Confectionery manufacturers forge ahead in Vietnam

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Top global producers, such as Orion, Nestlé, and Mondelēz, are discovering the country as a precious production hub, but more importantly, as a dynamic consumer market with great potential for growth.

According to the summary of the December 2016 report by Euromonitor available on the market research company’s website, over the review period, the rising consumer awareness of health and wellness had a consistently negative effect on demand for sugar confectionery.

In terms of prospects, the import taxes applied to sugar confectionery imported into Vietnam from other Asian countries, such as Thailand and South Korea, are expected to continue decreasing over the forecast period, based on trade agreements recently signed by the Vietnamese government.

This is set to result in further increases in the number of international players, which is set to result in harsher competition. In sugar confectionery, local players are expected to face the threat of losing ground to foreign rivals.

Mondelēz International

At a colossal VND11.6 trillion ($534 million) deal, global confectionery powerhouse Mondelēz International acquired an 80 per cent stake in Kinh Do Corporation’s snack business, setting up the Mondelēz Kinh Do brand on July 15, 2015.

The acquisition was seen as a means for Mondelēz to strengthen its route to its Asia-Pacific markets and set foot in Vietnam. The business has a combined portfolio of Kinh Do mooncakes, Cosy buscuits, and Solite soft cakes, in addition to AFC crackers, Oreo cookies, Ritz crackers, and Cadbury chocolate products.

In its 2015 annual report, Modelēz recorded $128 million in incremental net revenue from its Vietnamese acquisition, against a $29,636 million total net revenue. Considering its new Vietnamese operations only started in July of the year, these numbers were seen as encouraging.

Orion Corporation

Another powerhouse, Korean confectionery manufacturer Orion, best known for the brand Choco Pie, reported a record operating profit last year. The company’s operating profit rose by 9 per cent on-year, to KRW326.2 billion ($283.6 million).

As reported by newswire Korea JoongAng Daily, the group’s Vietnamese operation posted an impressive 24.1 per cent growth in 2016, surpassing the KRW200 billion ($173,900) threshold in sales, for the first time since Orion entered Vietnam.

According to the 2016 Investor Relation presentation, in Vietnam Orion has a 100 per cent owned subsidiary named Orion Food Vina. Between 2011 and 2015, the company’s revenue from the Vietnamese market saw a compounded annual growth rate of 11 per cent.

According to the company’s report on spin-off and stock split released in late 2016, in Vietnam the company plans aggressive market expansion, aiming for Vietnam to be the bridgehead of its expansion in Southeast Asia.

Lotte

Lotte, the leading confectioner in Japan and South Korea, now has one factory in the southern province of Binh Duong. Established in 1998, the factory produces chewing gums and chocolate products.

Not only expanding the sales of its own products in Vietnam, starting in 2013 the company has made headlines for its dramatic attempts at swallowing Vietnamese confectioner Bibica (HoSE: BBC).

In 2007, Bibica sold 30 per cent to Lotte. Then Lotte kept buying into Bibica and raising the holding to 43.56 per cent as of the end of 2013. Counterweight asset management company SSIAM under SSI and related companies held a total 40 per cent.

In September 2014, Lotte increased its ownership to 44.03 per cent. SSIAM and related companies sold their holding to PAN Food.

As of the end of 2016, Lotte Confectionery Co., Ltd. held 44.03 per cent of Bibica, being the biggest shareholder in the company, followed closely by PAN Food (42.25 per cent).

Lotte wants Bibica to produce Lotte-branded products, such as Lotte-Pie. Meanwhile, PAN wants Bibica to grow its own brands. Deputy chairman Truong Phu Chien, for multiple times, has told local media that Lotte’s target does not align with Bibica, and that Bibica wanted to work with PAN food more.

Perfetti Van Melle

Perfetti Van Melle started construction of a factory in Vietnam in 2006 and the second one in 2007. According to Euromonitor, Perfetti Van Melle Vietnam Ltd. continued to lead in terms of sales of sugar confectionery in 2016, accounting for 14 per cent of the total sales value during the year. The company’s leading position can be attributed mainly to its diverse product portfolio, which includes the Mentos, Alpenliebe, and Golia brands.

In addition, the company registered a slight increase in its share value in the sugar confectionery category between 2014 and 2016. The company has continuously expanded its distribution network across the country, actively conducting promotional activities.

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