Professional Documents
Culture Documents
June 2014
INDUSTRY COVERAGE
Total food consumption and growth
80
14.5% 15.3%
14.8%
12.3%
10.7%
10.0%
8.3%
7.3% 7.9%
60
40
20%
15%
10%
20
5%
0%
7.0%
6.8%
7.0%
6.7%
6.6%
1,000
6.5%
6.5%
500
-
6.0%
2010 2011 2012 2013 2014F
Annual Disposable Income (USD)
Consumer Expenditure (USD)
Saving ratio (%)
Source: Euromonitor International
Food staples
08/13
11/13
VNINDEX
02/14
05/14
Source: Bloomberg
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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 consumers 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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19.9
18.1
15
12.6
10
5
9.5 8.4
6.6
20
15
11.8
6.8 6.0 6.2 6.6
6.5
2012
6.8 7.2
6.2 5.8
5.0 5.4
2013
5.6
6.4
4.7
3.7
10
5
2.9
1.3
Inflation (%)
Source: Vietnam GSO, ADB
Overall
Foods
Apparels
Home Appliances
-2
We expect the GDP to maintain its growth pace while inflation remains under control
due to the governments 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
Vietnams 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.
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10.5
9.4
8.6
7.2
6.7
8.9
7.2
7.8
8.2 8
11
9
7.5
7.4
6.25
5.2
3.8
2005
2006
2007
2008
2009
2010
2011
2012
2013
1.2
1.2
1.1
1.1
1.1
1.1
1.1
1.0
1.1
1.1
81.4 82.4 83.3 84.2 85.1 86.0 86.9 87.8 88.8 89.7
Female
1.2
70-74 yrs
1.2
60-64 yrs
1.1
50-54 yrs
1.1
40-44 yrs
1.0
30-34 yrs
1.0
20-24 yrs
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Male
10-14 yrs
0-4 yrs
Population (mn)
-6000
-4000
-2000
2000
4000
6000
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
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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.
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.
20%
15.3%
12.8%
15%
10.4%
7.6%
1,000
500
-
1,262
1,090
918
2010
1,059
5%
1,169
1,259
20%
15.5%
14.1%
1,343
15%
10.6%
1,000
7.8%
10%
6.7%
1,607
1,507
1,399
1,500
500
0%
2011
2012
2013
2014F
Annual Gross Income (USD)
Annual Disposable Income (USD)
Annual Disposable income Growth (%)
1,091
987
854
358
2010
409
446
1,176
476
6.8%
10%
1,256
506
5%
0%
2011
2012
2013
2014F
Consumer Expenditure (USD)
Consumer Expenditure on F&B (USD)
Consumer expenditure growth (%)
7.0%
6.7%
1,000
6.8%
6.6%
500
-
7.0%
6.8%
854
918
2010
987
1,059
2011
1,091
1,169
2012
1,176
6.5%
1,256
6.6%
6.4%
1,259
2013
1,343
6.2%
Annual
Disposable
Income (USD)
Consumer
Expenditure
(USD)
Saving ratio (%)
2014F
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60%
40%
20%
0%
18%
17%
15%
20.7%
18%
18.3%
21%
80%
25%
25.5%
21.3%
21%
16%
21.2%
20%
15%
20.4% 19.2%
21.3% 22.7%
23%
17.5% 15.5%
20%
23.5% 22.3%
20.2%
11.4% 17.4%
8%
23.5% 24% 24.7% 25.3% 24.5% 24% 21.7%
15.1% 19.8%
4.6%
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
25%
C
B
20%
19%
65+
6%
2% 4%
Class A
9%
21%
14%
39%
34%
25%
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Class E
1,500,000 2,999,999
Class C
Class D
3,000,000 4,499,999
Class C
4,500,000 7,499,999
Class D
20%
14%
8%
2012
3% 2% 2%
Class F
Source: OECD
The social classes are classified based on gross monthly income band (VND) as follows:
Class F
01,499,999
Class B
38%
32%
27%
2011
Class B
7,500,000 14,999,999
Class E
Class A
>=
15,000,000
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609,359
133,835
2009
619,674
138,271
2010
Non-grocery outlets
624,274
141,475
2011
631,208
142,110
2012
636,158
143,613
2013
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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
Unit value change (%)
1,200
1,000
800
24.3%
8.7%
4.6
668
14.6% 13.2%
9.1%
9.2%
8.8%
5.8%
8.3%
4.9%
200
11.1% 10.9%
6.5%
4.6%
7.2%
3.7%
4.7%
3.6%
1.1%
3.9%
2.3%
1.6%
4
414
215
166
108
4
475
346
400
3.6
624
632
600
18.3%
15.6%
969
4.5
3
2
1
0
Malaysia
Vietnam
Philippines
Thailand
Indonesia
Source: Nielsen
18.7
20.4
19.9
21.2
5.9
12.8
5.8
14.6
4.4
15.5
6.5
14.7
25.1
26.8
27.6
12.2
16.8
20.4
12.9
10.0
18.3
14
0.3
8.4
11
2.9
5.4
7.2
3
3
(2.6)
Q1.2011 Q2.2011 Q3.2011 Q4.2011 Q1.2012 Q2.2012 Q3.2012 Q4.2012 Q1.2013 Q2.2013 Q3.2013
14
4.3
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Vietnams consumer
confidence index in Q4.2013 hit
its highest level of 98 in the last
two years.
Indonesia
118121118114
Philippines
Q2.2013
115114112
109
Thailand
Q2.20132
Q4.2013
96 95 97 98
107103
101 98
95 95 98 97
Vietnam
Malaysia
Singapore
Source: Nielsen
115
114
111
110
110
109
107
104
100
Source: Nielsen
Note: UAE United Arab Emirates
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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.
Biggest concern
Debts 3% 3%
Parents' welfare2%
Increasing fuel prices
6%
5%
35%
9%
Work/life balance
9%
8%
8%
11%
11%
12%
Health
11%
12%
Job security
19%
The economy
19%
41%
Physical exercise
46%
47%
7%
78%
14%
Source: Nielsen
Source: Nielsen
8%
36%
23%
Others
Source: Nielsen
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20%
22%
36%
37%
37%
Source: Nielsen
41%
66%
Source: Nielsen
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58.5%
80.3%
56.0%
77.0%
58.3%
79.5%
63.3%
82.8%
60.5%
83.3%
63.3%
83.5%
83.0%
Working
Male
67.8%
65.5%
Working
Female
40%
40%
49%
62%
68%
68%
72%
74%
74%
78%
79%
67%
55%
11%
14%
15%
38%
49%
74%
96%
Source: Nielsen
Source: Nielsen
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Page | 12
respondents. The other online activities including reading a grocery retailers flyers,
comparing prices of grocery products and browsing a manufacturers 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, Nielsens 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
None of above
6%
Other
11%
12%
27%
47%
48%
49%
36%
36%
39%
43%
53%
59%
59%
70%
72%
Source: Nielsen
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Entertainment tickets
Household appliance
47%
47%
Source: Nielsen
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Exports
29%
Domestic
consumption
71%
Food
58%
Beverage
13%
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Growth (%)
70
60 14.5% 15.3%
50
10.7%
40
8.3%
30
20
10
14.8%
15%
12.3%
10.0%
10%
7.3% 7.9%
57.2
49.8
40.3 44.3
5%
32.2 34.8 37.4
29.0
25.2
0%
Growth (%)
13.5% 15%
9.6%
600
6.8%
400
200
11.0%
290
331
362
6.4%
412
387
7.2%
441
8.8%
480
10%
533
605
5%
0%
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
17%
12%
9%
8%
1.1
0.8
0.8
0.5
0.9
Others
2.9
7%
5.3
5%
0%
3%
Diary(Vinamilk, Nestle,
Abbott, Frestland)
9.5
5%
11.9
Agri-products (Vinafood,
Vegetexco, Gentraco)
14
12
10
8
6
4
2
0
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
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.
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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
5.6
2013 growth
14%
12%
12%
10%
4
3
7%
6%
8%
6%
1.7
4%
0.7
1
0
2%
0%
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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, semimonthly 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, semimonthly 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.
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Investigation
Bureau
Price Administration
Bureau
Corporate
Finance
Tax
Affair
Budget
Affair
National Food
Reserves Bureau
Finance
Department
Tax
Bureau
Custom
Food Reserves
Bureau
Treasury
Directing to / supporting
Coordinating with
Source: Direction 05/CT-BTC
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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
countrys 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 highfrequency 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
2013 KEY IMPORTS
USD6.5 bn
Raw feed
Dairy materials
Seafood
Oil & fats
Wheat
Fruits & vegetables
% Contribution
46.4%
16.8%
10.7%
10.7%
9.4%
6.2%
Seafood
Rice
Coffee
Cashew
Cassava
Fruits & vegetables
Pepper
Tea
Cultivation
Fisheries
Livestock
% Contribution
38.9%
17.2%
15.5%
9.6%
6.3%
6.0%
5.2%
1.3%
LOCAL CONSUMPTION
USD34.8 bn 2013
% Contribution
54.8%
24.6%
20.6%
Wholesalers /
Distributors
Retailers
424 supermarkets
23 hypermarkets
365 minimarts & convenient stores
778,959 traditional markets & private shops
560,000 restaurants
and food outlets
12,500 hotels
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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
Import Tax
0-30%
0-20%
0-5%
7-40%
0-30%
Import Tax
15-40%
0-40%
3-30%
0-40%
0%
VAT
10%
10%
10%
10%
10%
Exported products
Products for export are not subject to Export Tax and subject to 0% VAT.
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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 countrys 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.
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Page | 21
5.6%
5.9%
6.9%
8%
6%
2,933
3,115
3,216
2,590
2,728
2,281
2,414
2,514
2,705
2,804
2009
2010
2011
2012
2013
4%
3.4%
2%
0%
34.4%
12
10
24.9%
8
6
4
2
0
40%
6.0
11.0%
3.4
4.5
2.4
2.8
3.7
2009
2010
2011
6.3
6.8
8.9%
30%
20%
4.3
7.0%
4.6
2012
2013
10%
0%
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Page | 22
100%
77.1%
80%
63.9%
60%
38.9%
4.2
2
2.6
1.8
Local consumption
(USD bn)
5.1
22.7%
5.3
40%
3.8%
20%
Growth (%)
0%
2009
2010
2011
2012
2013
Source: VASEP, VPBS research
18.4%
4.3
21.6%
6.1
5.0
6.7
9.8%
4
2
6.1
0.3%
-5.6%
0
2009
2010
2011
2012
25%
20%
15%
10%
5%
0%
-5%
-10%
2013
Growth (%)
Source: VASEP
Sao Ta (FMC)
Au Vung
Hung Vuong (HVG)
Agifish (AGF)
Minh Phu - Hau Giang
Cases
Quoc Viet
Seapimex
Vinh Hoan (VHC)
Minh Phu (MPC)
103
104.1
105.6
112.7
128.8
132.2
147.8
158.8
166.3
411.6
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.
www.VPBS.com.vn
Page | 23
US
EU
20%
22%
Japan
China & HK
3%
6%
17%
7%
8%
Australia
Others
Source: VASEP
8%
Korea
Asean
17%
1% 8%
2%
3%
6%
Other shrimps
21%
25%
Crab
Molluse
Others
Source: VASEP
www.VPBS.com.vn
Page | 24
competitive edge to Vietnam, relative to other countries, when exporting into Japans
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 Nielsens 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
100
20%
80
60
12%
13%
25%
20%
17%
13%
40
20
23%
15%
42.0
47.3
53.3
62.2
2010
2011
2012
2013
74.6
91.7
10%
5%
0%
2014F
2015F
The dairy sector, valued at VND62.2 trillion (USD2.9 billion) in 2013, is among the
fastest-growing in Vietnams 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, Vietnams 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.
www.VPBS.com.vn
Page | 25
70 30 5
6% 3% 0%
200
16%
Yogurt
670
55%
245
20%
7.7
13%
Condensed milk
3.2 0.2
5.1
5% 0%
8%
Drinking milk
Powdered milk
Drinking milk
27.9
45%
Yogurt
Condensed milk
Powdered milk
18.0
29%
Ice-cream
Cheese
Ice-cream
Cheese
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)
Thousand Cows
Growth (%)
600
77.0%
500
53.4%
400
300
200
100
0
15.3%
14.5%
133
2010
Thousand tons
100%
1,200
80%
1,000
60%
40%
152
10.0%
167
10.3%
184
326
500
2011
2012
2013
2017F
2020F
856
800
600
400
20%
200
0%
Growth (%)
103.8%
1,000
320
15.1%
368
15.0%
2010
2011
382
420
3.8%
9.9%
2012
2013
120%
100%
80%
60%
16.8%
40%
20%
0%
2017F
2020F
www.VPBS.com.vn
Page | 26
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
Vinamilk
34%
46%
Friesland Campina
Others
20%
Source: Euromonitor International, VPBS Research
6000
6000
5000
5000
4000
4000
3000
3000
2000
2000
1000
1000
0
1-Jan-09
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Source: Bloomberg
0
1-Jan-09
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
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.
www.VPBS.com.vn
Page | 27
22.3
24.0
20
15.9%
10
6.8%
7.0%
7.6%
0
2010
2011
Value (VND tn)
2012
20%
20
15%
15
10%
10
5%
0%
2013
Growth (%)
12.9
20.4%
10.7
15.5
18.0
25%
20%
20.6%
15%
15.8%
15.5%
10%
5%
0%
2010
2011
Value (VND tn)
2012
2013
Growth (%)
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%.
www.VPBS.com.vn
Page | 28
Vinamilk
Mead Johnson
Friesland
Others
Vinamilk
Friesland
Nestle Vietnam
Others
7.4%
23.5%
27.1%
7.3%
22.3%
26.8%
7.4%
20.3%
38.7%
40.9%
43.3%
45.5%
2010
2011
2012
2013
30.5%
29.3%
28.8%
27.9%
28.9%
28.2%
13.9%
14.3%
18.0%
14.1%
14.3%
18.5%
14.0%
14.3%
18.7%
14.2%
14.4%
19.0%
7.2%
25.2%
23.3%
23.8%
24.2%
24.5%
2010
2011
2012
2013
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
10
8
36.5%
29.7%
27.4%
30%
6
4
2
3.3
4.5
5.7
40%
7.7
20%
2011
Value (VND tn)
2012
Vinamilk
6%
IDP Ba Vi Milk
8%
TH Milk
10%
0%
2010
13%
73%
Others
2013
Growth (%)
Condensed Milk
Growing maturity, condensed milk remains a key dairy product of lowincome 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 categorys 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.
www.VPBS.com.vn
Page | 29
2.5%
2.7%
3.0%
5.1
5.0
4.8
4.6
3.0%
20%
2%
4.9
4.7
Vinamilk
1%
4.4
Others
0%
2010
2011
2012
80%
2013
Growth (%)
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 foreigners 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 Dos 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, Buds, 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
4
3
10.2%
11.5%
12.9%
14.0%
15%
29%
10%
2
1
2.2
2.5
0
2010
2011
Value (VND tn)
2.8
3.2
Vinamilk (VNM)
5%
0%
2012
2013
Value growth (%)
www.VPBS.com.vn
Kinh Do (KDC)
57%
10%
4%
Thuy Ta
Others
Page | 30
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 markets potentiality.
Noodles market volume & growth
600
8.2%
500
8.0%
7.5%
7.0%
400
6.1%
300
200
100
347
375
2010
2011
432
403
458
5.1%
481
2012
2013
2014F
10%
30
8%
25
6%
4%
20
15
19.1% 18.6%
17.4%
20.1
17.1
14.4
21.7
23.3
8.3%
7.0%
0%
5.9%
10%
0%
2011
2012
Growth (%)
20%
5%
2010
2015F
25%
15%
10
2%
24.6
2013
2014F 2015F
Growth (%)
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.
Noodles sales value breakdown, 2013 (VND bn)
61
0.3%
Instant Noodles
Pouch instant
noodles
Plain Noodles
21,686
99.7%
Source: Euromonitor International, VPBS research
Cups / bowl
instant noodles
19,885
92%
Source: Euromonitor International, VPBS research
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
www.VPBS.com.vn
Page | 31
meet the local peoples 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 companys
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 companys 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
16.5%
Acecook Vietnam
9.4%
5.1%
5.4%
12.1%
Masan Consumer
51.5%
Asia Food
Vifon
Saigon Vewong
22.6%
19.8%
5.1%
19.4%
5.7%
8.0%
9.3% 10.1%
Others
Source: Euromonitor International, VPBS research
www.VPBS.com.vn
Page | 32
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
600
500
400
300
200
100
0
6.6%
6.5%
5.3%
4.9%
4.5%
4.1%
506.2
527.1
411.5
438.4
461.6
484.4
2010
2011
2012
2013
2014F
20
6%
15
4%
10
2%
0%
2015F
Growth (%)
74.9
16%
97.5
20%
15.416.3
3% 3%
Fish sauces
MSG
280.3
58%
16.4%
11.7
17%
13.7
Others
16.9
17.7
18.4
20%
15%
5.4%
4.6%
4.2%
10%
5%
0%
2010
2011
2012
2013
2014F
2015F
Growth (%)
Soya sauces
Spicy chilli / pepper
16.9%
16.0
4.8
29%
MSG
Soya sauces
Spicy chilli / pepper
Others
www.VPBS.com.vn
Page | 33
Y2013
Masan Consumer
28.9%
23.1%
Ajinomoto Vietnam
43.5%
35.9%
Miwon Vietnam
3.0%
Acecook Vietnam
3.1%
5.5%
5.8%9.0%
Others
21.5%
20.7%
C
ONFECTIONERY
Despite slower growth, Vietnams
outpaced its regional peers
confectionery
market
still
In 2013, Vietnams 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, Vietnams 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
300
10.6%
10.3%
250
9.4%
8.6%
8.1%
200
150
100
50
168
186
2010
2011
203
221
239
7.6%
257
2012
2013
2014F
12%
25
10%
20
8%
15
6%
4%
0%
Growth (%)
11.1%
10
2%
2015F
11.0%
15%
10.3%
9.4%
9.2%
8.9%
13.8
15.2
16.6
18.2
19.8
12.4
2010
2011
2012
2013
2014F
2015F
10%
5%
0%
Growth (%)
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%.
www.VPBS.com.vn
Page | 34
54.2
24%
Savory snacks
2.9
18%
1.2
7%
6.9
42%
Savory snacks
Sugar confectionery
Sugar confectionery
Chocolate confectionery
5.5
33%
Chocolate confectionery
10
8
15%
9.6%
9.8%
9.1%
8.6%
8.5%
8.0%
8.1
6
4
2
5.3
5.9
6.4
6.9
7.5
2010
2011
2012
2013
2014F
10%
5%
0%
2015F
Y2013
26%
4%
5%
5%
6%
30%
10%
7% 7%
Kinh Do
Bibica
Hai Chau
Kraft Food
Hai Ha
Quang Ngai
Dong Khanh
Huu Nghi
Others
Growth (%)
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
www.VPBS.com.vn
Page | 35
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
8
6
5.0
4.6
4.2
9.6%
9.1%
9.2%
2010
2011
Tan Tan
9.7%
7.6%
10%
10.0%
4
2
11%
6.1
5.5
10%
9.6%
7.3%
9%
9%
2012
2013
5.0%
4.4%
4.3%
61.7%
2014F
Tuyen Ky
Liwayway Food
Seaspimex
Bibica
Kinh Do
Others
Growth (%)
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
4
3
14.1%
11.5%
2.1
2.4
2010
2011
20%
15.4%
9.5%
2
1
2.9
2.7
8.1%
3.2
10%
5%
0%
2012
2013
Hai Ha
15%
2014F
Growth (%)
20.1%
25.6%
Bibica
Hai Chau
2.7%
3.2%
4.3%
6.9%
19.0%
Lotte
Mars
18.2%
Kinh Do
Others
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
www.VPBS.com.vn
Page | 36
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.
Kidos Bakery, Onor 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
600
7.3%
7.4%
7.5%
6.9%
400
200
6.6%
362
389
418
447
476
6.4%
506
2010
2011
2012
2013
2014F
2015F
0
Volume ('000 tons)
15
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
7.6%
7.8%
7.8%
7.0%
10
5
8.4
9.0
9.7
10.4
2010
2011
2012
2013
6.6%
6.6%
11.1
11.8
0
Value (VND tn)
Growth (%)
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
2014F 2015F
Growth (%)
0.2
2%
Bread
Cake
8.0
77%
Pastry
www.VPBS.com.vn
Page | 37
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
Kinh Do
13.4%
Nhu Lan
5.9%
5.5%
4.5%
4.3%
66.4%
Duc Phat
Orion Food Vina
Bibica
Others
Source: Euromonitor International, VPBS research
1200
500
1000
400
800
300
600
200
400
100
200
0
1-Jan-09
USD/MT
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Source: Bloomberg
0
20-Feb-09
20-Feb-10
20-Feb-11
20-Feb-12
20-Feb-13
20-Feb-14
Source: Bloomberg
Vietnam was not an exception; its refined sugar wholesale price was down 18.7% yo-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 sugars price downtrend continues.
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Page | 38
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
2013 Sales
2013 growth
Key players
Beverage
categories
USD8 bn
7.6%
Alcoholic
USD5.6 bn
6.3%
Sabeco, Habeco
Soft drinks
USD1.7 bn
12.4%
Hot drinks
USD0.7 bn
6.9%
17.4%
82.6%
Off-trade
40.4%
59.6%
58.4%
41.6%
On-trade
560,000 caf /
bars, restaurants
and food outlets
12,500 hotels
Off-trade
Modern trade
424 supermarkets
23 hypermarkets
365 minimarts &
convenient stores
35% off trade
Traditional trade
778,959 traditional
markets & private
shops
65% off trade
www.VPBS.com.vn
Page | 39
[Special consumption tax (SCT) = SCT rate x Selling price before VAT (*)
[VAT = VAT rate x (Selling price before VAT (*) + SCT)
www.VPBS.com.vn
Page | 40
ALCOHOLIC DRINKS
Drinking culture adoption stimulates growth
As increasing Vietnameses 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 /%)
4
3
13.8%
2.36
12.6%
2.66
2.92
9.9%
3.15
3.38
7.9%
7.0%
3.59
6.3%
1
2010
2011
2012
2013
2014F
150
15.9%
100
88.5
5%
50
0%
Growth (%)
104.8
112.5
119.5
7.3%
6.3%
133.1
20%
15%
5.7%
10%
5.4%
0%
2011
2012
126.3
5%
2010
2015F
18.4%
2013
2014F
2015F
Growth (%)
Beer
Beer
Spirits
Spirits
Wine
Wine
3,079
97.7%
Source: Euromonitor International, VPBS research
www.VPBS.com.vn
5.7 4.7
4.8%4.0%
109.1
91.3%
Source: Euromonitor International, VPBS research
Page | 41
Japan
South Korea
37
China
29
27
Vietnam
Thailand
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
4
13.9% 12.7%
9.9%
7.9%
7.1%
2
1
0
2.3
2010
2.6
2011
2.9
2012
3.1
2013
3.3
6.3%
3.5
15%
150
10%
100
5%
50
0%
2014F 2015F
Growth (%)
25%
16.2%
20%
19.6%
15%
7.3%
6.1%
5.5%
5.2%
10%
121.1
5%
80.1
95.8
102.8
109.1
115.1
2010
2011
2012
2013
2014F 2015F
0%
Growth (%)
www.VPBS.com.vn
Page | 42
52,000
12.4
11%
23.8
22%
Standard lager
36,000
36,000
23,000
Economy lager
22,000
16,000
Premium lager
73.0
67%
Premium
Source: Euromonitor International, VPBS research
Standard
Economy
Sabeco
9.2%
7.8%
17.3%
Vietnam Breweries
47.5%
24%
Others
Hanoi (Habeco)
333' export (Sabeco)
Habeco
Hue Breweries
18.2%
29.7%
15.8%
7.7%
8.4%
14.4%
Heineken (Heineken /
Vietnam Breweries)
Others
With a minimal presence in Vietnams 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 todays busier lifestyles, soft drinks with health benefits saw a
remarkable growth, such as RTD (ready to drink) tea, energy drinks and fruit /
www.VPBS.com.vn
Page | 43
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
4
18.8%
17.5%
17.1%
15.9%
3
2
1
1.5
1.8
2.7
2.4
2.1
13.4%
3.1
20%
50
15%
40
2011
2012
2013
2014F
25%
11.6%
30
10%
20
5%
10
0%
2010
22.6%
12.9%
20%
12.4%
11.4%
40.3
25.6
28.5
32.2
36.2
2010
2011
2012
2013
10.6%
44.6
15%
10%
5%
2015F
0%
Growth (%)
2014F
2015F
Growth (%)
5.7
16%
6.0
16%
RTD tea
Carbonates
21.0
58%
Bottled water
Fruit/Vegetable juice
Sport/energy drinks
Others
www.VPBS.com.vn
39.8%
13.8
16.4
18.5%
18.7
21.0
23.4
25.7
50%
40%
30%
14.1%
12.2%
11.4%
9.8%
20%
10%
0%
2010
2011
2012
2013
2014F
2015F
Growth (%)
Page | 44
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.
Soft drinks market shares, 2013
PepsiCo
24.7%
25.5%
URC Vietnam
3.4%
CocaCola
10.5%
Vinamilk
22.7%
13.3%
Others
9.2%
6.1%
URC Vietnam
41%
10.8%
Interfood
Tan Quang Minh (TQM)
12.1%
46.4%
10.2%
Tribeco
20.8%
Others
19.6%
Wonderfarm (Interfood)
Nuta green tea lemon (TQM)
Tribeco (Tribeco)
Others
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 timesaving for busy lifestyles. A variety of formulas were successfully introduced with 3in-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%.
www.VPBS.com.vn
Page | 45
94.5
7.6%
101.6
109.1
117.1
134.7
7.5%
50
7.4%
7.3%
0
2010
2011
2012
2013
7.2%
7.2%
2014F
2015F
7.8%
20
7.6%
15
7.4%
10
7.2%
7.0%
10.2%
12%
10%
8%
6%
4%
2%
0%
7.1%
7.1%
6.9%
6.7%
6.4%
11.5
12.3
13.1
14.1
15.0
16.0
2010
2011
2012
2013
2014F
2015F
Growth (%)
Growth (%)
1.5
11.0%
Coffee
3.7
28.2%
Tea
8.0
60.8%
Others
12.1%
6.3
6.9
7.4
9.2
15%
10%
8.5%
8.2%
7.7%
7.3%
6.8%
2011
2012
2013
2014F
2015F
2
0
5%
0%
www.VPBS.com.vn
8.6
2010
8.0
Growth (%)
Page | 46
11%
5.3%
18.1%
33%
Trung Nguyen
Viet Thai International
32.6%
Vinatea
Unilever Vietnam
52.5%
15.5%
Others
Others
www.VPBS.com.vn
32%
Page | 47
Exchg
1
2
3
4
5
6
7
8
9
10
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
VNM
MSN
KDC
VCF
HVG
MPC
VHC
SBT
TAC
NHS
Average 45 peers
Market cap
Products
101,679
67,244
8,805
3,694
2,760
2,277
1,957
1,808
913
656
Net profit
Y2013 Chg %
Dairy
F&B, Mining, Banking
Confectionery
Coffee
Fisheries
Fisheries
Fisheries
Sugar
Oil & fats
Sugar
30,949
11,943
4,561
2,299
11,043
11,112
5,095
2,220
4,291
1,044
Y2013
16.5%
14.9%
6.4%
8.7%
43.6%
40.0%
20.5%
13.2%
6.4%
11.7%
17.6%
6,534
1,307
493
260
296
294
176
239
66
101
Y2013
Trailing
ROA
ROE
DE
PE
15.6
149.0
17.8
14.2
11.1
8.4
12.4
7.6
13.9
6.5
19.1
PB
5.8
4.7
1.8
3.3
1.2
1.4
1.3
1.0
2.2
0.7
3.6
21.1%
101.7
25%
20%
67.2
80
30.9
40
20
11.3%
10.8%
60
3.8%
11.9
15%
10.8%
8.8 4.6
3.7 2.3
2.2%
11
2.8
KDC
VCF
HVG
2.4%
2.3
11.1
1.5%
1.8 2.2
0.9 4.3
0.7 1.1
VHC
SBT
TAC
BBC
0
VNM
MSN
MPC
4.3%
3.1%
2.0 5.1
10%
5%
0%
Price
YTD
12-month
(VND)
movement
return
(shares - LTM)
(VND bn - LTM)
-9.6%
11.5%
3.9%
2.2%
-7.8%
37.5%
37.9%
0.8%
13.7%
5.3%
5.8%
-3.2%
-16.4%
7.1%
-39.6%
6.9%
26.0%
50.4%
-11.3%
26.6%
8.0%
22.8%
234,981
241,791
58,281
1,701
297,261
7,316
6,701
335,167
4,918
81,155,258
32.7
22.3
3.2
0.3
7.7
0.2
0.2
4.4
0.2
1,262
122,000
92,000
53,000
139,000
22,600
33,000
32,400
12,500
48,100
532
www.VPBS.com.vn
50
Food staples
VNINDEX
40
30
20
10
0
05/13
-10
08/13
11/13
02/14
05/14
Page | 48
Exchg
1
2
3
4
5
6
7
8
9
10
Hong Kong
Singapore
Hong Kong
Singapore
Hong Kong
Shanghai
Bangkok
Bursa Malays
Indonesia
Bursa Malays
151 HK Equity
WIL SP Equity
322 HK Equity
THBEV SP Equity
2319 HK Equity
600600 CH Equity
CPF TB Equity
PEP MK Equity
INDF IJ Equity
FGV MK Equity
Average 70 peers
Market cap
18,577
16,320
16,065
12,045
9,813
9,793
6,487
6,050
5,351
5,154
Products
Confectionery
Food Diversified
Flour&Grain
Brewery
Dairy
Brewery
Food Diversified
Food Diversified
Food Diversified
Flour&Grain
Y2013 Chg %
3,818
44,085
10,941
5,075
7,053
4,239
12,683
1,045
5,573
3,993
13.7%
-3.0%
18.8%
-2.1%
23.6%
13.4%
10.3%
7.3%
4.1%
-4.3%
3.5%
Net profit
Y2013
Y2013
687
1,391
494
619
299
321
306
315
330
361
24.1%
5.1%
-10.9%
-32.0%
28.5%
15.2%
-61.9%
14.4%
-30.5%
19.5%
-8.0%
18.0%
3.2%
4.5%
12.2%
4.2%
7.6%
2.4%
30.1%
5.9%
9.0%
5.9%
Trailing
ROA
ROE
DE
15.8%
3.0%
5.9%
11.0%
4.5%
7.1%
2.7%
6.1%
5.1%
5.7%
5.3%
35.3%
9.3%
17.2%
21.5%
11.8%
13.9%
9.1%
6.6%
17.0%
18.0%
13.5%
64.7%
174.6%
58.2%
72.1%
77.0%
14.6%
169.8%
2.7%
116.3%
66.2%
38.6%
PE
27.1
11.7
32.5
19.5
32.8
30.5
21.2
19.2
16.2
14.3
20.3
PB
9.6
1.1
5.6
4.2
3.9
4.2
1.9
1.3
2.8
2.6
2.7
Due to the tensions in the East Sea between Vietnam and China, Vietnams 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.
www.VPBS.com.vn
Page | 49
www.VPBS.com.vn
Page | 50
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 (ChinSu), 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 Vietnams 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 MSNs growth lie in factors including the faith in Masans
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, MSNs
current market capitalization is USD3.34 billion.
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Page | 51
networks including 140 points of sales and 185 distributors. Currently, Masan
Consumers holds 53.2% ownership interest in Vinacaf. 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 VinaCaf 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 VinaCaf 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, VCFs current market capitalization is USD174.9
million. VCF was also trading at 14.2 times, a lower multiple than sector average PE.
VCFs share price as of May 20, 2014 was significantly down 39.6% since the yearearlier day.
www.VPBS.com.vn
Page | 52
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 countrys 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 KDCs 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 sectors 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. Vietnams 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 Vietnams F&B local market but also for the export markets
www.VPBS.com.vn
Page | 53
Target
Acquirer
Seller
VinaCafe
Masan Consumer
Pybeco
Masan Consumer
Vinh Hao
Masan consumer
Panga Holdco
AGD
Proconco
10-Oct-12 Proconco
Masan Consumer
Nichirei Foods
Cholimex
IFS
10
Ezaki Glico
KDC
11
Cargill Vietnam
Higashimaru Co.Ltd
12
Carlsberg
Huda
13
Masan Consumer
14
Viet Thai
15
30-Jun-11 CP Vietnam
CP Pokphand China
16
Yen Viet
17
18-May-11 Nutifood
Nutifood
18
19
20
Masan consumer
21
Kirin Holdings
IFS
SBT
24.5%
na
63.5%
24.5%
na
63.5%
200
8%
8%
18
25.6%
48.9%
96
40%
40%
21.8
10.6%
29.6%
6.25
19%
19%
undisclosed
23%
23%
34.1
10%
10%
3.9
100%
100%
90
50%
100%
53.3
50.1%
50.1%
49%
25
49%
609
71%
71%
7.1
32%
32%
3.7
25%
25%
62.5
34.9%
34.9%
52
100%
100%
159
10%
10%
92
57%
57%
21.3
24.8%
24.8%
68.5%
22
23
Undisclosed
SBT
45.9
68.5%
24
VinaCapital
Thai Hoa
undisclosed
10%
10%
25
Vinamilk
40
100%
100%
Target
Acquirer
Seller
10-Oct-11 AA Corporation
Unicharm
Diana
27%
128
95%
27%
95%
85%
85%
Saigon Paper
10.7
38%
38%
SEB Group
Vietnam Fan
6.4
51%
51%
Target
Acquirer
Seller
Itochu, Familymart
Thai An
49%
49%
32
65%
65%
Phu Thai
undisclosed
65%
65%
2-Aug-12 3A Nutrition
Abbott
3A
undisclosed
100%
100%
Sojitz Group
9.5
26%
51%
Kokubu
19%
19%
www.VPBS.com.vn
Page | 54
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www.VPBS.com.vn
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