F&B’s pandemic losses lead to share shake-up via M&A

F&B’s pandemic losses lead to share shake-up via M&A

Thailand’s C.P. Vietnam JSC has completed the acquisition of nearly 17 per cent in Sao Ta Food JSC, a member of Vietnam’s The PAN Group. C.P. Vietnam bought 4.35 million shares and then 5.4 million more on October 10-11, becoming a major shareholder in the Vietnamese food processing company.

Sao Ta Food has maintained fast growth during the pandemic while others were facing difficulties. In the first half of 2021, Sao Ta Food’s shrimp business recorded a positive revenue and profit of VND2.13 trillion ($92.6 million) and VND113 billion ($4.9 million), up 31 and 23 per cent, respectively. The company recorded a revenue of $155 million in the first nine months of the year, an increase of 12 per cent on-year.

As the largest animal feed company in Vietnam with a distribution network spanning across numerous countries, C.P. Vietnam can assist Sao Ta Food in finding new orders and expanding its business. Above all, the participation will help Sao Ta Food complete its value chain, reducing the cost of input materials, especially feed which accounts for 60-70 per cent of the total cost of shrimp farming.

Meanwhile, NovaGroup’s Nova Consumer Group is also exploring potential mergers and acquisitions (M&A) deals in the food and beverage (F&B) sector. With a view to perfecting its closed supply chain, Nova Consumer uses M&A to acquire the missing pieces for its chain, focusing on raw materials and consumer goods such as sausages, cakes, rice, tea, and coffee. In May, Nova Consumer took over the PhinDeli coffee brand. The company plans to develop PhinDeli coffee shops within Novaland real estate showrooms as well as distribute PhinDeli instant coffee products at its convenience stores.

Masan Group has also been pursuing M&A in the F&B scene over the years, resulting in impressive growth and the soaring valuation of its stocks. In May, The Sherpa Company, a Masan Group subsidiary, signed an agreement to acquire a 20 per cent stake in the Phuc Long Heritage JSC tea shop chain. Sherpa invested $15 million into the company to acquire the Phuc Long brand, one of the most popular beverage brands in Vietnam.

Meanwhile, packaged food producer KIDO Group has launched the Chuk Chuk café brand. The chain will operate under the franchise model with 1,000 stores across the country by 2025. KIDO also made a comeback in the confectionery market in the early second half, five years after selling Kinh Do Binh Duong to Mondelēz International.

According to Samuel Son-Tung Vu, partner at law firm Bae, Kim & Lee Vietnam, while the pandemic put a damper on the market in the short term, Vietnam’s growing population will help F&B and other fast-moving consumer goods to rebound swiftly.

He added that due to the pandemic, some F&B chains have suffered significant financial losses, which may lead to further needs of funding. This will present more opportunities for not only M&A, but also other funding instruments such as bonds and new share issuances.

As social distancing rules are being relaxed and the public is vaccinated, consumer spending is expected to rise sharply.

“In the M&A scene, companies with strong finances can pick up a bargain, and they can be very selective of targets with good fundamentals. These companies are not necessarily looking for targets in the same industry, but rather those that can complement their existing businesses,” Vu noted.

According to a recent survey by Vietnam Report, the F&B sector has been hit hard by the COVID-19 pandemic. Since the onset of the fourth wave in April, and especially since July, the outbreak has affected more than 91 per cent of businesses in this industry. Most businesses have become more cautious, with 78 per cent expecting difficulties in the months ahead, up from 37 per cent a year earlier. However, up to 80 per cent of F&B groups believe that recovery will be swift for Vietnam.

Speaking at VIR’s webinar on M&A amid the pandemic a fortnight ago, Nguyen Cong Ai, partner and head of Strategy at KPMG Vietnam, said, “The F&B industry has faced enormous difficulties during the pandemic, much like service businesses and restaurants. There is a possibility that 30 per cent of independent restaurants will disappear after the pandemic as restaurant owners cannot afford to maintain physical locations unless they do business from their home.”

However, he said coffee and restaurant chains will flourish after the pandemic, presenting a great opportunity for deep-pocketed players to step up M&A and enhance their presence in the sector.