Kido gloves are off in M&A bout

A key aspect of Kido Group’s M&A strategy is taking advantage of insider know-how Photo: Duc Thanh

During its recent annual general meeting, Kido Group (previously known as Kinh Do Corporation whose nearly 20 per cents stake was owned by foreign investors) announced its 2016 plan to continue its “Food and Flavour” strategy with a focus on consumer foods such as instant noodles, cooking oil, soy sauce, and ice-cream. To achieve this, Kido plans to merge with or acquire existing firms in the sector.

The firm will use its ample cash reserves of VND3 trillion ($134.5 million) to carry out these mergers and acquisitions (M&A). According to Kido’s Board of Directors, M&As are the fastest and most stable option to venture into the consumer foods market, as the firm can take advantage of existing facilities and insider know-how.

Firstly, the group will boost its ownership from 24 to 51 per cent at Vocarimex and nominate new executives to the latter’s board. As a major player in the Vietnamese cooking oil market, Vocarimex currently owns 51 per cent stake in Tuong An Vegetable Oil JSC, 49 per cent stake in Golden Hope Nha Be, and 24 per cent stake in Cai Lan Oil & Fats Industries Company. This means that through the takeover of Vocarimex, Kido will be able to learn the business strategies for the popular cooking oil brands Tuong An, Golden Hope, and Neptune.

Secondly, Kido will continue its strategic partnership with Saigon Ve Wong in producing instant noodles. Still according to reports from Ho Chi Minh Securities, instant noodles seem to be the most challenging sector for Kido, as the market has been saturated with strong brands from Masan, Acecook, and Asia Foods.

Moreover, according to statistics from the World Instant Noodles Association, the volume of instant noodle consumption in Vietnam has dropped in recent years. Specifically, the number of servings decreased from 5.2 million in 2013 to 5 million in 2014, and maintained the downward trend to 4.8 million in 2015.

“As the Vietnamese economy grows quickly, any potential business sector has of course been covered already by many brands. Instant noodles are simply an example of this phenomenon. We’re confident that Kido will find our own segment in the competitive noodles market and reach a top-three position in the long run,” said Kido’s deputy chief executive officer Nguyen Thi Xuan Lieu.

Kido is also actively seeking other M&A opportunities in the food and beverage sector. Its board of directors stressed that careful consideration was necessary to ensure long-term co-operation and a stable gain in market share. However, last year, Kido fell through in its well-publicised M&A deal with PhinDeli, a Vietnamese coffee brand with operations in the US. Kido attributed this failure to incompatibilities between PhinDeli’s products and Kido’s distribution network.

On the selling side, Kido will withdraw completely from Kinh Do Binh Duong JSC by selling its remaining 20 per cent stake to Mondelez International. The firm’s confectionery arm had already been renamed Mondelez Kinh Do in March.

Experts noted that Kido’s M&A strategy was somewhat similar to its rival Masan Group, which also dominates the Vietnamese food and beverage industry through a slew of aggressive M&As. In the past six years, thanks to its huge cash reserves and bank loans, Masan has acquired the café brand Vinacafe Bien Hoa, cattle-feed firms Proconco and Anco, pure water producer Vinh Hao, Saigon Nutri Food, and Cholimex.