Minute Maid – CocaCola) to Olay CC cream (P&G)
and Pond’s BB cream (Unilever) – ‘foundation plus moisturizer’.
Buy more on promotion and switch to local brands in response
to price increases
Vietnamese people are lured by products with free gifts. Thus, people mostly tend to
buy more on promotion in the context of price increases, according to the Nielsen
study. Also, there was a shift from purchasing of foreign brands to Vietnamese
brands without switching cost thanks to improving quality of domestic products with
appropriate pricing. Buying bigger pack size to enjoy discounts and changing
shopping channels to pocket money for saving were the next reactions of consumers
in response to price increases.
List spending cuts Consumer’ reaction to price rise
Source: Nielsen Source: Nielsen
Women are in control of spending decisions
Demographic statistics indicate that the number of working women is on the rise.
The proportion of working females in the total female population posted a faster
growth than that of working males, presenting an increase from 58.5% in Q1.2012
to 67.8% in Q4.2013. 90% of women surveyed believe that their role and
responsibility is changing for the better according to the research.
Additionally, women in different generations definitely behave differently in their
shopping activities. Examples of that include: A daughter with an average age of 30
is the most impulsive among buyers and is a heavier media user while a mother
with an average age of 47 is prone to shop ahead, look for good value and enjoys
advertising. A grandmother with an average age of 67 is the most habitual shopper
15%
18%
19%
21%
22%
29%
41%
44%
44%
46%
49%
63%
65%
67%
Cut at-home entertainment
Cut down on smoking
Cut down or buy cheaper alcohol
Switch to cheaper grocery brands
Use my car less often
Cut down on holidays/short breaks
Cut down on take-away meals
Delay replacement of household items
Cut down on telephone expenses
Cut out annual vacation
Delay upgrading PC, Mobile
Try to save on gas and electricity
Spend less on new clothes
Cut out-of-home entertainment
66%
41%
37%
37%
36%
22%
20%
Buy more on 'promotion'
Buy more Vietnamese brands
Buy bigger pack sizes
Buy cheaper brands
Change shopping channel to
save money
Buy more of smaller pack sizes
Buy more of private label brands
www.VPBS.com.vn Page | 12
and appreciates word-of-mouth importance. In general, women usually plan their
shopping list and follow advertising on TV and radio. Their brand loyalty is mainly
influenced by their perceptions of product quality.
Product or service providers have started to cater specifically to women. As such,
Sacombank offered Ladies First Credit Card, Women SME Service Package and 8th
March Branch, banking for women. Anlene developed calcium milk for modern
women which boast a content of four fold calcium by volume. Nhat Dang Nhi Da, a
spa and fitness center, was designed exclusively for women with six branches
nationwide.
Number of working female / male of female / male population
Source: Vietnam GSO
Advertising continues to influence buying decisions
68% of Vietnamese respondents confirmed that commercial advertising will increase
their brand preference. This ratio far crossed over that of global consumers (55%),
Singapore (49%) and Hong Kong (40%). It even slightly surpassed the rate of Asia
Pacific (67%). As the country’s social media channels keep growing, Vietnamese
people will continuously be captivated by commercial advertising that will affect their
purchasing decisions. Further, television and outdoor advertising remain the
strongest beacon of people’s attention, followed by news, magazines (online, papers)
and advertising panels at bus stations.
Commercials increase buyer’s brand preference Seen advertising on media channels
Source: Nielsen Source: Nielsen
Online purchasing is not common yet, but online behaviors
herald significant potential
Amongst browsing activities to shop performed on any online connected devices,
there were more people usually conducting product research and looking for product
information online, which were implied by the survey results of 72% and 70% of total
81.8% 80.3% 77.0% 79.5% 82.8% 83.3% 83.0% 83.5%
58.5% 56.0% 58.3% 63.3% 60.5% 63.3% 65.5% 67.8%
Q1.2012 Q2.2012 Q3.2012 Q4.2012 Q1.2013 Q2.2013 Q3.2013 Q4.2013
Working
Male
Working
Female
55%
67%
79%
78%
74%
74%
72%
68%
68%
62%
49%
40%
40%
Global
Asia Pacific
Korea
Philippines
Indonesia
India
China
Thailand
Vietnam
Malaysia
Singapore
Hongkong
Taiwan
% of respondents who strongly / somewhat agree
96%
74%
49%
38%
15%
14%
11%
Television
Outdoor advertising
News / magazine
Advertising at bus station
LCD screen at building, office
Bus LCD screen
LCD screen at coffee shop
www.VPBS.com.vn Page | 13
respondents. The other online activities including reading a grocery retailer’s flyers,
comparing prices of grocery products and browsing a manufacturer’s website were
also done by the majority of research participants.
Despite the majority of respondents conducting online product and producer
research, less than half of the people were asked to make a purchase of a product
online. In general, most of the activities were carried out on weekly basis. In terms of
online purchase intent of product categories for the next six months, food and
beverage ranked fourth with 39% of total respondents; while apparel, footwear and
accessories followed by household appliances and cellphones remained in the top
three categories that consumers intend to buy.
The rate of internet penetration in Vietnam is low at fifth in Asia and has the potential
to increase in the future. Besides, Nielsen’s research also showed that 92% of
Vietnamese consumers are more likely to trust recommendations from people they
know and 63% are more likely to trust consumer opinions online. We believe these
indicators offer promise of ample growth for online purchasing in the long term.
Activities on online connected devices Purchase intents via online connected devices
Source: Nielsen Source: Nielsen
72%
70%
59%
59%
53%
49%
48%
47%
27%
12%
11%
6%
Conduct product research
Look up product information
Read a grocery retailer's flyer
Compare prices of grocery product
Browse a producer's website
Look for deals online
Look for coupons online
Purchase a product online
Feedback on a grocery category
Use a digital shopping list
Other
None of above
47%
47%
43%
39%
36%
36%
Apparel / Accessory / Shoes /
Jewelry
Household appliance
Mobile phone & accessories
Food & beverage
Travel service reservation
Entertainment tickets
www.VPBS.com.vn Page | 14
FOOD AND BEVERAGE
Consumption in Vietnam is growing slowly as consumers are still very careful in
spending due to economic circumstances have not recovered. However,
developments of retail systems plus consumption habits show a promising market
for the retail industry in general and in particular food and beverage. The retail
market of food and beverage in Vietnam is highly fragmented, with the presence of
only a few large firms. The retail market is primarily driven by none organizations
retailers, including traditional retailers and independent grocers. The organized
retailers penetrate mainly limited in urban areas. There are few players dominate the
in food and beverage market, domestic including large enterprises such as Vinamilk
(dairy), Kinh Do (bakery), Masan Consumer (diversified products), Minh Phu (sea
food), Vinafood, Halico (beverage), Bibica (confectionery), Sabeco (beer). Foreign
companies are including Nestle (coffee); Nabati Indonesia (confectionery); Diageo,
Heineken, Carlsberg, SABMiller (alcoholic drinks); Kirin Beverage (soft drinks); AEON,
E-mart and Investment Co. U & I, FamilyMart, NTUC FairPrice (diversification of food
products). In addition, the large multinational companies are setting up independent
units and joint ventures to invest in areas such as coffee, candy, alcoholic drinks, soft
drinks, and retail distribution system.
In 2013, Vietnam’s food and beverage market was worth over USD 60.1 billion,
accounting for 40.5% of the total consumption of the country. In the same year,
Vietnam’s F&B consumption was USD42.8 billion, representing an increase of 8.2%
against 2012 and a CAGR of 11% during the period of 2010-2013.. Domestic
consumption in the country reached 42.8 billion accounted for 71.2% of the total
industry production value, 29% of the remaining exports (seafood, rice, coffee,
cashew nuts…).
Food and beverage value breakdown
Nguồn: VPBS tổng hợp
Food consumption maintains double-digit growth. In 2013, food consumption was
USD34.8 billion, posting a remarkable CAGR of 11.4% over the period of 2010 to
2013. Despite recent slow growth in FMCG purchases, the combination effects of
continuous economic growth, golden demographic structure, rapid urbanization and
emergence of middle income earners as well as a mass grocery retail network, will
fuel the growth of overall food consumption in the medium- and long-term. Also, due
to its nature as a defensive sector which is essential for living, food is considered a
key component of a balanced investment portfolio over the investment horizon.
Exports
29%
Food
58%
Beverage
13%
Domestic
consumption
71%
www.VPBS.com.vn Page | 15
Vietnam food consumption is projected to retain its double-digit growth of 11.4%
over the period of 2014 to 2018 by Euromonitor International.
Food consumption and growth Food consumption per capita and growth
Source: Euromonitor International Source: Euromonitor International
In 2013, agri-products, meats & eggs and seafood continued to be the biggest three
categories with USD26.7 billion or 76.8% value contribution to total local food
consumption. Agri-products including rice, maize, coffee, tea, pepper, cashew,
sugarcane, cassava, fruits and vegetables posted double-digit growth of 11.8%
compared with 2012. The following categories of dairy, oil and fats and noodles
notably surpassed USD1 billion of sales value each, in which dairy valued at USD2.9
billion market size, saw the highest growth of 16.5% against last year among other
categories. Also, confectionery and bakery together made up USD1.3 billion and
increased by over 8.2% from 2012.
Food market value and growth in 2013
Source: Vietnam GSO, Euromonitor International, VPBS estimates
Note: (*) Agri-products including rice, cassava, maize, coffee, tea, pepper, cashew, sugarcane, fruits
and vegetables
In the beverage market side, alcoholic drinks are the largest sector with 70%
contribution to total market value. Revenue from this sector increased by 6.3% to
USD 5.6 bil, the lowest growth rate compared to the other drinks. Beer accounts for
the largest share of alcohol consumption, Sabeco, Habeco is domestic company's
which dominate Vietnam beer market.
25.2 29.0 32.2 34.8 37.4 40.3 44.3 49.8 57.2
14.5% 15.3%
10.7%
8.3% 7.3% 7.9%
10.0%
12.3%
14.8%
0%
5%
10%
15%
20%
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014F2015F2016F2017F2018F
Food consumption (USD bn) Growth (%)
290 331 362 387 412 441 480 533 605
13.1% 14.1%
9.6%
6.8% 6.4%
7.2% 8.8%
11.0%
13.5%
0%
5%
10%
15%
0
200
400
600
800
2010 2011 2012 2013 2014F2015F2016F2017F2018F
Food consumption per capita (USD) Growth (%)
11.9 9.5
5.3 2.9 1.1 1 0.8 0.8 0.5 0.9
12%
0%
3%
17%
5%
8%
5%
9% 7%
0%2%4%6%8%10%12%14%16%18%
0
2
4
6
8
10
12
14
Ag
ri-p
rod
ucts
(V
ina
foo
d,
Veg
ete
xco
, G
en
tra
co
)
Me
at,
Eg
gs (
Vis
san
, C
au
Tre
, H
a L
on
g)
Sea
foo
d (
Hu
ng
Vu
on
g,
Vin
h H
oa
n,
An
Gia
ng
)
Dia
ry(V
inam
ilk,
Nestl
e,
Ab
bo
tt, F
restl
an
d)
Oil
an
d F
ats
(C
ai
La
n,
Tu
on
g A
n,
Go
lde
n
Ho
pe
)
No
od
les (
Aceco
ok V
iet
Na
m, M
asan
Co
nsu
me
r,
Asia
Fo
od
)
Sau
ce a
nd
Dre
ssin
g
co
nd
imen
ts(M
asan
Co
nsu
mer,
Ajin
om
oto
Việ
t N
am
)
Co
nfe
cti
on
ery
(K
inh
Do
,
Kra
ft F
oo
d,
Hai
Ch
au
)
Bakery
(K
inh
Do
, N
hu
La
n,
Du
c P
ha
t)
Oth
ers
2013 Marke Value
Growth in 2013 (%)
www.VPBS.com.vn Page | 16
Soft drinks saw the highest growth of 12.4% to reach $ 1.7bn sales in 2013, while hot
drinks is the smallest segment carries about 0.7 billion in sales. In soft drinks market,
Coca-Cola and PepsiCo dominate the carbonated soft drinks market, Tan Hiep Phat
array occupies none gas soft drinks. Hot drinks are the smallest segment which
brought only USD 0.7 billion in revenue. Hot drinks market under the control of
Nestle and VinaCafe.
In 2013, retail sales of the beverage sector in Vietnam reached USD8 billion, a 7.6%
rise compared with 2012. According to forecasts of the key players, in the period 2014
and 2015, beverage market value is expected to increase by 7.5%. So as consumers
switch to beverage products with higher value, expected profits in this sector would
increase by 10.5% in 2016.
Beverage market value and growth in 2013
Sources: Euromonitor International, VPBS
5.6
1.7
0.7
6%
12%
7%
0%
2%
4%
6%
8%
10%
12%
14%
0
1
2
3
4
5
6
Alcoholic drinks (Sabeco,
Habeco)
Soft drinks (Pepsi,Coca Cola,
Tan Hiep Phat, URC Vietnam)
Hot drinks (Nestle, Vinacafe,
Vinatea)
2013 market value 2013 growth
www.VPBS.com.vn Page | 17
PRICING MECHANISM
Determination of price
Circular 25/2014/TT-BTC dated February 17, 2014 provides pricing methods for
products inbound that are both manufactured and imported. There are two methods
of determination based on comparison and expenditures.
The comparison method is defined as pricing products based on analysis and
comparison results of price levels, usage, quality, origin and economic – technology –
legal features between the target and the comparable products currently trading in
the domestic market, with reference to the regional and global market if available.
Expenditure method is defined as pricing products based on reasonable and valid
production costs and a profit estimated in line with current market prices and
relevant government policies. The pricing formulas provided as follows:
Inbound manufactured products
Price = production costs + estimated profit (if any) + special sales tax (if any) + valued
added tax and other taxes (if any)
Imported products
Price = import price (*) + selling, administration and financial expenses (if any) +
estimated profit (if any) + valued added tax and other taxes (if any)
(*) Import price = CIF price + import tax + special sales tax (if any) + other fees and
taxes (if any) + other regulated cash payments (if any)
Price administration
According to Direction 05/CT-BTC dated December 24, 2013, Price Administration
Bureau has primary duties to (1) closely watch goods price fluctuation in domestic,
regional and global markets (2) supervise price declaration and registration of
enterprises (3) provide solutions for tax and financial mechanism, price
administration and stabilization (4) coordinate with Investigation Bureau to conduct
unexpected examinations (5) report to the Ministry of Finance on a weekly, semi-
monthly and monthly basis.
Coordinating with Price Administration Bureau, Finance Department is responsible
for (1) tracking market demand, supply, price and tax revenues (2) timely proposing
appropriate measures for price stabilization without any shortage or speculation of
goods (3) controlling budget and monitoring the execution of price stabilization
program (if any) and (4) reporting to the Ministry of Finance on a weekly, semi-
monthly and monthly basis.
Directed by the Ministry of Finance, National Food Reserves Bureau makes proper
stocks release and top-up to balance of stock reserves. Local enterprises are
encouraged to participate in the stabilization program by purchasing additional
goods for reserves with or without interest support and loans provided by the state
budget.
www.VPBS.com.vn Page | 18
Regulatory reporting lines
Reporting to Directing to / supporting Coordinating with
Source: Direction 05/CT-BTC
Ministry of Finance
Finance
Department
Price Administration
Bureau
National Food
Reserves Bureau
Tax
Bureau Custom Treasury
Food Reserves
Bureau
Budget
Affair
Tax
Affair
Corporate
Finance
Investigation
Bureau
Province People Committee, local companies and entrepreneurs, consuming market
www.VPBS.com.vn Page | 19
FOOD
Food supply chain
In 2013, the majority of input materials for food production was locally produced with
a farming value of USD44 billion including cultivation, fisheries and livestock. Also,
there was spending of USD6.5 billion for import of key inputs such as raw feed, dairy
materials, seafood, oil and fats, wheat, fruits and vegetables. During the year, the
country’s food production was estimated more than USD52.1 billion in which local
consumption accounted for 66.8% or USD34.8 billion and key commodities for export
(seafood, rice, coffee, cashew, etc.) comprised most of the remainder at USD17.3
billion. Domestically, food has been consumed mainly through commercial and
traditional trade channels .Traditional channels including nearly 779,000 traditional
markets and small private shops which are suitable for small quantity and high-
frequency food purchases. Traditional channels accounted for 75% of food retail
value, the remaining 25% belongs to commercial channels including 447
supermarkets, hypermarkets, convenience stores and food service operators with
significant presence of 560,000 restaurants and food outlets and 12,500 hotels.
Food supply chain
Source: GSO Vietnam, Euromonitor International, VPBS research
2013 LOCAL FARMING
USD44 bn
2013 KEY IMPORTS
USD6.5 bn
2013 FOOD PRODUCTION
Over USD52.1 bn
2013 KEY EXPORTS
USD17.3 bn
LOCAL CONSUMPTION
USD34.8 bn – 2013
% Contribution
Cultivation 54.8%
Fisheries 24.6%
Livestock 20.6%
% Contribution
Raw feed 46.4%
Dairy materials 16.8%
Seafood 10.7%
Oil & fats 10.7%
Wheat 9.4%
Fruits & vegetables 6.2%
% Contribution
Seafood 38.9%
Rice 17.2%
Coffee 15.5%
Cashew 9.6%
Cassava 6.3%
Fruits & vegetables 6.0%
Pepper 5.2%
Tea 1.3%
Wholesalers /
Distributors
Retailers Food service operators
Consumers - 90 million (by end of 2013)
424 supermarkets
23 hypermarkets
365 minimarts & convenient stores
778,959 traditional markets & private shops
560,000 restaurants
and food outlets
12,500 hotels
www.VPBS.com.vn Page | 20
Tax and duties on food
VAT Tax Law Amendment 31/2013/QH13, Decree 209/2013-ND-CP and Circular
164/2013/TT-BTC effective from January 1, 2014 regulated VAT and Import Export Tax
for cultivation, livestock and aquatic products.
Inbound manufactured products
1. Raw or preliminary treated products
Raw o preliminary treated products which produced / fished and sold by individuals
or organizations are not subject to VAT.
Raw or preliminary treated products which traded among VAT deduction registered
enterprises / cooperatives are not subject to VAT.
Raw or preliminary treated products which are sold by VAT deduction registered
enterprises / cooperatives to other enterprises / entrepreneurs / individuals are
subject to 5% VAT.
2. Processed products produced and traded by VAT deduction method enterprises /
cooperatives are subject to 10% VAT.
3. Processed or unprocessed products traded by enterprises / cooperatives /
entrepreneurs / individuals registered VAT direct method are subject to VAT of
1% of revenue.
Imported products
Imported raw or preliminary treated products are subject to Import Tax only.
Imported processed products are subject to Import Tax and VAT.
Import Tax = Import tax rate x Import price
VAT = VAT rate x (Import price + Import tax)
Tax and duties on imported products
Import Tax Import Tax VAT
Seafood 0-30% Coffee, tea, pepper 15-40% 10%
Dairy 0-20% Grains 0-40% 10%
Livestock 0-5% Oil & fats 3-30% 10%
Meat 7-40% Sugar 0-40% 10%
Eggs, honey 0-30% Raw feed 0% 10%
Source: VAT Law 31/2013/QH13, Decree 209/2013/ND-CP, Circular 164/2013/TT-BTC
Exported products
Products for export are not subject to Export Tax and subject to 0% VAT.
Impacts of TPP on food
TPP technically allows the member countries to have free tariff when trading among
others. As such, while Vietnam has limitations or even unavailability of Sanitary and
Phyto-sanitary Measures (SPS); technical barriers to trade (TBT) comprised of
requirements on packaging, records, logistics, etc. and; commercial defense
measures such as anti-dumping, anti-subsidy, etc.; the country’s domestic food
market will confront significant competitive pressure from TPP countries in terms of
technology, quality and even price.
www.VPBS.com.vn Page | 21
As an agriculturally focused country in general, Vietnam has become one of the
largest agri-products export countries in the world and is likely to exert demands on
TPP partners to open their markets apart from the free trade tariffs. However, TPP
appears to have no limitations on rights of using the SPS, TBT and the commercial
defense measures for import countries. A chapter of discussion about these
instruments is available in TPP but mainly emphasize the cooperative manner in
dealing with complaints (if any) amongst the countries. In fact, there was a tendency
observed globally that the other protective measures will be escalated in response to
tariffs being removed.
Thus, we envision that Vietnam is in need of effectively improving its protective
measures such as roadmap of custom tariffs (not strict but feasible in TPP), Tariffs
Rate Quota (the most feasible and widely accepted in TPP), SPS and TBT. Although
SPS and TBT are very popular in the United States, Australia and New Zealand,
Vietnam, however, is facing obstacles in execution of these two measures. It is due to
(1) too high standards causing difficulty for local products and (2) insufficient
resources to assure compliance of products exported to Vietnam. As such, technical
support commitments in particular matters should be required for TPP countries.
Potential of focused categories
Within the focused categories, dairy possesses the strongest momentum to enter
into a growth phase thanks to low milk consumption per capita and accelerating
habits of drinking milk as an essential daily nutrition among Vietnamese consumers.
Meanwhile, other categories including seafood, noodles, sauces and dressing
condiments, confectionery and bakery are reaching maturity with a slowdown in their
growth rate. This is attributable to the majority of consumers being fully aware and
using the products for a long term (noodles, sauces and dressing condiments) and
due to the nature of discretionary goods (confectionery and bakery). For seafood,
Vietnam is the third largest country in fishery and aquaculture (after China and India).
Although, around 60% of total seafood production is for export, local people have
also consumed a large volume of seafood with extreme hikes in the period 2009 to
2012. However, these categories remain attractive as they are driven by a golden
population demographic, rapid urbanization rate, economic growth, rising disposable
income and high density of retail outlets.
SEAFOOD
Production growth plummeted due to wide-spread Early Mortality
Syndrome on shrimp farming
Vietnam possesses an interlacing system of rivers and a 3,260 km long coastline. It is
ranked third in 2013 among the largest countries for fishery and aquaculture
activities, preceded only by China and India. Fishery volume (mainly from tuna) has
recently grown every year thanks to favorable weather conditions and a new fishing
technique of using high pressure lamps, which helps double productivity and saves
15 to 30% of the fishing time. The decline in growth of production value during 2012
and 2013 was due to approximately 100,000 hectares of shrimp farms, which account
for 15% of the country’s total shrimp farms, suffering from Early Mortality Syndrome
(EMS). The disease, however, has been controlled since Q4 2013 and is no longer a
threat. In 2013, seafood production rose 3.4% to reach 6 million tons in volume and
grew 7% to reach USD11.4 billion in value.
www.VPBS.com.vn Page | 22
Seafood production volume and growth Seafood production value and growth
Source: VASEP, GSO Vietnam Source: VASEP, GSO Vietnam
Low quality of breeding seeds
Breeding seeds play a critical role in the value chain of seafood production and have
strong influence on the latter stages of production. However, quality of breeding
seeds remains low in Vietnam. For pangasius, seed parents are mainly sourced from
local farmers with uncertain quality and limited technological know-how, which led
to the recent phenomenon of degeneracy. For shrimp, the parents mostly depend on
natural fishery with inequitable quality and not many passed through quarantine.
Administration on breeding seeds remained undisciplined with vague regulation on
farming, quarantine and inspection. Consequently, shrimp have been subject to low
immunity toward diseases, such as the recent EMS disturbance. Currently, quality-
controlled shrimp seeds are mostly distributed by CP Vietnam and Uni-President
Vietnam with a capacity of 1 to 2 billion seed parents per annum.
Raw materials for aquatic feed production mainly imported
According to the Vietnam Association of Seafood Exporters and Producers (VASEP),
there are 130 aqua-feed manufacturers providing 3.8 million tons of feed per year,
meeting 85.6% of local demand. Of these, 96 factories produce feed for pangasius
and the remaining factories produce for black tiger shrimp and white legged shrimp.
Import of finished aqua-feed has been decreasing over time but 50% of the raw
materials for the feed production (soybean, soya oil cake, maize, fish meal, group of
acid amines, etc.) still depend on imports. At the moment, the aqua-feed market is
largely dominated by Uni-President and CP Thailand with 35 to 45% of market share.
Domestic seafood consumption reached USD5.3 billion in 2013
The domestic market made a minor contribution of less than 5% of the revenue of
local seafood producers. This was attributable to lower selling prices relative to
export prices, while cost of production, logistics and promotion advertising were still
high. Further, Vietnamese consumers are acquainted with purchasing fresh seafood
from traditional wet markets while the local producers concentrate on frozen-
processed seafood. In 2013, domestic consumption of seafood reached USD5.3
billion, accounting for 43.9% of total local production and import value, which was
USD12.1 billion. According to the Center of Planning and Development of Aquatic
Products, domestic consumption will increase annually at 5.4% on average for the
period from 2011 to 2020.
2,281 2,414 2,514 2,705 2,804
2,590 2,728 2,933 3,115 3,216
5.8% 5.6% 5.9% 6.9%
3.4%
0%
2%
4%
6%
8%
0
2,000
4,000
6,000
8,000
2009 2010 2011 2012 2013
Catch ('000 tons) Aquaculture ('000 tons)
Growth (%)
2.4 2.8 3.7 4.3 4.6
3.4 4.5
6.0 6.3 6.8
11.0%
24.9%
34.4%
8.9% 7.0%
0%
10%
20%
30%
40%
0
2
4
6
8
10
12
2009 2010 2011 2012 2013
Catch (USD bn) Aquaculture (USD bn)
Growth (%)
www.VPBS.com.vn Page | 23
Seafood local consumption value and growth
Source: VASEP, VPBS research
Export value recorded USD6.7 billion in 2013
According to General Department of Vietnam Customs, in 2013, export of aquatic
products recorded USD6.7 billion, rising 9.8% relative to 2012. The US, EU, Japan,
China, Hong Kong and Korea were primary export markets of the sector, together
occupying 71% of the export value. However, only the US and China had a fast
growth pace of more than 25% last year. In terms of aqua-product categories, the
country exported USD3.11 billion of shrimp, which accounted for 46% of total export
value, followed by USD1.76 billion of pangasius (26%) and USD526.7 million of tuna
(8%).
Seafood export value and growth Top 10 seafood exporters, 2013 (USD mn)
Source: VASEP Source: VASEP
Almost 73% of total seafood export value belongs to 100 seafood processing
companies, in which the top 10 contributed 22.8% to the export value in 2013. Minh
Phu was the leader with USD411.6 million. If its subsidiary, Minh Phu Hau Giang, was
counted, the Company would account for 8% of the export value and left the other
peers in its wake such as Vinh Hoan (USD166.3 million or 2.5%) and Seapimex
(USD158.8 million or 2.4%). Hung Vuong and its subsidiary, Agifish, together, are
considered to be the biggest producer of pangasius. If standing alone, Hung Vuong is
the second largest after Vinh Hoan in pangasius production.
1.8 2.6
4.2 5.1 5.3
77.1%
38.9%
63.9%
22.7%
3.8%
0%
20%
40%
60%
80%
100%
0
2
4
6
2009 2010 2011 2012 2013
Local consumption
(USD bn)
Growth (%)
4.3 5.0
6.1 6.1 6.7
-5.6%
18.4% 21.6%
0.3%
9.8%
-10%
-5%
0%
5%
10%
15%
20%
25%
0
2
4
6
8
2009 2010 2011 2012 2013
Export (USD bn) Growth (%)411.6
166.3
158.8
147.8
132.2
128.8
112.7
105.6
104.1
103
Minh Phu (MPC)
Vinh Hoan (VHC)
Seapimex
Quoc Viet
Cases
Minh Phu - Hau Giang
Agifish (AGF)
Hung Vuong (HVG)
Au Vung
Sao Ta (FMC)
www.VPBS.com.vn Page | 24
Seafood export markets, 2013 Seafood export value by categories, 2013
Source: VASEP Source: VASEP
High anti-dumping tax
According to VASEP, the US Department of Commerce has recently announced the
final results of the ninth anti-dumping duty administration review between August 1,
2011 and July 31, 2012 towards frozen processed pangasius imported from Vietnam.
Therein, Vinh Hoan was entitled to the most favorable rate of USD0 per kg instead of
USD0.03 per kg previously. Hung Vuong retained the last levy of USD1.2 per kg. The
tax rate significantly increased from USD0.42 per kg since the end of March 2014 to
USD1.2 per kg at present. The general rate of USD2.11 per kg is applied for other
Vietnam exporters. The representative of VASEP asserted that this was an
unreasonable, inconsistent and protective judgment that caused disadvantage to
Vietnam’s pangasius. We project that the country’s export of pangasius will
slowdown in the foreseeable future.
Export price of pangasius declined while that of shrimp hiked
The export price of pangasius in 2013 was USD2.2 per kg, a decrease of 9.1% due to
fierce competition among 230 local exporters while it was expected to increase by
1.8% to USD1.7 per kg because of reduction in output volume in the year.
The export price of shrimp rose 20% in 2013, which was attributed to the outbreak of
EMS worldwide. EMS spread through the major shrimp producing countries of
China, India, Vietnam and Thailand which caused global shrimp output to drop
precipitously 23% in the year. However, as mentioned earlier, the disease has been
brought under control and a gradual reduction in price is expected as production
recovers.
TPP offers not much benefit on tariffs, but challenging local
competition
Theoretically, TPP allows aquatic products from Vietnam to enjoy a tariff of 0% when
exporting to TPP countries, especially the US and Japan. These two key markets
accounted for 39% of total seafood export value in 2013. However, this tariff benefit
seems, in fact, to be insignificant. For instance, import tariffs for the US market are
relatively low (0.3% for raw seafood, 4.7% for processed seafood); the rates for Peru
and Canada are roughly 0%, while Malaysia, Singapore, Australia have removed
tariffs in accordance with ASEAN free trade agreements. For the Japan market, the
import tariffs for Vietnam’s aquatic products were lower than that of other countries
(3.5% for raw seafood, 7.3% for processed seafood). Thus, TPP brings more of a
22%
17%
17% 8%
7%
6%
3%
20%
US
EU
Japan
China & HK
Korea
Asean
Australia
Others
26%
25% 21%
8%
6% 3% 2%
1% 8%
Pangasius
Black tiger shrimp
White leg shrimp
Tuna
Squid & octopus
Other shrimps
Crab
Molluse
Others
www.VPBS.com.vn Page | 25
competitive edge to Vietnam, relative to other countries, when exporting into Japan’s
market.
In terms of imports, Vietnam currently imposes quite high tariff barriers of 15% for
raw seafood and 30% for processed seafood. Companies in TPP countries exporting
aquatic products into Vietnam will be entitled to have the barrier totally removed,
which will undoubtedly bring huge competitive pressure for the local players. For
domestic companies using imported raw materials, TPP does not make big changes
because taxes imposed on imported materials for exported goods will be refunded.
Obviously, if taking a particular consideration, these companies will save opportunity
cost on tax reimbursement procedures and tax payments, which is seen as an
advantage but not remarkable. Thus, TPP offers insignificant benefits on customs
tariffs for aquatic-product-export enterprises while creating significant competition
for domestic-market-focused enterprises.
DAIRY
Strongest momentum to enter growth phase; powdered milk and
drinking milk dominated dairy market
According to Nielsen’s research, per capita milk consumption in Vietnam was just 15
liters per annum, far behind Thailand (34 liters / year), China (25 liters / year) and the
UK (112 liters / year) in 2012, an indication of colossal market growth opportunity for
dairy products. The Vietnam Department of Livestock Production estimates
Vietnamese people will consume 28 liters of milk per year by 2020. Moreover, the
customer base for dairy products has broadened thanks to the manufacturers
continued efforts to target different demographic segments, such as female
professionals and seniors. Thanks to low per capita milk consumption, rising health
consciousness, new habits of drinking milk, and a growing customer base, we
believe this category possesses the strongest momentum to enter a growth phase.
Dairy sales value and growth
Source: Euromonitor International, VPBS Research
The dairy sector, valued at VND62.2 trillion (USD2.9 billion) in 2013, is among the
fastest-growing in Vietnam’s non-discretionary consumer sector, with an increase of
16.5% in 2013 and a CAGR of 14% over the period 2010 to 2013.Vietnam dairy
revenue comes mainly from two segments: powdered milk and drinking milk. These
two segments’ revenue accounts for 74% of the total market value which is USD 2.2
billion (VND 45,900 billion). According to Euromonitor International, Vietnam’s dairy
market value will have increases of 20% and 23% for the year 2014 and 2015. Yogurt
is reckoned to be the segment which will bring high profit thanks to undeveloped
market either in demand or supply.
42.0 47.3 53.3 62.2
74.6 91.7
12% 13% 13%
17%
20% 23%
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
2010 2011 2012 2013 2014F 2015F
Value (VND tn)
Growth (%)
www.VPBS.com.vn Page | 26
Dairy category volume breakdown Dairy category value breakdown
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Local raw fresh milk supply only meets less than one-third of
production demand,
The sector faces supply and demand imbalances in raw fresh milk as domestic herds
(184,216 cows) were able to provide only 420,000 tons of raw milk, about 28% of total
domestic demand for production in 2013. Vietnam is ranked in the top 20 countries
worldwide importing input materials for dairy production. In 2013, the country
imported around 1.2 million tons of raw milk powder valued at USD841 million. Thus,
heavy dependence on imported materials brings the attendant risk of profit margins
being squeezed out due to global price fluctuation. However, this risk is mitigated by
strong consumer loyalty for prominent brands and because milk products are
exposed to low price elasticity of demand relative to other categories. The
Department of Livestock Production estimates local milk production will surge to
856,000 tons in 2017 (326,000 cows herd) and 1,000,000 tons (500,000 cows herd) by
2020, yet the supply will only meet 30% of local demand.
Milk cow herd (cows) Raw fresh milk local production
Source: Department of Livestock Production Source: Department of Livestock Production
Market concentrated on Vinamilk and Friesland Campina
Out of the 20 local milk producers, only TH Milk ultimately enjoys internal control in
raw fresh milk for production. The company currently owns a herd of 45,000 cows
farmed on 8,100 ha of land that produce 400 tons of fresh raw milk on a daily basis.
TH Milk has set targets to own the largest herd of 137,000 cows by 2017 and 203,000
cows by 2020 nationwide. The other players such as Vinamilk, Nutifood Friesland
Campina Vietnam, Moc Chau can partly supply fresh milk. Their shortage in input
material is overcome by purchases from domestic farmers and imports. Vinamilk is
now the largest fresh milk collector, purchasing more than 60% of fresh milk from
farmers across the country. The second largest fresh milk collector is Friesland
Campina Vietnam (Dutch Lady brand milk). The company has purchased nearly
670
55% 245
20%
200
16%
70
6%
30
3%
5
0%
Y2013 (000 tons) Drinking milk
Yogurt
Condensed milk
Powdered milk
Ice-cream
Cheese
27.9
45%
18.0
29%
7.7
13%
5.1
8%
3.2
5%
0.2
0%
Y2013 (VND tn)
Powdered milk
Drinking milk
Yogurt
Condensed milk
Ice-cream
Cheese
133 152 167 184 326 500
15.3% 14.5% 10.0% 10.3%
77.0%
53.4%
0%
20%
40%
60%
80%
100%
0
100
200
300
400
500
600
2010 2011 2012 2013 2017F 2020F
Thousand Cows Growth (%)
320 368 382 420
856
1,000
15.1% 15.0% 3.8%
9.9%
103.8%
16.8%
0%
20%
40%
60%
80%
100%
120%
-
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2017F 2020F
Thousand tons Growth (%)
www.VPBS.com.vn Page | 27
82,000 tons of fresh milk from local farms in 2013, accounting for about 20% of total
domestic fresh milk production. These two companies dominate the local market
with 46% and 20% market shares respectively. We expect fiercer competition among
existing players due to the increasing number of brand substitutes and low threats of
new entrants as the category has relatively high barriers to entry.
Dairy market shares, 2013
Source: Euromonitor International, VPBS Research
Downtrend in world price of raw milk powder benefits local
producers
Milk production in Vietnam comes from two sources: from cow farms and imports.
Imported dairy ingredients include milk powder and raw milk products. Raw milk
products are imported not only to produce milk but also to produce such as
confectionery, functional foods, nutritional foods milk. etc.... Vietnam imports raw
milk products mainly from New Zealand, America, Australia and Europe. Costs of raw
milk accounts for approximately 65 to 70% of total input costs. Thus, any change in
world production could cause price volatility and shortages that would negatively
affect local production.
USDA skim milk powder spot price (USD/MT) USDA whole milk powder spot price (USD/MT)
Source: Bloomberg Source: Bloomberg
After a hike in Q2 2013, the price of skim milk powder (1.25% butterfat) and whole
milk powder (26% butterfat) has decreased significantly to this date. The skim milk
powder spot price was down 19.6% y-o-y from USD5,225 per metric ton (MT) to
USD4,200 per MT as of the end of May 20, 2014. Also, the whole milk powder spot
price dropped 22.5% y-o-y from USD5,600 per MT to USD4,337.5 per MT as of May
20, 2014. USDA expects the downward trend will be on-going through the end of
2014 due to world production increases through herd expansion and higher yield
outputs per cow. Therefore, we believe the favorable trend in world prices of raw
milk powder will favorably benefit the gross margin of local producers in 2014.
46%
20%
34% Vinamilk
Friesland Campina
Others
0
1000
2000
3000
4000
5000
6000
1-Jan-09 1-Jan-10 1-Jan-11 1-Jan-12 1-Jan-13 1-Jan-14
0
1000
2000
3000
4000
5000
6000
1-Jan-09 1-Jan-10 1-Jan-11 1-Jan-12 1-Jan-13 1-Jan-14
www.VPBS.com.vn Page | 28
Imposed ceiling prices on milk products for children under 6 years
old
According to Decision 1079/QD-BTC, effective from June 1, 2014, 25 milk products for
children under 6 years of age have had ceiling prices imposed for both wholesale and
retail distribution. The wholesale ceiling price has ranged from VND72,000 to
VND610,000 for different brands including Dielac Alpha, Frisolac Gold, Nan,
Lactogen, Enfagrow, Enfamil, Abbott, Similac and Grow G-Power. The retail ceiling
price was determined by the sum of wholesale ceiling prices and other relevant
expenses (capped at 15% of the wholesale ceiling price) and regulated by the Price
Administration Bureau.
Powdered milk and drinking milk
Robust appetite for powdered milk and drinking milk
We saw robust consumption in powdered milk and drinking milk over the period of
2010 to 2013. Powdered milk, which made up 45% of Vietnam’s dairy market, posted
a CAGR of 10.1% and VND27.9 trillion (USD1.32 billion) worth in 2013. Drinking milk
accounts for 29% of the dairy market’s value, or VND18 trillion (USD851.6 million), in
2013. The sub-category recorded a remarkable CAGR of 18.9% during the same
period. As the majority of input materials for powdered milk and drinking milk are
sourced from overseas, local producers will benefit from the capability to pass on
incremental costs to end users when import prices rise.
Powdered milk value and growth Drinking milk value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Foreign players control powdered milk, leaving drinking milk for local
competitors
With the advantages of worldwide large-scale farming of cow herds, big production
capacity and modern technologies, foreign players firmly controlled the local
powdered milk market with 53.1% market shares in 2013. As such, Abbott was
leading with 24.5% value share, followed by Mead Johnson and Friesland Campina
with that of 14.4% and 14.2%, respectively. However, Vinamilk also had significant
presence in the powdered milk market with 19% value share.
Conversely, local players dominated the drinking milk market which was led by
Vinamilk with 45.5% market shares in 2013. While Friesland Campina owned a
considerable market share of 20.3% and Nestle had a modest share at 7.4%.
20.9 22.3 24.0 27.9
6.8% 7.0% 7.6%
15.9%
0%
5%
10%
15%
20%
0
10
20
30
2010 2011 2012 2013
Value (VND tn) Growth (%)
10.7 12.9
15.5 18.0
15.5%
20.4% 20.6%
15.8%
0%
5%
10%
15%
20%
25%
0
5
10
15
20
2010 2011 2012 2013
Value (VND tn) Growth (%)
www.VPBS.com.vn Page | 29
Powdered milk key players Drinking milk key players
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Yogurt
Yogurt registered the fastest growth among other dairy categories
Yogurt is traditionally perceived by Vietnamese consumers to be a healthy food that
provides digestion benefits after meals. Due to growing attention to food safety and
hygiene, consumers have quickly shifted to branded yogurt on the shelves as a
strong alternative to unbranded ones. Hence, yogurt registered the fastest value
growth rate of 34.3% to VND7.7 trillion (USD364.7 million) in 2013, producing an
impressive CAGR of 32.7% during 2010-2013.
Vinamilk – dominant yogurt market
In 2013, Vinamilk continued to lead the yogurt market, with 73% value share, in which
eating yogurt commanded a 95% value share. Local consumers are said to be loyal
towards the strong national brand given its long reputation for product quality and
dense marketing campaigns.
Yogurt market value and growth Yogurt market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Condensed Milk
Growing maturity, condensed milk remains a key dairy product of low-
income earners
In spite of low nutritional content, condensed milk held 8.3% value share within the
dairy market thanks to its long prevalence among Vietnamese consumers, especially
low-income earners. However, as the performance of drinking milk and powdered
milk posted robust growth, demand for condensed milk is confronting the maturity
stage. The category’s growth slowed to 2.5-3% y-o-y in value during 2010-2013 as
consumers’ disposable income has increased and they began a shift to more nutrient
rich dairy products.
23.3% 23.8% 24.2% 24.5%
18.0% 18.5% 18.7% 19.0%
14.3% 14.3% 14.3% 14.4% 13.9% 14.1% 14.0% 14.2%
30.5% 29.3% 28.8% 27.9%
2010 2011 2012 2013
Abbott Vinamilk Mead Johnson Friesland Others
38.7% 40.9% 43.3% 45.5%
25.2% 23.5% 22.3% 20.3% 7.2% 7.4% 7.3% 7.4%
28.9% 28.2% 27.1% 26.8%
2010 2011 2012 2013
Vinamilk Friesland Nestle Vietnam Others
3.3 4.5
5.7 7.7
29.7%
36.5%
27.4%
34.3%
0%
10%
20%
30%
40%
0
2
4
6
8
10
2010 2011 2012 2013
Value (VND tn) Growth (%)
73%
8%
6%
13% Vinamilk
IDP Ba Vi Milk
TH Milk
Others
www.VPBS.com.vn Page | 30
Condensed milk market value and growth Condensed milk market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Vinamilk in control of the condensed milk market
Vinamilk, with its two prominent brands Longevity and Southern Star, have long
dominated the condensed milk market and accounted for approximately 80% of the
total sale value. Friesland Campina remained the second largest player with two key
brands of Dutch Lady and Completa.
Ice cream
Steady growth in demand- Thanks to the escalating number of youth who
perceive ice cream to be a tasty dessert or snack and the growing number of modern
style coffee shops that serve a variety of flavors and sizes, demand for ice cream has
grown steadily to VND3.2 trillion (USD152.8 million) and reported a CAGR of 12.8%
over the period 2010 to 2013.
Ice cream still dominated by local brands, yet foreigner’s rising footprints
In 2013, Kinh Do retained its leading position in the Vietnamese ice cream market
with its two brands of Celano and Merino accounting for a 29% market share.
Vinamilk and Thuy Ta followed in second and third places. Kinh Do’s competitive
edge is attributed to their strong brand awareness, deep market penetration in terms
of preferences and tastes of the local consumer as well as regular sweepstakes and
discounts. In fact, Kinh Do also enjoyed the highest retail value growth of 27.8% in
2013 for ice cream. There is, however, an increasing presence of foreign brands in
the manner of franchise including Baskin-Robbins, Snowee, HaagenDazs, New
Zealand, Bud’s, Monte Rosa, Fanny, etc. Although the ice cream market is dominated
by local players with very competitive prices and attractive packaging, urban
consumers are becoming more captivated by foreign brands thanks to their plentiful
flavors and modern style outlets.
Ice-cream market value and growth Ice-cream market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
4.7
4.9
5.0
5.1 2.5% 3.0%
2.7% 3.0%
0%
1%
2%
3%
4%
4.4
4.6
4.8
5.0
5.2
2010 2011 2012 2013
Value (VND tn) Growth (%)
80%
20%
Vinamilk
Others
2.2 2.5 2.8 3.2
10.2% 11.5%
12.9% 14.0%
0%
5%
10%
15%
0
1
2
3
4
2010 2011 2012 2013
Value (VND tn) Value growth (%)
29%
10% 4%
57%
Kinh Do (KDC)
Vinamilk (VNM)
Thuy Ta
Others
www.VPBS.com.vn Page | 31
NOODLES
Despite slow growth, noodles hit USD1 billion sales in 2013
According to the Word Instant Noodle Association (WINA) Vietnam ranks number
four in instant noodles consumption with a demand of 5 billion units each year (56.2
instant noodles units/person/year) behind China, Indonesia and India. Currently
Vietnam has about 600 noodles brands which are distributed in a system of
supermarkets such as Co.opmart, Maximark, and Lotte Mart. Domestic production
accounts for 95% of market share. In 2013, noodles recorded a slower increase in
both volume and value, but the sales value surpassed USD1 billion (VND21.7 trillion),
with the volume of 432 thousand tons. The growth for noodles was attributable to its
convenience as an alternative to rice and has plenty of flavor, their pack size and
price as well as marketing communication efforts of the market players.
New launch of Kokomi of Masan Food, a brand targeting the low-income segment,
was one of the most successful combinations of running effective commercial
advertising, boosting store displays and competitive pricing. Both international and
local producers retained their positive perception of the noodle market’s potentiality.
Noodles market volume & growth Noodles market value & growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Instant noodles occupy almost all of the total noodle consumption, of which pouch
instant noodles was the major packaging with 92% contribution to the sales value.
However, high convenience in daily usage led cups or bowls of instant noodles to
stay popular among Vietnamese consumers, especially youngsters, workers and
busy officers. This type of packaging reported a volume growth of 8.4% in 2013.
According to our analysis, Vietnam consumes a high amount of noodles partly due to
the desire to save money in unstable economic situations and also because noodles
347 375 403 432 458 481
8.2% 8.0% 7.5% 7.0%
6.1% 5.1%
0%
2%
4%
6%
8%
10%
-
100
200
300
400
500
600
2010 2011 2012 2013 2014F 2015F
Volume ('000 tons) Growth (%)
14.4 17.1
20.1 21.7
23.3 24.6 19.1% 18.6% 17.4%
8.3% 7.0% 5.9%
0%
5%
10%
15%
20%
25%
0
5
10
15
20
25
30
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
Noodles sales value breakdown, 2013 (VND bn) Instant noodles sales value breakdown, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
21,686
99.7%
61
0.3%
Instant Noodles
Plain Noodles
1,801
8%
19,885
92%
Cups / bowl
instant noodles
Pouch instant
noodles
www.VPBS.com.vn Page | 32
meet the local people’s taste: spicy and sour However, we reckon that the noodle
market will see a slowdown in growth because of trends towards more healthy
nutrition while instant noodles are not considered to be a healthy food.
Acecook Vietnam, Masan Food & Asia Food own 80% of noodle
market
As one of the pioneers in the production of instant noodles in Vietnam, Acecook
Vietnam maintained its leading position in the last three years with 51.5% market
share in 2013 with twenty noodles brands in 2013. Popular brands of Acecook
Vietnam including brands in economic segment (VND 2500-5500/ pack) as Hao Hao,
Vina Acecook and Hao 100 are already common staples of many consumers and
accounted for almost half of the entire noodle brand share. The company’s
competitive strategy is to build strong brands with high product diversification to
meet preferences and tastes of consumers.
Masan Consumer was the second biggest player with 16.5% value share in the
noodle market thanks to the company’s focus on different market segments as
Omachiand Kokomi noodles and on-going marketing activities with attractive
messages. As such, the Kokomi brand targets the low income segment with a very
low price VND3,000 (USD0.14) per pack and a message of ‘Dai Ngon Tung Soi’
(Chewy Noodle Strand).Meanwhile, Asia Food gains market presence through its
series of social donation activities. For instance, for each pack of Gau Do instant
noodles sold, the company will contribute VND10 (USD0.04 cent) to a fund for
underprivileged children. The Gau Do ranked fourth (9.3%) in 2013 noodle brand
share. Asia Foods’ main products include instant noodles, instant porridge and
noodle soup ("Gau Do", "Hello", "Vifood" and "Hao Hang", etc). In particular, the Hello
product lines give Asia Foods participation in the high class segment and account for
12.1% of the market today
Noodles market shares, 2013 Noodles brand shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
SAUCES AND DRESSING CONDIMENTS
Most condiments have reached maturity
Fish sauce, Mono Sodium Glutamate (MSG) and soya sauce remain very popular and
irreplaceable condiments in the daily meals of Vietnamese people. Together, these
accounted for nearly 89% of the category sales valued at VND16.9 trillion (USD800.6
million). However, the value growth rate of sauces and dressing condiments in
Vietnam has dramatically dropped from 16.9% (2012) to 5.4% (2013). These
categories have reached maturity as consumers are fully aware of and have already
51.5%
16.5%
12.1%
5.4% 5.1%
9.4% Acecook Vietnam
Masan Consumer
Asia Food
Vifon
Saigon Vewong
Others
19.8%
19.4%
10.1% 9.3%
8.0%
5.7%
5.1%
22.6%
Hao Hao (Acecook VN)
Vina Acecook (Acecook VN)
Hao 100 (Acecook VN)
Gau Do (Asia Food)
Omachi (Masan Consumer)
Tien Vua (Masan Consumer)
A-one (Saigon Vewong)
Others
www.VPBS.com.vn Page | 33
used them for a long time. While fish sauces, MSG and soya sauces are mature
nationwide, bouillon cubes and powder, as modern alternatives, are poised to
become mature in urban areas.
Sauces & dressing condiments volume & growth Sauces & dressing condiments value & growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Accelerating use of bouillon cubes as an alternative to MSG in rural
areas
There was rising consumer usage of bouillon cubes for cooking as an alternative to
MSG in rural areas. By successfully delivering the ‘natural taste’ message, bouillon
cube producers have led rural people to enjoy meals with the natural sweetness of
stock meat instead of consuming pure MSG. The ‘Maggie 3 Ngot’ bouillon cube
(Maggie 3 sweets) of Masan Food has gained significant market presence.
Masan Consumer and Ajinomoto Vietnam control the market
Sauces, dressings and condiments are largely controlled by Masan Consumer and
Ajinomoto Vietnam with 65% market sales value. Among many popular brands, Nam
Ngu fish sauces, Tam Thai Tu and Chinsu soya sauces of Masan Food are leading
brands in the market with 43.4% market shares. Ajinomoto Vietnam was prominent
with Ajinomoto MSG brand accounting for 20.7% market shares.
411.5 438.4 461.6 484.4 506.2 527.1
6.6% 6.5%
5.3% 4.9% 4.5% 4.1%
0%
2%
4%
6%
8%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014F 2015F
Volume ('000 tons) Growth (%)
11.7 13.7
16.0 16.9 17.7 18.4 16.4% 17% 16.9%
5.4% 4.6% 4.2%
0%
5%
10%
15%
20%
0
5
10
15
20
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
Sauces & dressing condiments vol. breakdown Sauces & dressing condiments val. breakdown
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
280.3
58% 97.5
20%
74.9
16%
15.4
3%
16.3
3%
Y2013 ('000 tons)
Fish sauces
MSG
Soya sauces
Spicy chilli / pepper
Others
8.6
51% 4.8
29%
1.6
9%
0.6
3%
1.3
8%
Y2013 (VND tn)
Fish sauces
MSG
Soya sauces
Spicy chilli / pepper
Others
www.VPBS.com.vn Page | 34
C
ONFECTIONERY
Despite slower growth, Vietnam’s confectionery market still
outpaced its regional peers
In 2013, Vietnam’s confectionery market grew at a slower pace given its nature of
being a discretionary item in the context of slowing purchasing power. In 2013, the
category sales were VND16.6 trillion (USD0.79 billion), a rise of 9.4% versus 2012.
Despite this, Vietnam’s confectionery market still remains attractive in the SEA region
as it substantially outperforms the average growth of 3% in the region and that of
1.5% in the world.
Confectionery market volume and growth Confectionery market value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
The category is appealing in the long run thanks to increasing awareness of Western
culture and lifestyle among the Vietnam consumers and the much lower
confectionery consumption per capita of 1.8kg per annum relative to the global
average of 2.8kg. Euromonitor International expects the slow growth of the
confectionery market to continue in 2014 and 2015, however, the CAGR for the period
of 2013 to 2017 is projected to hover between 10% and 11%.
Biscuits, cookies, crackers and savory snacks are key drivers
In 2013, biscuits, cookies and cracker consumption reached 118.5 thousand tons or
VND6.9 trillion (USD0.33 billion), followed by savory snacks with that of 54.2
thousand tons or VND5.5 trillion (USD0.26 billion). These two sub-categories
dominated the confectionery market with 75% market shares, leaving the remaining
168 186 203 221 239 257
10.6% 10.3% 9.4%
8.6% 8.1% 7.6%
0%
2%
4%
6%
8%
10%
12%
-
50
100
150
200
250
300
2010 2011 2012 2013 2014F 2015F
Volume ('000 tons) Growth (%)
12.4 13.8 15.2 16.6 18.2 19.8
11.0% 11.1% 10.3%
9.4% 9.2% 8.9%
0%
5%
10%
15%
0
5
10
15
20
25
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
Sauces & dressing condiments market shares Sauces & dressing condiments brand shares
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
43.5%
21.5%
3.1%
3.0%
28.9%
Y2013
Masan Consumer
Ajinomoto Vietnam
Miwon Vietnam
Acecook Vietnam
Others
23.1%
20.7%
9.0% 5.8% 5.5%
35.9%
Y2013
Nam Ngu (Masan Consumer)
Ajinomoto (Ajinomoto VN)
Nam Ngu II (Masan Consumer)
Tam Thai Tu (Masan Consumer)
Chin-su (Masan Consumer)
Others
www.VPBS.com.vn Page | 35
minority to sugar and chocolate confectioneries with VND4.1 trillion (USD0.19
billion).
Biscuits, cookies and crackers
Savory biscuits / crackers and plain biscuits are the most consumed thanks
to less sugar and more vitamin content
Accounting for 42% of the confectionery market value, biscuits, cookies and crackers
recorded VND6.9 trillion (USD0.33 billion) sales in 2013, posting a CAGR of 9.2%
during 2010 to 2013. Since savory and plain biscuits and crackers contained less
sugar and more vitamins, these two segments are considered healthier products
among the other sub-categories. They remained the most consumed with reported
sales of VND5.3 trillion (USD0.25 billion) or 76% of total category value in 2013.
Market concentrated on Kinh Do
Kinh Do maintained the leading position in the sub-category with 30% market share
in 2013. The next competitors were far behind Kinh Do in grasping the market
including, Bibica (10%), Hai Chau (7%), Kraft Food (7%) and Hai Ha (6%). The AFC
from Kinh Do and Ritz from Kraft Food are well recognized brands of savory biscuits,
while Cosy Marie from Kinh Do was the most popular plain biscuit brand in Vietnam
thanks to its tasty flavor and reasonable price.
Biscuits, cookies, crackers value & growth Biscuits, cookies, crackers market shares
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Savory snacks
Demand remains strong despite unit price increases
With a 33% contribution to the confectionery market value, savory snacks reported
VND5.5 trillion (USD0.26 billion) sales in 2013, recording a higher CAGR of 9.5%
during 2010 to 2013 than biscuits, cookies and crackers. Despite increases of unit
5.3 5.9 6.4 6.9 7.5 8.1
9.6% 9.8% 9.1% 8.6% 8.5% 8.0%
0%
5%
10%
15%
0
2
4
6
8
10
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
30%
10%
7% 7% 6%
5% 5%
4%
26%
Kinh Do
Bibica
Hai Chau
Kraft Food
Hai Ha
Quang Ngai
Dong Khanh
Huu Nghi
Others
Y2013
Confectionery volume breakdown Confectionery value breakdown
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
118.5
54% 54.2
24%
44.2
20%
3.7
2%
Y2013 ('000 tons)
Biscuits, cookies, crackers
Savory snacks
Sugar confectionery
Chocolate confectionery
6.9
42%
5.5
33%
2.9
18%
1.2
7%
Y2013 (VND tn)
Biscuits, cookies, crackers
Savory snacks
Sugar confectionery
Chocolate confectionery
www.VPBS.com.vn Page | 36
price over the period, the sales posted a higher and flat growth rate, suggesting
demand for savory snacks remains strong. Extruded snacks and nuts accounted for
58% of the sub-category sales, equivalent to VND3.3 trillion (USD156.2 million) in
2013.
Market fragmented
The savory snack market is fragmented among the huge number of players each with
minority market shares. In 2013, these players included Tan Tan with 9.7% market
share, Tuyen Ky (7.6%) and Liwayway Food (a Philippines company – 7.3%). The
avory snack segment is not a focus of Kinh Do where its market share was only 4.3%.
Savory snacks value and growth Sweets and savory snacks market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Sugar confectioneries
Sugar confectioneries facing intense competition from savory snacks
Revenue growth of the sugar confectionery segment was 9.5% in 2013, which was
much slower than the levels recorded in 2011. This was attributed to rising consumer
awareness of health issues related to the level of sugar intake, such as high blood
pressure, obesity and diabetes. Thus, it led sugar confectioneries to confront strong
competition from savory snacks which are considered to have lower sugar content.
Pastilles, gums, jellies and chews continue to be the most popular sugar
confectionery category in Vietnam, accounting for 58% of the value or VND1.6 trillion
(USD75.7 million).
Sugar confectionery market value and growth Sugar confectionery market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Perfetti Van Melle, Bibica and Hai Ha are dominant market players
Perfetti Van Melle is still leading the sugar confectionery segment in Vietnam through
its Mentos, Alpenliebe and Golia brands, accounting for 20.1% of market share in
4.2 4.6 5.0
5.5 6.1
9.1% 9.2%
9.6% 9.6%
10.0%
9%
9%
10%
10%
11%
0
2
4
6
8
2010 2011 2012 2013 2014F
Value (VND tn) Growth (%)
9.7%
7.6%
7.3%
5.0%
4.4%
4.3%
61.7%
Tan Tan
Tuyen Ky
Liwayway Food
Seaspimex
Bibica
Kinh Do
Others
2.1 2.4 2.7 2.9 3.2
14.1% 15.4%
11.5% 9.5%
8.1%
0%
5%
10%
15%
20%
0
1
2
3
4
2010 2011 2012 2013 2014F
Value (VND tn) Growth (%)
20.1%
19.0%
18.2% 6.9%
4.3% 3.2% 2.7%
25.6%
Perfetti Van Melle
Hai Ha
Bibica
Hai Chau
Lotte
Mars
Kinh Do
Others
www.VPBS.com.vn Page | 37
2012. Bibica and Hai Ha closely followed the leader, taking second and third places
with market shares of 19% and 18.2%, respectively. While local companies target
low- and middle-income segments, international peers confine their focus to the
high-end segment.
BAKERY MARKET
Growth in the expansion of modern style bakery outlets
The bakery market enjoyed a CAGR of 7.6% over the period of 2010 to 2013, reaching
VND10.4 trillion (USD0.5 billion) by the end of 2013. This was due in part to a new
style of bakery outlet expanding quickly across Vietnam since 2010 and becoming
more and more popular as a place for people to gather, similar to coffee shops.
Kido’s Bakery, Onoré Bakery, Tous Le Jour, Paris Bagguette, Bread Talk and Brodard
bakery are some examples of this new style of bakery in Vietnam.
Bakery market volume and growth Bakery market value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Bread retained the biggest sales among other bakery products
As one of the popular alternatives to rice and noodles, bread retained its status as a
primary consumption bakery product compared to other sub-categories (such as
cakes and pastries) with VND8 trillion (USD378.7 million) sales in 2013, equivalent to
76.8% of total bakery market revenue.
Bakery categories breakdown
Source: Euromonitor International, VPBS research
Unpackaged baked goods growing presence
Thanks to the rising number of bakery outlets, sales value of unpackaged or artisanal
products has grown gradually, reaching VND4.1 trillion (USD195.2 million) and
accounting for 39.6% of total bakery sales. In 2013, packaged baked goods sales were
VND6.3 trillion (USD297 million). However, there is a low probability that unpackaged
products will have a strong impact on the revenue of packaged goods, as each
category serves different benefits. While packaged baked goods offers great
362 389 418 447 476 506
7.3% 7.4% 7.5%
6.9% 6.6% 6.4%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
0
200
400
600
2010 2011 2012 2013 2014F 2015F
Volume ('000 tons) Growth (%)
8.4 9.0 9.7 10.4 11.1 11.8
7.6% 7.8% 7.8%
7.0% 6.6% 6.6%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
0
5
10
15
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
8.0
77%
2.2
21%
0.2
2% Bread
Cake
Pastry
Y2013 (VND tn)
www.VPBS.com.vn Page | 38
convenience for busier lifestyles, consumers can enjoy more delicious taste of
unpackaged or artisanal products served in the modern bakery outlets.
Fragmentary market
The bakery market is highly fragmented, in which Kinh Do notably retained its first
place with 13.4% market shares in 2013 while other typical competitors such as Nhu
Lan, Duc Phat, Orion Food Vina and Bibica presented an average of 5.1% market
share each.
Bakery market shares, 2013
Source: Euromonitor International, VPBS research
Sugar price trends downward, wheat price bounds back
Sugar and wheat flour significantly account for about 35 to 40% of material costs of
confectionery and bakery production. Thus, any change in world production could
cause price volatility and shortages which in turn negatively affect local production.
In 2013, the favorable trend of world sugar and wheat price strongly supported the
gross margin of local players. 2013 was a third consecutive year world sugar prices
dropped due to production exceeding consumption demand. The USDA forecasts
sugar production will reach 175 million MT worldwide and the oversupply situation
will continue in 2014, a prospect for a fourth year of price descent. Relative to the
beginning of 2013, Sao Paolo refined sugar’s spot price decreased 16.9% to USD640
per MT as of May 20, 2014.
Sao Paolo refined sugar spot price US wheat spot price
Source: Bloomberg Source: Bloomberg
Vietnam was not an exception; its refined sugar wholesale price was down 18.7% y-
o-y to VND13,000 per kg in the third week of May 2014. In contrast to sugar, wheat
prices depend on the weather conditions in main areas of world wheat production,
such as North America and Canada, Brazil, Australia and were affected by political
turmoil in the Ukraine. Wheat prices were USD334 per MT as of May 20, 2014, an
increase of 15.2% compared to the beginning of the year. In 2014, the confectionery
business may not have as high a gross profit margin as in 2013 but we expect it will
not be too low as long as sugar’s price downtrend continues.
13.4%
5.9%
5.5%
4.5%
4.3% 66.4%
Kinh Do
Nhu Lan
Duc Phat
Orion Food Vina
Bibica
Others
0
200
400
600
800
1000
1200
1-Jan-09 1-Jan-10 1-Jan-11 1-Jan-12 1-Jan-13 1-Jan-14
USD/MT
0
100
200
300
400
500
20-Feb-09 20-Feb-10 20-Feb-11 20-Feb-12 20-Feb-13 20-Feb-14
USD/MT
www.VPBS.com.vn Page | 39
BEVERAGES
Beverage categories breakdown
In 2013, retail sales of the beverage sector in Vietnam reached USD8 billion, a 7.6%
rise compared with 2012. Alcoholic drinks were the largest category with 70%
contribution to total beverage market value. It modestly grew 6.3% up to USD5.6
billion, the lowest growth rate amongst other beverage categories. Soft drinks posted
the highest growth of 12.4% to record USD1.7 billion in sales value, while hot drinks
was the smallest segment with USD0.7 billion revenue in 2013.
Beverage categories sales and growth
Source: Euromonitor International, VPBS Research
Beverage distribution channels
The majority of alcoholic drinks were distributed through on-trade channels due to
rising common perception of drinking to socialize. Soft drinks followed the same
pattern but at a less steep ratio of 60:40 relative to the ratio of 80:20 of the alcoholic
drinks due to its convenience and high frequency of use. In contrast, hot drinks were
mainly consumed through off-trade channels as Vietnamese consumers consider hot
drinks a daily necessity and usually are consumed at home. In general, for each of
beverage category, there was 65% of off-trade sales value gone through the
traditional channels with almost 779,000 of traditional markets and private shops.
Beverage distribution channels
Source: Euromonitor International, VPBS Research
82.6% 59.6%
41.6%
17.4% 40.4%
58.4%
Alcoholic
drinks
Soft drinks Hot drinks
On-trade Off-trade
Beverage
categories
Alcoholic
Soft drinks
Hot drinks
2013 Sales
USD5.6 bn
USD1.7 bn
USD0.7 bn
2013 growth
6.3%
12.4%
6.9%
Key players
Sabeco, Habeco
PepsiCo, Tan Hiep Phat, URC VN
Nestle, Vinacafe, Vinatea
USD8 bn 7.6%
Off-trade On-trade
Modern trade
424 supermarkets
23 hypermarkets
365 minimarts &
convenient stores
35% off trade
560,000 café /
bars, restaurants
and food outlets
12,500 hotels
Traditional trade
778,959 traditional
markets & private
shops
65% off trade
www.VPBS.com.vn Page | 40
Tax and duties on beverages
1. Inbound manufactured products
Local manufactured products are subject to special consumption tax (SCT) and VAT
as follows:
[Special consumption tax (SCT) = SCT rate x Selling price before VAT (*)
[VAT = VAT rate x (Selling price before VAT (*) + SCT)
(*) Including package value
2. Imported products
Imported products are subject to Import Tax, Special Consumption Tax (SCT) and
VAT as follows:
Import Tax = Import tax rate x Import price (*)
Special Consumption Tax (SCT) = SCT rate x (Import price (*) + Import tax)
VAT = VAT rate x (Import price (*) + Import tax + SCT)
(*) Including package value
Tax and duties for beverages
Import Tax Special Consumption Tax (SCT) VAT
Current Current From July 1, 2015 (Draft) Current
Wine > 20% alcohol 45% 50% 65% 10%
Wine < 20% alcohol 50 - 55% 25% 35% 10%
Beer 35% 50% 65% 10%
Soft drinks (carbonate) 20 - 40% 0% 10% 10%
Source: Special Consumption Tax Law 27/2008/QH12, Circular 216/2009/TT-BT
Impacts of TPP on beverages
TPP offers new opportunities for (1) increasing export value (currently insignificant),
(2) applying self-certifying mechanisms on the products origins (3) attracting more
FDI from the US and TPP countries for local beverage sector and (4) participating in
the regional / global value chain (GVC) of local enterprises.
However, TPP also brings significant challenges to (1) huge competition of global
giant beverage groups when tax barriers are removed (2) deep market penetration of
foreign competitors through the GVC (3) squeezed out market shares of local alcohol
producers due to some segments of Vietnamese consumers’ preference for imported
alcohol brands..
Potential of beverage categories Beverages in Vietnam are reaching their
maturity phase, as such, all of the categories experienced slower growth. Despite
this, soft drinks posted a double-digit growth of 12.4% in 2013, the highest relative to
alcoholic drinks and hot drinks thanks to its high convenience and health benefits.
Further, alcoholic drinks are still considered as high potential due to Vietnamese
social customs of drinking as a means to establishing relationships for life and
business. These consumers ever growing exposure to worldwide drinking cultures
and the growing establishment of on-trade channels are also seen as crucial supports
for the category’s growth.
www.VPBS.com.vn Page | 41
ALCOHOLIC DRINKS
Drinking culture adoption stimulates growth
As increasing Vietnamese’s exposure to drinking cultures around the world couples
with their popular perception of drinking to socialize, Vietnam alcoholic drinks
consumption continues growing y-o-y and has gained the biggest retail sales among
other beverage categories. Further, rising numbers of tourists and expatriates living
in big cities also incentivize alcohol-serving retailers to expand, which in turn
stimulates local consumption as rising adoption of western lifestyle becomes more
prevalent.
In 2013, Vietnamese people drank a remarkable 3.15 billion liters of alcohol,
equivalent to VND119.5 trillion (USD5.6 billion), representing double-digit CAGR of
10.1% and 10.6% during 2010 to 2013. Despite its slowing growth since 2012 because
of reaching maturity, alcoholic drinks remains one of the potentially lucrative markets
in Vietnam. It is expected to reach USD6.3 billion in 2015 by Euromonitor
International.
Alcohol consumption volume and growth (liters /%) Alcohol consumption value and growth (VND trillion)
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Beer dominating the alcoholic market
Alcoholic beverage consumption is largely driven by the beer category which
accounted for 98% of sales volume and 91% of sales value in 2013. Spirits and wine
accounted for only 2.3% volume share (74 million liters) and 8.8% value share
(VND10.4 trillion or USD492 million). In 2013, beer consumption recorded more than
3 billion liters, equivalent to VND109.1 trillion (USD5.2 billion).
2.36 2.66
2.92 3.15 3.38 3.59 13.8% 12.6%
9.9% 7.9% 7.0% 6.3%
0%
5%
10%
15%
-
1
2
3
4
2010 2011 2012 2013 2014F 2015F
Volume (bn liters) Growth (%)
88.5
104.8 112.5 119.5 126.3 133.1 15.9% 18.4%
7.3% 6.3% 5.7% 5.4%
0%
5%
10%
15%
20%
0
50
100
150
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
Alcohol categories volume breakdown Alcohol categories value breakdown
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
3,079
97.7%
39
1.2% 35
1.1%
Y2013 (mn liters)
Beer
Spirits
Wine
109.1
91.3%
5.7
4.8%
4.7
4.0% Y2013 (VND tn)
Beer
Spirits
Wine
www.VPBS.com.vn Page | 42
Vietnam ranked fourth for beer consumption per capita in Asia
While Vietnam was leading in the SEA region with 29 liters of beer consumption per
capita in 2012, the country captured the 4th position for the entire Asia region, only
after Japan (64 liters), South Korea (45 liters) and China (37 liters). According to
Vietnam Breweries Associations (VBA), beer consumption per capita rose
approximately 10% up to 32 liters in 2013. As such, Vietnam is considered one of the
beer loving countries and is among the most attractive destinations for international
breweries.
Beer consumption per capita in selected Asia countries, 2012
Source: VPBS research
The Vietnam beer market had a CAGR of over 10% in volume and value during the
period from 2010 to2013. However, as the market becomes saturated, growth cannot
be as fast as it was prior to 2011. Beer is forecasted to grow at a slower pace with an
average 5.3% per annum and the sales will be USD5.7 billion by 2015.
Beer consumption volume and growth Beer consumption value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Lager dominating other types of beer
Lager is the main type of beer in Vietnam since Vietnamese consumers are already
familiar with the taste of lager and are reticent to try new tastes. Thus, other types of
beer such as dark beer, stout and low-alcohols have only a limited presence in the
market. Standard lager holds the lion’s share its biggest shares of 67% of total lager
due to still low disposal-income per capita. Also, there was a large gap of at least
43% higher in unit price range of each segment including premium, standard and
economy.
64
45 37
29 27
Japan South Korea China Vietnam Thailand
Liters per capita
2.3 2.6 2.9 3.1 3.3 3.5
13.9% 12.7% 9.9%
7.9% 7.1% 6.3%
0%
5%
10%
15%
0
1
2
3
4
2010 2011 2012 2013 2014F 2015F
Volume (bn liters) Growth (%)
80.1 95.8 102.8 109.1 115.1 121.1
16.2% 19.6%
7.3% 6.1% 5.5% 5.2%
0%
5%
10%
15%
20%
25%
0
50
100
150
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
www.VPBS.com.vn Page | 43
Sabeco and Habeco maintain market’s leading position
Domestic players control the local beer market, in all three segments of premium,
standard and economy. This is attributable to their long establishment and wide
distribution of domestic products as well as affordable prices, even for the premium
segment. The average unit price of foreign premium brands was normally 33% - 50%
higher than that of local premium brands.
Sabeco continued to lead the beer market with 47.5% value share in 2013. Its
prominent brands such as Saigon Export, 333’export and Saigon Lager accounted for
46.8% market shares by brands. Vietnam Brewery and Habeco hold the second and
third positions with market shares of 18.2% and 17.3% respectively. While Hanoi beer
brand of Habeco took 15.8% of brands share, Heineken and Tiger of Vietnam Brewery
occupied 11.5% of the pie. The top three players Sabeco, Vietnam Brewery and
Habeco, together, hold 83% of value sales of beer in 2013.
With a minimal presence in Vietnam’s beer market, foreign players mainly focused
on the premium segment, with brands introduced including San Miguel, Corona,
Carlsberg, Budweiser and Asahi. We anticipate foreign players will continue to fuel
the local beer market dynamics as they continue to exhibit interest in the market
potentiality and actively seek entry opportunities.
SOFT DRINKS
Highest growth rate amongst other beverages
Thanks to the growing health conscious of Vietnamese people and demand for more
convenient in today’s busier lifestyles, soft drinks with health benefits saw a
remarkable growth, such as RTD (ready to drink) tea, energy drinks and fruit /
Lager beer categories value share, 2013 Price range by beer segment, 2013 (VND)
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Beer market shares, 2013 Beer brand shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
73.0
67%
23.8
22%
12.4
11% Standard lager
Economy lager
Premium lager
36,000
23,000 16,000
52,000
36,000
22,000
Premium Standard Economy
47.5%
18.2%
17.3%
7.8%
9.2% Sabeco
Vietnam Breweries
Habeco
Hue Breweries
Others
24%
15.8%
14.4% 8.4%
7.7%
29.7%
Saigon Export (Sabeco)
Hanoi (Habeco)
333' export (Sabeco)
Saigon lager (Sabeco)
Heineken (Heineken /
Vietnam Breweries)
Others
www.VPBS.com.vn Page | 44
vegetable juice. Consumers also have concerns about food safety and the hygiene of
unpackaged drinks. Thus, products like bottled water, as a daily necessity, enjoyed
good performance since it has more benefits of convenience and cleanliness than
common tap water.
Among other beverages, soft drinks enjoyed the highest value growth rate of 12.4%
in 2013 and the strongest CAGR of 12.2% over 2010 to 2013. It was also the only
category that recorded double-digit growth of 15.9% in 2013 and CAGR of 17% over
2010 to 2013 in terms of sales volume. In 2013, soft drinks reported 2.4 billion liters
consumption, equivalent to VND36.2 trillion (USD1.7 billion).
Soft drinks sales volume and growth Soft drinks sales value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
RTD tea dominating the soft drinks
Tea is perceived as one of Vietnam’s traditional drinks and enjoys a long history.
With the advantages of convenience, refreshing and thirst-cooling characteristics,
RTD tea is the best choice for the tropical country with high humidity. Further, it also
offers good health benefits with low sugar content and more vitamins and minerals
relative to carbonates. As such, RTD contributed 58% to soft drink revenue while
carbonates took only 16% shares in 2013.
RTD tea enjoyed a rapid increase in 2009 to 2010 and then slowed down, yet still
maintained two-digit growth. In 2013, RTD tea reported VND21 trillion (USD994
million) value of sales, an increase of 12.2%, and 1 billion liters volume of sales, rose
13.3% compared to 2012. It represented a robust CAGR of 15.9% in volume and
14.9% in value over the period of 2010 to 2013.
1.5 1.8 2.1 2.4 2.7 3.1
18.8% 17.5% 17.1% 15.9%
14.6% 13.4%
0%
5%
10%
15%
20%
0
1
2
3
4
2010 2011 2012 2013 2014F 2015F
Volume (bn liters) Growth (%)
25.6 28.5 32.2 36.2 40.3 44.6
22.6%
11.6% 12.9% 12.4% 11.4% 10.6%
0%
5%
10%
15%
20%
25%
0
10
20
30
40
50
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
Soft drinks categories value breakdown RTD tea sales value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
21.0
58% 6.0
16%
5.7
16%
2.1
6%
1.0
3% 0.4
1%
Y2013 (VND tn)
RTD tea
Carbonates
Bottled water
Fruit/Vegetable juice
Sport/energy drinks
Others
13.8 16.4
18.7 21.0
23.4 25.7 39.8%
18.5% 14.1% 12.2% 11.4% 9.8%
0%
10%
20%
30%
40%
50%
0
5
10
15
20
25
30
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
www.VPBS.com.vn Page | 45
Tan Hiep Phat ranked second in soft drinks but first in RTD tea
In 2013, PepsiCo was leading the local soft drinks with 25.5% market share, closely
followed by Tan Hiep Phat (THP) with that of 22.7%. PepsiCo is prominent among
carbonates with brands such as Pepsi, 7-up and Mountain Dew, while THP was the
pioneer of RTD tea with Zero Degree and Dr. Thanh brands which led to a booming
demand for this herbal product during 2009 to 2010. The company highly dominated
the RTD tea market itself with 41% market shares. Its strong competitor is Universal
Robina Corporation (URC), with C2 brand which is also well-recognized by its taste
and handy bottle size.
HOT DRINKS
Instant format drives hot drinks to grow
Hot coffee and tea are long-standing traditional drinks of Vietnamese people. These
require time to serve by boiling ground coffee or tea leaves with water in a coffee
filter or teapot. Thus, development of instant products offers a perfect solution not
only to maintain the traditional drinking habit but also ensure convenience and time-
saving for busy lifestyles. A variety of formulas were successfully introduced with 3-
in-1 and 2-in-1 instant format for both coffee and tea. As such, the growth of hot
drinks is largely driven by instant products. Although the growth rate was not as high
as soft drinks, hot drinks recorded revenue of VND14.1 trillion (USD667.5 million),
rose 6.9%, and consumption volume of 117.1 thousand tons, grew 7.3%.
Soft drinks market shares, 2013
Source: Euromonitor International, VPBS research
RTD tea market share RTD tea brand shares
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
25.5%
22.7%
13.3%
10.5%
3.4%
24.7%
PepsiCo
Tan Hiep Phat
URC Vietnam
CocaCola
Vinamilk
Others
41%
20.8%
12.1%
10.8%
6.1% 9.2%
Tan Hiep Phat (THP)
URC Vietnam
Interfood
Tan Quang Minh (TQM)
Tribeco
Others
46.4%
19.6%
10.2%
9.1%
5% 9.4%
Zero degree green tea (THP)
C2 cool & clean (URC VN)
Wonderfarm (Interfood)
Nuta green tea lemon (TQM)
Tribeco (Tribeco)
Others
www.VPBS.com.vn Page | 46
Hot drinks sales volume and growth Hot drinks sales value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
Growing presence of coffee shops also an impetus
Most hot drink products were sold through off-trade channels which took 58.4% of
total sales value, with an increasing presence of on-trade channels such as coffee
chains with modern styles such as Highlands, Trung Nguyen, Gloria Jeans, The
Coffee Bean, Angel-in-us and Starbucks, all of which have bolstered this sector’s
growth. Their growth can also be attributed to the common cultural practice of
gathering and socializing at coffee shops in Vietnam.
Coffee accounted for the majority of hot drinks
Coffee continued to lead the hot drinks market with 60.8% share of total category
revenue (VND8 trillion or USD378.7 million), followed by tea with 28.2% shares
(VND3.7 trillion or USD175.1 million). Vietnam continues to be, no doubt, a strong
coffee drinking country.
In 2013, coffee posted a higher value growth of 7.7% than the overall hot drinks
category, of 6.9% thanks to robust accelerating demand for instant coffee which
currently accounts for 75% of the total sales value of coffee. While 3-in-1 products
(mixture of coffee, milk and sugar) have been widely accepted by consumers since
their initial launch in 2011, there has been a gradual shift to the 2-in-1 format (coffee
with sugar or milk), instant cappuccino and latte (Italian taste) as alternatives. There
is also a minimal presence of 4-in-1 instant coffee with ginseng or other nutritional
additives.
Hot drinks categories value breakdown Coffee sales value and growth
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
94.5 101.6 109.1 117.1 125.6
134.7
7.6%
7.5%
7.4% 7.3%
7.2% 7.2% 7.0%
7.2%
7.4%
7.6%
7.8%
0
50
100
150
2010 2011 2012 2013 2014F 2015F
Volume ('000 tons) Growth (%)
11.5 12.3 13.1 14.1 15.0 16.0
10.2%
7.1% 7.1% 6.9% 6.7% 6.4%
0%
2%
4%
6%
8%
10%
12%
0
5
10
15
20
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
8.0
60.8%
3.7
28.2%
1.5
11.0%
Y2013 (VND tn)
Coffee
Tea
Others
6.3 6.9 7.4
8.0 8.6
9.2
12.1%
8.5% 8.2% 7.7% 7.3% 6.8%
0%
5%
10%
15%
0
2
4
6
8
10
2010 2011 2012 2013 2014F 2015F
Value (VND tn) Growth (%)
www.VPBS.com.vn Page | 47
Market concentration on local players
The domestic hot coffee market was largely controlled by local companies including
Vinacafe Bien Hoa, Trung Nguyen and Viet Thai International, which together
occupied 56% market share in 2013. The competitive advantage of these competent
players is their deep penetration of the Vietnamese coffee culture and the benefits of
consumers’ preferences and tastes. However, with a colossal budget allocated to
marketing and promotion, Nestlé Vietnam has firmly captured consumers’ brand
awareness and holds the first position with 33% market share.
In 2013, Vietnam National Tea (Vinatea) continued to lead the local tea market, with
32% of the sales value, followed by Unilever Vietnam with that of 15.5%. Vinatea is
long-established with its industry experience and technology. Between 2010 and
2013, the tea category saw robust branding strategies come to the fore with
international companies. This has led to the rising market share of Unilever Vietnam
with well-recognized Lipton brand including Yellow Label and Clear Green.
Coffee market shares, 2013 Tea market shares, 2013
Source: Euromonitor International, VPBS research Source: Euromonitor International, VPBS research
33%
32.6%
18.1%
5.3%
11% Nestle Vietnam
Vinacafe Bien Hoa
Trung Nguyen
Viet Thai International
Others
32%
15.5%
52.5%
Vinatea
Unilever Vietnam
Others
www.VPBS.com.vn Page | 48
F&B STOCKS ON THE EXCHANGES
Currently, there are 45 food and beverage (F&B) companies listed on the HSX and
HNX with a total market cap of VND199.3 trillion (USD9.4 billion), representing 19.6%
of the total aggregate market cap of both exchanges.
The return-on-assets (ROA) and return-on-equity (ROE) for the F&B sector appear
attractive, averaging 8.4% and 18.8% in 2013, respectively. As of May 20, 2014, the
sector peers index was trading at an average PE of 19.1 times, which was slightly
below that of the regional peer index at PE of 20.3 times. Also, the F&B sector trading
return outperformed the VN-Index in the latest twelve months (LTM) at 22.8%
compared with 8%.
Selected local peer group comparison (VND bn)
Source: Bloomberg, data as of May 20, 2014
Business results of selected F&B companies, 2013
Source: Bloomberg
F&B stock price index versus VN-Index F&B stock price index versus VN-Index
Source: Bloomberg, data as of May 20, 2014 Source: Bloomberg, data as of May 20, 2014
No. Ticker Exchg Market cap Products Y2013 Chg % Y2013 Chg % Net margin ROA ROE DE PE PB
1 VNM HSX 101,679 Dairy 30,949 16.5% 6,534 12.3% 21.1% 28.6% 37.2% 2% 15.6 5.8
2 MSN HSX 67,244 F&B, Mining, Banking 11,943 14.9% 1,307 3.7% 10.9% 2.8% 9.1% 125% 149.0 4.7
3 KDC HSX 8,805 Confectionery 4,561 6.4% 493 39.2% 10.8% 7.7% 10.1% 12% 17.8 1.8
4 VCF HSX 3,694 Coffee 2,299 8.7% 260 -12.7% 11.3% 16.1% 23.0% 20% 14.2 3.3
5 HVG HSX 2,760 Fisheries 11,043 43.6% 296 13.7% 2.7% 3.0% 12.7% 188% 11.1 1.2
6 MPC HSX 2,277 Fisheries 11,112 40.0% 294 1644.9% 2.6% 3.8% 18.5% 298% 8.4 1.4
7 VHC HSX 1,957 Fisheries 5,095 20.5% 176 -16.4% 3.5% 6.9% 12.0% 41% 12.4 1.3
8 SBT HSX 1,808 Sugar 2,220 13.2% 239 -35.4% 10.8% 7.4% 13.0% 59% 7.6 1.0
9 TAC HSX 913 Oil & fats 4,291 6.4% 66 3.2% 1.5% 5.4% 16.1% 73% 13.9 2.2
10 NHS HSX 656 Sugar 1,044 11.7% 101 23.5% 9.7% 5.4% 11.3% 92% 6.5 0.7
Average 45 peers 17.6% 1.8% 9.4% 8.4% 18.8% 134.2% 19.1 3.6
Net revenue Net profit TrailingY2013
101.7
67.2
8.8 3.7 2.8 2.3 2.0 1.8 0.9 0.7
30.9
11.9 4.6 2.3
11 11.1 5.1 2.2 4.3 1.1
21.1%
3.8%
10.8% 11.3%
2.2% 2.4% 3.1%
10.8%
1.5% 4.3%
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
120
VNM MSN KDC VCF HVG MPC VHC SBT TAC BBC
Mkt Cap (VND tn) Net sales (VND tn) Net margin (%)
No. Ticker
Price
(VND)
YTD
movement
12-month
return
Avg daily trading
(shares - LTM)
Avg daily trading
(VND bn - LTM)
1 VNM 122,000 -9.6% -3.2% 234,981 32.7
2 MSN 92,000 11.5% -16.4% 241,791 22.3
3 KDC 53,000 3.9% 7.1% 58,281 3.2
4 VCF 139,000 2.2% -39.6% 1,701 0.3
5 HVG 22,600 -7.8% 6.9% 297,261 7.7
6 MPC 33,000 37.5% 26.0% 7,316 0.2
7 VHC 32,400 37.9% 50.4% 6,701 0.2
8 SBT 12,500 0.8% -11.3% 335,167 4.4
9 TAC 48,100 13.7% 26.6% 4,918 0.2
VNIndex 532 5.3% 8.0% 81,155,258 1,262
Food Staples 5.8% 22.8%-10
0
10
20
30
40
50
05/13 08/13 11/13 02/14 05/14
Food staples VNINDEX
www.VPBS.com.vn Page | 49
Selected regional peer group comparison (USD mn)
Source: Bloomberg, data as of May 20, 2014
Due to the tensions in the East Sea between Vietnam and China, Vietnam’s stock
exchanges have responded as expected with many listed stock prices losing their
accumulation since the end of 2013. However, stocks with strong fundamentals have
gradually recovered in price.
VNM: Vietnam Dairy Products JSC, Vinamilk - The leading
dairy producer
Established in 1976, Vinamilk was originally named Southern Milk-Coffee Company
which operated two dairy-processing factories, Thong Nhat and Truong Tho. Since
being re-named as Vinamilk in 1992, VNM has built and acquired ten additional dairy
factories, resulting in a national footprint of twelve diary processing facilities in
Vietnam. The company also recently purchased stakes in three overseas companies
to secure raw materials supply and to reach new markets. Its acquisitions include
Miraka in New Zealand, Driftwood in the United States, and Angkor in Cambodia.
Starting with condensed milk production in 1976, VNM has rapidly become a market
leader in Vietnam's dairy sector with a diversified product range of more than 200
SKUs. Most of its revenue comes from dairy-based products comprising liquid milk
(Twin Cows, ADM+, Flex, Fino Star, powdered milk (Dielac, Sure Prevent, CanxiPro,
Diecerna), yogurt (Susu, Kefir, Star, Probeauty, Probi) and condensed milk (Southern
Star, Longevity) while other beverages such as juice (Vfresh), tea (Lincha), mineral
water (Icy) and soy milk (GoldSoy) account for 5% of revenue.
The Company currently operates five model cow farms with over 8,000 heads of
cattle which were imported from Australia and provide 90 tons of milk per day. It has
also built relations with more than 5,000 households who are breeding more than
65,000 cows across the country that supply 460 tons of milk per day. VNM also has
an extensive distribution network with over 224,000 points of sale throughout the
country and accounts for 46% of dairy market share in 2013.
Vinamilk was honored by Forbes Asia for its “Top 200 Best Under A Billion” in Asia
2012. This was the first and uniquely Vietnamese company to be honored in the
Forbes Asia list.
Listed on the Ho Chi Minh Stock Exchange since Jan 2006, VNM is the largest market
capitalized company (USD5.5 billion) in the F&B sector, followed by Masan Group
(MSN) and Kinh Do Corporation (KDC). The Company continued to lead the pace with
outstanding performance relative to peers in term of revenue, net margin (21.1%),
ROA (28.6%), ROE (37.2%) and a very low DE ratio of 2.1%. In 2013, VNM reached net
No. Ticker Exchg Market cap Products Y2013 Chg % Y2013 Chg % Net margin ROA ROE DE PE PB
1 151 HK Equity Hong Kong 18,577 Confectionery 3,818 13.7% 687 24.1% 18.0% 15.8% 35.3% 64.7% 27.1 9.6
2 WIL SP Equity Singapore 16,320 Food Diversified 44,085 -3.0% 1,391 5.1% 3.2% 3.0% 9.3% 174.6% 11.7 1.1
3 322 HK Equity Hong Kong 16,065 Flour&Grain 10,941 18.8% 494 -10.9% 4.5% 5.9% 17.2% 58.2% 32.5 5.6
4 THBEV SP Equity Singapore 12,045 Brewery 5,075 -2.1% 619 -32.0% 12.2% 11.0% 21.5% 72.1% 19.5 4.2
5 2319 HK Equity Hong Kong 9,813 Dairy 7,053 23.6% 299 28.5% 4.2% 4.5% 11.8% 77.0% 32.8 3.9
6 600600 CH Equity Shanghai 9,793 Brewery 4,239 13.4% 321 15.2% 7.6% 7.1% 13.9% 14.6% 30.5 4.2
7 CPF TB Equity Bangkok 6,487 Food Diversified 12,683 10.3% 306 -61.9% 2.4% 2.7% 9.1% 169.8% 21.2 1.9
8 PEP MK Equity Bursa Malays 6,050 Food Diversified 1,045 7.3% 315 14.4% 30.1% 6.1% 6.6% 2.7% 19.2 1.3
9 INDF IJ Equity Indonesia 5,351 Food Diversified 5,573 4.1% 330 -30.5% 5.9% 5.1% 17.0% 116.3% 16.2 2.8
10 FGV MK Equity Bursa Malays 5,154 Flour&Grain 3,993 -4.3% 361 19.5% 9.0% 5.7% 18.0% 66.2% 14.3 2.6
Average 70 peers 3.5% -8.0% 5.9% 5.3% 13.5% 38.6% 20.3 2.7
Net revenue Net profit TrailingY2013
www.VPBS.com.vn Page | 50
consolidated revenue of VND30,949 billion (USD1.46 billion), a 16.5% increase, and
net consolidated profit of VND6,534 billion (USD309.3 million), a growth of 12.3%.
The cash dividends of 2013 were approved at 48% on par, out of which 28% on par
had been paid out in 2013. In 2014, VNM targets VND36,298 billion (USD1.72 billion,
+15.9%) in total consolidated revenue and VND5,993 billion (USD283.7 million, -8.3%)
in net consolidated profit. VNM was trading at a relatively cheap PE of 15.6 times
compared to the sector’s average PE. VNM’s share price slightly declined 3.2% as of
May 20, 2014 relative to the year-earlier day.
KDC: Kinh Do Corporation – The leading confectioner
Established in 1993, Kinh Do Corp is now a leading confectionery company in
Vietnam with about 200 SKUs such as biscuits (Cosy) cookies (Korento), crackers
(AFC), cakes (Solite), moon cakes, bread (Aloha), bun (Scotti), etc. It also produces ice
cream (Celano, Melano) and yogurt (Well Yo). As the leading player in the
confectionery field, the company has gained significant market share (2013) in
cookies (30%), crackers (56%), and especially in the seasonal moon cake (76%)
segment. Strong brand equity helps the company to maintain its market leadership in
sales and facilitates stronger market penetration for any new product launches.
The company has established an extensive distribution network nationwide with
159,600 retail outlets and 30,000 ice-cream chilled storage points of sales spread
throughout the country. KDC is operating three factories in the north and south of
Vietnam.
KDC has an M&A growth strategy that include the acquisition of Nutifood, Vinabico
and Tribeco during the period of 2007 to 2008. The company also made shares
issuance to strategic investors such as Ezaki Glico (a Japanese confectionery
producer that owns a 5.06% stake in KDC) and a recent group of local strategic
companies (Thap Lang Ha Co.Ltd., Dong Tam JSC, An Thinh Loc Real Estate
Investment Co.Ltd., Truong Thinh Phat Investment JSC). The Company was honored
by the Trade Promotion Bureau, Department of Commerce & Industry for ‘Top 10
Vietnam’s Best Brands 2011’ award.
In 2013, KDC reported net revenue of VND4.6 trillion (USD215.9 million), an increase
of 6.4% y-o-y, and net profit of VND492.8 billion (USD23.3 million), an increase of
39.2% y-o-y. It also displayed a strong net margin of 10.8% (relative to that of 3-4% of
confectionery peers), ROA of 7.7%, ROE 10.1% and a low DE ratio of 11.7% in the
year. Biscuits, cakes, moon cakes, bread and snacks made up the majority of their
revenue with 84%, while yogurt and ice-cream brought 15% of revenue in 2013.
Among its competitors, KDC has allocated the biggest budget for marketing
campaigns and promotion in the last few years.
Listed on the Ho Chi Minh Stock Exchange since 2004, KDC’s current market
capitalization is USD440 million. KDC was trading at PE of 17.8 times, lower than the
sector multiples. Despite frictions over the East Sea, KDC’s share price as of May 20,
2014 has still ascended 7.1% compared to the year-earlier day.
Masan Group (HSX: MSN) – The conglomerate of food and
beverage, banking and mining
Masan Group is one of Vietnam’s largest private sector companies focused on
building market-leading businesses that capitalize on Vietnam’s structural
www.VPBS.com.vn Page | 51
consumption, banking and resources stories. The Group owns majority interest in
Masan Consumer (77.7%), Masan Resources (77.7%) and minority in Techcombank
(30.4%). Masan consumer was also prominent in M&A activities including acquisition
of 53.2% stake of Vinacafe Bien Hoa, 63.5% stake of Vinh Hao Mineral Water and 40%
stake of Proconco Animal Feed.
Commenced operation in 2000, Masan Consumer is one of Vietnam's largest local
diversified FMCG companies with 30% market share. The Company manufactures
and distributes a range of food and beverage products, including soya sauce (Chin-
Su), fish sauce (Nam Ngu), chili sauce (Tam Thai Tu), instant noodles (Omachi,
Kokomi), instant coffee (Vinacafe), instant cereals (Kachi) and bottled beverages (Vinh
Hao).
Masan Resources is one of the largest private sector natural resources companies in
Vietnam, currently developing the world-class Nui Phao polymetallic project in
Northern Vietnam. Nui Phao will be a globally significant producer of tungsten,
fluorspar and bismuth – niche industrial minerals that are significant enough to
establish a private sector leader. Techcombank is currently one of the largest Joint
Stock Commercial Banks in Vietnam in terms of total assets, loans, deposits,
customers and distribution network. In the 20 years since its establishment, it has
developed a diversified range of financial products and services to cater to the
financial needs of Vietnam’s 50 million strong labor force and 305,000 private
enterprises.
In January 2013, Kohlberg Kravis Roberts (KKR) followed up their US$159 million
investment in Masan Consumer, which closed in April 2011, with a further
investment of US$200 million, marking the largest private equity deal ever in
Vietnam. In August 2013, Texas Pacific Group (TPG), who had previously invested in
the Company, invested over US$50 million in Masan Agri, our newly established
subsidiary of Masan Consumer focused on the agricultural sector.
The core drivers for MSN’s growth lie in factors including the faith in Masan’s
Consumers, shortening M&A period from 10 years to 3 years and allocation of
USD1.2 billion capital from world-class investors and partners (65% to business &
investment, 12% to M&A activities and 23% to cash balance).
In 2013, the company recorded a revenue of VND11,943 billion (USD565.3 million),
14.9% above that of 2012, while its net profit has declined 33% to VND1,307 billion
(USD61.7 million) due to surging product development expenses, branding costs and
falling financial revenue from its associate, Techcombank. MSN retained its zero
dividend policy for 2013 and the Group is poised to exceed US$1 billion in revenues
in 2014. Listed on the Ho Chi Minh Stock Exchange since October 2009, MSN’s
current market capitalization is USD3.34 billion.
VCF: Vinacafe Bien Hoa – The second coffee manufacturer
VinaCafe Bien Hoa is the second key player in coffee production with a market share
of 32.6%, closely following Nestlé Vietnam. VCF is operating three factories with a
total capacity of 4,080 tons of instant coffee per annum. The key products are instant
coffee (3-in-1, Wake-up Saigon, Café Phinn), nutritional cereal (Kachi) and coffee-
energy drink (Wake-up 247). Instant coffee made up the majority of the company’s
net revenue with an 80% contribution. After Masan Consumer’s acquisition of VCF’s
stake in Q4.2011, both companies consolidated their nationwide distribution
www.VPBS.com.vn Page | 52
networks including 140 points of sales and 185 distributors. Currently, Masan
Consumers holds 53.2% ownership interest in Vinacafé. The Company was received
the following awards: ‘Vietnam Golden Star 2013’, ‘2013 National Quality – Silver’
and ‘High Quality Vietnamese Product for the 18th year’.
In 2013, VCF successfully re-launched VinaCafé as a traditional brand with
contemporary attributes and introduced a new brand of coffee-energy drink ‘Wake-up
247’. Its products are mainly consumed domestically while exports to key markets
such as the United States, the European Union, Japan and Australia accounted for
only 8.3% of total net revenue.
In 2013, the company recorded VND2,341 billion (USD110.8 million) net revenue, up
9.3% and VND260.4 billion (USD12.3 million) net profit, down 12.7% in 2013. The
decrease was due to expenditures allocated for re-launch of VinaCafé and Kachi
brand and a new brand development of coffee-energy drink. However, it saw a strong
net margin of 11.3%, ROA of 16.1%, ROE of 23% and a relatively low DE ratio of
20.4% in the year. In 2014, VCF plans revenue of VND3,000 billion (USD142 million,
+28.2%) and net profit of VND400 billion (USD18.9 million, +53.6%). Listed on the Ho
Chi Minh Stock Exchange since 2011, VCF’s current market capitalization is USD174.9
million. VCF was also trading at 14.2 times, a lower multiple than sector average PE.
VCF’s share price as of May 20, 2014 was significantly down 39.6% since the year-
earlier day.
MPC: Minh Phu Corporation – The largest shrimp exporter
Established in 1992, after 20 years of continuous development, Minh Phu has become
the largest shrimp exporter nationwide and possesses strong creditability in Asia and
worldwide. In 2013, the Company recorded USD411.6 million in export revenue and
accounted for 6.1% of Vietnam’s seafood export value of USD6.7 billion. MPC’s
product portfolio includes fresh shrimp (RPTO IQF, RPD IQF, HLSO Block, EZP IQF,
etc.), steamed shrimp (CPTO IQF, CPD IQF, CEZP, etc.) and premium products
(nobashi, tempura, sushi, etc.). Almost 100% of MPC products have been export to
key markets such as the United States, the European Union, Canada, Japan, Korea
and Australia. Minh Phu has the biggest production capacity in Vietnam, with that of
76,000 tons per annum (TPA) including two factories in Ca Mau (36,000 TPA) and Hau
Giang (40,000 TPA). It also has the largest aquaculture operation countrywide with
one farm of breeding seed in Ninh Thuan (5 billion posts per year), two industrial
farming areas in Kien Giang (600 ha) and Vung Tau (300 ha) and one ecological farm
area in Ca Mau (320 ha).
In 2013, MPC posted VND11,112 billion (USD526 million) in net consolidated revenue,
up 40%; and VND294 billion (USD13.9 million) in net consolidated profit, a surge of
16 fold, thanks to dramatic increases in export revenue. As such, MPC showed a 2.6%
net margin, 3.8% ROA and 18.5% ROE in the year. While the 2013 DE ratio of MPC
was mostly three times, it is effectively reduced to 1.7 times thanks to huge cash
balance of USD94.7 million. In 2014, the Company targets USD550 million net
consolidated revenue (+4.6%) and USD20 million net consolidated profit (+43.6%).
Listed on the Ho Chi Minh Stock Exchange since 2006, MPC’s current market
capitalization is USD107.8 million. MPC was trading at a PE of 8.4 times, less than
half of the sector average PE. Despite frictions over the East Sea, MPC’s share price
as of May 20, 2014 strongly rose 26% relative to the year-earlier day.
www.VPBS.com.vn Page | 53
CONCLUSION
Among the focused food categories, dairy has the strongest momentum to enter into
growth phase while other categories including seafood, noodles, sauces and
dressing condiments, confectionery, bakery and beverages are reaching maturity
and, as such, experienced slower growth. However, the synergy effects of continuing
economic growth, golden demographic structure, rapid urbanization, rising
disposable income and the middle class, tax supports and a high density of grocery
retail networks will drive up the overall F&B consumption in the medium to long
term. We believe the sector continues to deliver double-digit growth over the next
five years.
In 2013, the country’s F&B sector witnessed two global private equity firms, Kohlberg
Kravis Roberts (KKR) and Texas Pacific Group (TPG), closed landmark deals in
Vietnam with their additional investments in Masan Consumer of USD200 million
and USD50 million, accordingly. Masan Consumer, itself, was also prominent with its
majority acquisition of Vinacafe Bien Hoa and Vinh Hao mineral water during the
year. Given the growing appetite for emerging market-based assets of global
investors and the consolidation of local players, we predict the blooming in M&A
activities in food and beverage sector will continue in the medium to long term.
Another company which is very active in M & A is a joint stock company KDC. The
company has received about VND1,700 billion from strategic partners, raised its cash
to total VND4.000 billion. With this amount of cash, the market would have predicted
that KDC’s strategy is to expand retail distribution system and participate in markets
other than confectionery.
The F&B sector remarkably outperformed the VN-Index in the latest twelve months
(as of May 20, 2014) at 22.8% against 8%. In 2013, the sector’s ROA (8.4%) and ROE
(18.8%) appeared very attractive. The local peer group was trading at slightly cheaper
prices (PE 19.1 times) relative to regional peers group (20.3 times). Also, there are
some stocks exposed strong fundamentals and still cheaper values than the sector
average multiples such as VNM, KDC, VCF and MPC. Based on the above factors, we
propose a recommendation to contemplate accumulation of F&B stocks in the
medium to long term. Furthermore, due to its nature as a defensive sector that is
essential to daily life, F&B stocks continue to be a preferred target for a balanced
investment portfolio. However, we would like to note investors about the impact of
TPP on F&B industry. Vietnam’s import tariffs for F&B are considerably high, while
the country has limited (and at time unavailable) SPS (Sanitary and Phyto-sanitary
Measures), TBT (Technical Barriers to Trade) and commercial defense measures for
the sector. As such, the on-going negotiation of TPP would lead the domestic market
to confront a huge competition of TPP members in terms of technology, quality and
even price when tax barriers are removed. In contrast, other TPP countries possess a
strong system of defensive and protective measures rather than just the tariffs
themselves. Also, the partnerships seem not to have any restrictions on rights of
using these defensive instruments for the import countries. Hence, TPP is not only a
challenge for Vietnam’s F&B local market but also for the export markets
www.VPBS.com.vn Page | 54
APPENDIX- M&A ACTIVITIES
M&A transactions – F&B
Source: VPBS Research
M&A transactions – FMCG
Source: VPBS Research
M&A transactions – Retails & Distribution
Source: VPBS Research
No. Time Target Acquirer Seller Deal Value % Acquire % Stake
1 20-Dec-13 VinaCafe Bien Hoa - VCF Gaoling Fund, YHG Investment VinaCafe 41.6 24.5% 24.5%
2 4-May-13 Phu Yen Beer - Pybeco Masan Consumer Pybeco 12 na na
3 1-Feb-13 Vinh Hao Mineral Water Masan Consumer Vinh Hao 29.3 63.5% 63.5%
4 9-Jan-13 Masan Consumer Kohlberg Kravis Roberts & Co Masan consumer 200 8% 8%
5 2-Dec-12 Go Dang Seafood - AGD Panga Holdco AGD 18 25.6% 48.9%
6 10-Oct-12 Proconco Masan Consumer Proconco 96 40% 40%
7 15-Jun-12 Hanoi Liquor - Halico Streetcar Investment Holding - Diageo na 21.8 10.6% 29.6%
8 15-Mar-12 Cholimex Foods Nichirei Foods Cholimex 6.25 19% 19%
9 14-Mar-12 Interfoods - IFS Indochina Beverage Holdings IFS undisclosed 23% 23%
10 18-Jan-12 Kinh Do - KDC Ezaki Glico KDC 34.1 10% 10%
11 14-Nov-11 Shrimp Feed mill Cargill Vietnam Higashimaru Co.Ltd 3.9 100% 100%
12 28-Oct-11 Hue Breweries Carlsberg Huda 90 50% 100%
13 11-Oct-11 VinaCafe Bien Hoa - VCF Masan Consumer Beta Securities, Mr. Tran Quang Loc 53.3 50.1% 50.1%
14 27-Jul-11 Viet Thai International Jollibee Foods Corp. Viet Thai 25 49% 49%
15 30-Jun-11 CP Vietnam CP Pokphand China Charoen Pokphand Group (Thai) 609 71% 71%
16 16-Jun-11 Yen Viet Vietnam Opportunity Fund - VOF Yen Viet 7.1 32% 32%
17 18-May-11 Nutifood DI Asian Industrial Fund (DIAIF) Nutifood 3.7 25% 25%
18 9-May-11 Hanoi Liquor - Halico Streetcar Investment Holding - Diageo Vietnam Opportunity Fund (VOF) 62.5 34.9% 34.9%
19 20-Apr-11 Nghe An Tate & Lyle Sugar TH Milk Food JSC Tate & Lyle (UK) 52 100% 100%
20 24-Mar-11 Masan Consumer Kohlberg Kravis Roberts & Co Masan consumer 159 10% 10%
21 11-Mar-11 Interfoods - IFS Kirin Holdings IFS 92 57% 57%
22 1-Dec-10 Societe De Bourbon Tay Ninh Dang Thanh Co.Ltd SBT 21.3 24.8% 24.8%
23 18-Nov-10 Societe De Bourbon Tay Ninh Undisclosed SBT 45.9 68.5% 68.5%
24 16-Nov-10 Thai Hoa Coffee VinaCapital Thai Hoa undisclosed 10% 10%
25 14-Sep-10 Vinamilk-Saigon Coffee Factory Trung Nguyen Vinamilk 40 100% 100%
No. Time Target Acquirer Seller Deal Value % Acquire % Stake
1 10-Oct-11 AA Corporation LD Invest / Maj Invest Asia Mekong Enterprise Fund II undisclosed 27% 27%
2 25-Aug-11 Diana Vietnam Unicharm Diana 128 95% 95%
3 10-Aug-11 International Consumer Products Corp - ICPMarico Mekong Enterprise Fund II, Bankinvest Individuals60 85% 85%
4 31-May-11 Saigon Paper Daio Paper Corp & Bridgehead Saigon Paper 10.7 38% 38%
5 30-May-11 Vietnam Fan JSC SEB Group Vietnam Fan 6.4 51% 51%
No. Time Target Acquirer Seller Deal Value % Acquire % Stake
1 Q2.2013 JV Vina Familymart Phu Thai Corp. Itochu, Familymart undisclosed 49% 49%
2 Q1.2013 Thai An Corp. (Northern retail) Berli Jucker Corp. - BJC Thai An 32 65% 65%
3 24-Jun-13 Phu Thai Corp. Berli Jucker Corp. - BJC Phu Thai undisclosed 65% 65%
4 2-Aug-12 3A Nutrition Abbott 3A undisclosed 100% 100%
5 3-Apr-12 Huong Thuy Trading Sojitz Group New Land Corp. 9.5 26% 51%
6 3-Apr-12 Huong Thuy Trading Kokubu New Land Corp. 7 19% 19%
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