Bach Hoa Xanh grocery chain faces gloomy prospects

September 30, 2022 | 13:39
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From its pole position during the pandemic, when the company was sitting atop in terms of brand value growth pace, the Bach Hoa Xanh grocery chain is seemingly losing its appeal owing to recent complications.

Over a week ago, Brand Finance – the world’s leading brand valuation and strategy consultancy – reported that the Bach Hoa Xanh grocery chain under Vietnam’s major retailer Mobile World Group (MWG) has witnessed the fastest growth in its brand value in the year to date.

The grocery chain’s value shot up 178 per cent to reach $279 million, even surpassing the growth pace of well-established major players such as southern-based developer Novaland, which eyed a 132 per cent spike in its brand value, BaoViet Insurance with a 116 per cent hike, and MBBank with a rise of 113 per cent.

In terms of brand valuation, how customers and partners perceive a brand plays a crucial role. The Bach Hoa Xanh chain has been sitting atop in terms of brand value growth pace in the past year and bagged high appraisals from customers and partners.

In 2021, the Bach Hoa Xanh chain was one of the businesses allowed to open and trade during the pandemic.

The unit reportedly raked in $1.22 billion in revenue, showing a 33 per cent jump on-year, and contributed 23 per cent to MWG's total revenue.

Of which, 45 per cent came from fresh, chilled, and frozen products, 38 per cent from other food and drinks, and 17 per cent from supplements and medication, cosmetics, and other products.

For the first time since its foundation in 2015, Bach Hoa Xanh posted positive earnings before interest, taxes, depreciation, and amortisation, in which 90 per cent of its existing outlets counted as a profit.

Bach Hoa Xanh grocery chain faces gloomy prospects
Bach Hoa Xanh chain faces losing appeal due to recent complications

Despite such positive growth, several outlets in the grocery chain caught ill fame last year, associated with price hikes during the pandemic or selling outdated items. Several stores were even sanctioned.

In 2022, while not directly benefitting from the pandemic incentives and as consumers have more options and supply chains have gradually resumed, the Bach Hoa Xanh chain has quickly witnessed signs of a slide.

The grocery chain incurred losses of about $49 million in the first half, thus causing its parent company MWG’s net profit to diminish during the period.

According to Bao Viet Securities, the grocery chain is undergoing a shake-up with a novel new layout and has closed a raft of outlets in the first six months of this year.

The chain incurred losses of about $49 million in the first half, thus causing its parent company’s net profit to diminish during the period.

Based on its website data, in late 2021, the grocery chain consisted of 2,106 outlets, falling to just 1,740 outlets as of September 22 – down by 366 outlets or 17.4 per cent.

Along with this, ten days ago Bach Hoa Xanh chain once again created a stir among the public after being detected selling fresh Chinese mushrooms under the guise of quality local goods bearing Vietnamese Good Agricultural Practices (VietGAP) tags.

The grocery chain then reported that they have taken back and stopped selling whole mushroom products from supplier Dong A Trading and Production JSC, based in Thu Duc city – a district-level unit belonging to Ho Chi Minh City that was suspected of importing made-in-China mushrooms then giving the products VietGAP labels before resale.

Late this August, parent company MWG was reported to have a plan of selling a 20 per cent stake in the grocery chain, which is valued at an estimated $1.5 billion. The deal is expected to be finalised early next year.

The proceeds would be used to help Bach Hoa Xanh to invest in a distribution centre, fixed assets, technology, and online channels, as well as to feed the chain’s expansion.

With Bach Hoa Xanh’s chain operation model not yet comprehensive, plus its recent sales and operational difficulties, the feasibility of MWG’s plan for a 20 per cent stake sale in Bach Hoa Xanh still hangs in the balance.

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