Chuong Duong Beverages JSC facing crisis

January 22, 2018 | 13:46

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Chuong Duong Beverages JSC (stock code: SCD) had a bad year in 2017 with the first loss reported since listing on the stock exchange in 2006.

Chuong Duong's products have been losing the battle with foreign beverage brands

The company’s net revenue in the fourth quarter of 2017 declined 47 per cent on-year to VND88 billion ($3.9 million) due to consumption falling by over 7 million litres.

While the beverage market maintains a stable growth momentum, the revenue and profit of the this company fell sharply. In 2017, accumulated revenue hit VND339 billion ($14.93 million) and pre-tax profit was a negative VND2.2 billion (nearly $0.1 million).

This is the first year this company reported losses since being listed on the stock exchange in 2006. These figures are also far different from the targeted VND494 billion ($21.76 million) of revenue and VND38 billion ($1.67 million) of pre-tax profit.

The difficulties of this company come from slow adaptation to the changing market and consumer taste, as well as lack of capital. Chuong Duong still uses old production lines from the 2000s, forcing them to outsource large portion of their production. This pushed costs and products prices too high, making it difficult to compete on the market.

The company’s approved business plan for 2013-2017 stipulated an average revenue growth of 10-15 per cent per annum. However, this target has been decreased due to competition with foreign beverage brands.

Against this context, the 40-year-old beverage brand increased discounts for distributors to accomplish its revenue and profit targets. However, it was not enough to ensure the company’s sustainable and stable development.

Distribution and sales policies are adding to Chuong Duong’s ails. The company only focused on several distributors instead of expanding its market share. The budget for marketing campaigns has been increasing in the last years, but their effectiveness is not good.

Chuong Duong Beverage JSC is one of large beverage companies in Vietnam with some favourite products such as soft drink with gas (saxi, soda, orange, strawberry), soft drink no gas, and pure water.

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