Kido reports bleak business in cooking oil segment

April 26, 2019 | 08:14
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Despite cooking oil being considered “the goose that laid the golden eggs” for Kido Corporation (Kido), however, the decrease in revenue in this segment brought down the net revenue of the corporation in the first quarter of this year.
kido reports bleak business in cooking oil segment
Kido reported a 7 per cent drop in overall revenue, mainly due to its floundering cooking oil segment

Kido’s freshly released financial statement reported a first quarter net revenue of VND1.55 trillion ($67.39 million), down 7 per cent on-year, due to the decreasing business results in the cooking oil segment.

Notably, Golden Hope Nha Be Edible Oils Co., contributed VND7 billion (304,347) to Kido’s consolidated revenue, while the remaining member companies, namely Vocarimex and Tuong An Vegetable Oil JSC, reported net revenue of VND626 billion ($27.2 million) and VND840 billion ($36.5 million), decreasing 43 per cent and 22 per cent on-year, respectively.

Tuong An said that it is focusing on developing the high-end cooking oil segment, while simultaneously decreasing the market share in the mid-segment which bring low profit. Meanwhile, Vocarimex reported that the fierce competition between manufacturers and the decrease in selling prices made decreased the company’s net revenue.

Cooking oil is still seen as a promising market by both international and local manufacturer. According to Euromonitor, Vietnamese people consume less than 10 kilogrammes of cooking oil per annum, less than the World Health Organization’s (WHO) recommended level of 13.5kg. However, the figure is expected to rise to 16.2-17.4kg by 2020 and to 18.6-19.9kg by 2025.

Nielsen estimated the value of the Vietnamese cooking oil market at VND30 trillion ($1.3 billion), making it quite an attracting segment.

However, cooking oil is not a sector with easy profit to be made by just anybody. After five years spending $130 million to build a soybean oil processing facility (2011), Bunge Limited, an American agribusiness and food company, failed to turn profit and decided to sell 45 per cent of its stakes to Wilmar in July 2016.

Since then, a three-party joint venture has been created with Bunge and Wilmar as equal, 45 per cent shareholders, and soybean meal distributor Quang Dung (a majority owner of feed miller Green Feed) retaining its 10 per cent stake in the operations. Wilmar is also a major shareholder of Calofic.

Meanwhile, Acecook Vietnam (wholly owned by two Japanese firms) exited the segment with the disappearance of the De Nhat cooking oil brand, proving unable to weather competitive pressure and accompanying marketing and promotion expenses.

Kido’s massive investments to increase its market share through M&A deals may just repeat the unfortunate past.

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