Sugar industry with a family backbone

Dang Van Thanh - president of TTC Group

The sugar deal

Some six years ago, Thanh Thanh Cong Group (TTC) and other member companies managed to acquire 68.52 per cent holdings at Societe De Bourbon Tay Ninh (SBT), owner of a massive sugarcane plantation and an advanced processing plant. The EUR34 million ($38.08 million) transaction unfolded a new path in the sugar industry for TTC.

Looking back at the deal, Thanh said that the reason his group was selected purely came down to the group’s length of experience in the domestic sugar industry. “Agriculture accounts for the majority of Vietnam’s GDP. So it was an opportunity and also a challenge for us to invest in agriculture,” said Thanh.

Apart from sugar, TTC also has investments in many other fields in the agricultural industry.

“There are quite a few businessmen switching to agricultural investments lately. In my case, I do have a genuine agricultural background. Sugarcane is my root,”
Thanh noted.

TTC is a privately-owned company, with some 37 years of history in the operation of five core business lines, including sugar, real estate, energy, hospitality, and education. TTC has a chartered capital of VND11.37 trillion ($521.55 million) and Thanh’s family holds 100 per cent of the stakes. With 23 subsidiaries and joint ventures, the group’s consolidated revenue in 2015 added up to VND15.4 trillion ($706.42 million), while its profit was recorded at VND1.11 trillion ($50.91 million).

In comparison to other domestic companies of the same size, TTC is special in its own right, as its governing board sits right below the board of directors. This control centre monitors all business branches and subsidiaries through so-called sectorial committees, such as the sugar, energy, real estate, hospitality, education, or finance committee.

TTC does not have an intention to go public, despite the fact that many of its member companies have been listed, such as Thanh Thanh Cong Tay Ninh JSC (TTC Tay Ninh, formally known as SBT), Bien Hoa Sugar or Sacomreal.

“We have gone through the reviews for the 2011-2015 period, and approved the development vision for 2016-2020,” said Thanh, adding that after the restructuring phase, the group was now prepared to bring the sugar industry to the international scene: to make itself heard in the region and to get ready for competition, when a raft of free trade agreements, like the AFTA (ASEAN Free Trade Area) and the TPP (Trans-Pacific Partnership) took effect.

The sweet path

TTC, according to its circulated data, currently holds up to 30 per cent of the domestic sugar industry. Despite the fact that sugarcane and sugarcane syrup making are ancient Vietnamese traditions, the sugar industry has only started in the mid-90s. Prior to that, the entire country had nine sugar factories altogether, with a crushing capacity of around 9,000 tonnes, which is now dwarfed by TTC’s capacity of 29,000 tonnes. In 1995, the government launched the national programme of “One billion tonnes of sugar”, introducing a policy line to promote the sector’s development. A few years later, the number of sugar factories was boosted to 44.

The mass production of sugar in many provinces brought along long-term effects up until now: illogical development of material areas and obsolete processing plants. After the sugar bang, the target of one million tonnes of sugar was met, yet the cost of production, around $55 per tonne on average, was somehow more expensive than Brazil’s $20 and Thailand’s $35, according to local FPT Securities.

In terms of productivity, the local sugar industry achieved approximately 65 tonnes a hectare, some 10 per cent below the world average. According to data published by Hoang Anh Gia Lai, on its Attapeu sugarcane project, Laos harvested 120 tonnes a hectare.

Vietnamese sugar production currently makes up for 1 per cent of the global production, equivalent to a tenth of Thailand’s contribution.

Filling up the gap

“We have carried out the reform, rearrangement, and reorganisation of the sugar industry, which then comes down to the three links of harvesting area, production methods, and market,” Thanh pointed out, as part of the group’s attempts to close up the gap of sugar production between Vietnam and other countries.

“Thanh is a bold businessman. Weathering the ups and downs, he has been able to keep his spirit fired up,” commented Pham Phu Ngoc Trai, chairman of Global Integration Business Consultants (GIBC) and former chairman and CEO of PepsiCo Southeast Asia. Trai highly appreciates Thanh’s bravery and boldness in making practical decisions, regardless of the fact that Thanh did not go through professional business training.

Due to the fragmented growth of the Vietnamese agricultural sector, large-scale investments are hard to carry out. Under Thanh’s administration, member companies started to work with local farmers to form across-the-board linkages. What this means is that sugarcane growers owning large swathes of land can lease their land or join TTC’s production chain, to share the benefit. Thanh says that it is an advanced co-operation, which provides a guarantee for farmers.

Sugarcane retains the highest volume of sugar within 16 hours after harvesting, so sugarcane firms supply areas generally lie within 50 kilometres from their factories. With regard to seeds, TTC imports its them from developed sugarcane-harvesting nations that meet the Vietnamese edaphic conditions.

The 2014-2015 sugarcane season yielded an average of 90 tonnes a hectare for TTC Tay Ninh, an increase of 20 per cent compared to the volumes recorded prior to the acquisition of SBT. What is more, apart from RE (refined extra) sugar products, the bagasse is used as biofuel, which can provide half of the energy demand in Tay Ninh province in the dry season. TTC also enhances the sugarcane value chain by utilising all products derived from sugar production, for instance,molasses for food processing and ethanol products or organic fertilizers. For every $1 dollar earned from the value chain, sugar makes up 80 cents, while the by-products contribute the remaining.

In 2016, a brand-new beverage “made in TTC” will also be launched onto the local market. The product is collected through the evaporation of sugarcane products, possessing a taste described as neutral, non-sweet, with a light fragrance of sugarcane. “Served chilled, I’m totally addicted to it,” Thanh said, having a sip from the bottle.

Home sweet home

Born in 1960, Thanh and his wife, Huynh Bich Ngoc (born in 1962), first opened their molasses business, called Thanh Cong, in 1979. With little investment to start with, the business was literally run by both husband and wife, where he handled the sales and marketing and she the bookkeeping.

In 1991, Thanh was one of the founders of Sacombank and subsequently helped bring the bank up to be a commercial joint stock bank with nationwide network coverage. When he lost his controlling rights in the bank in 2012, it had a total asset value of VND140 trillion ($6.42 billion) and a network of 432 branches and transaction offices.

TTC, however, has continued standing strong and well-managed along the way ever since. According to Ngoc, when the banking job was not too busy, her husband was always on the road with her between Can Tho and TuyenQuang, to bargain for molasses.

When the banking business got busy, Thanh spent all of his time working for Sacombank, while Ngoc took hold of TTC. Through the banking line, they saw an opportunity in the real estate sector, which led to them setting up Sacomreal in 2004, TTC’s real estate arm at the time.

Thanh has a rather open mind-set regarding advanced financial products, evident in the listing of the bank on the stock exchange in 2006 or its appeal to big financial institutions, such as IFC, ANZ or Dragon Capital.

Besides Thanh, his family members also play an important role in the family business: his wife, Ngoc, is TTC’s vice chairman; his son, Dang Hong Anh, is chairman and co-founder of Sacomreal; and his daughter, Dang Huynh Uc My, was once chairman of TTC Tay Ninh. Given its business size and experience, the Dangs were voted by Forbes Vietnam as one of the largest family businesses in the country in 2014.

What sets this family apart from others is their close linkage between life and work. By tradition, Ngoc said, all family members join for lunch, except if someone is on a business trip or at an important business meeting, professing to a concerted effort to maintain the relationship between family members.

The family, however, encountered hardships in 2012. After being excluded from the bank, merely holding onto his board member seat, Thanh and his children were temporarily held under custody at the end of the year, for the duration of an investigation into his time at Sacombank, the sale of bank assets and the family’s outstanding debts. They were released after 48 hours and carried on co-operating with the authorities to shed light on the issues. The case then quieted down and was closed without a formal conclusion. Afterwards, Sacombank leaders declared to transfer 80 million Sacombank shares, worth VND1.6 trillion ($73.39 million), from the family, in a bid to “clear up the credit and bonds that remained valid among the related parties.”

At the beginning of 2015, Thanh was rumoured to find his way back to the banking sector. His response to queries at an interview in March 2015 was simply that “At the moment, I have no plans at all.”

With regard to the upcoming integration competition, Thanh noted that his opinion towards the issue has not changed and he sturdily believes that “without competition, there is no development.”