Masan Consumer expanding FMCG empire in VN

With the coming partial acquisition of bottled beverage producer Vinh Hao, Masan Consumer Joint Stock Co, an arm of Masan Group, is preparing to upgrade into Masan Consumption and expand its local fast-moving consumer goods (FMCG) empire.

Masan Consumption will also focus on the food and beverage business, and entering the medical, retail and agricultural segments associated with consumer products.

The goal for Masan Consumption is to "lead the local market in the sector of consumer goods, in addition to its food and drinks business."

Currently, Masan Consumer is financially capable of realizing its future plans in expanding its FMCG empire after the cash-rich firm received a $200 million investment from American firm Kohlberg Kravis Roberts (KKR) earlier this year.

KKR has so far poured $359 million into Masan Consumer.

Masan Consumer’s board of directors early this month authorized chairman Nguyen Dang Quang or general director Truong Cong Thang to decide on the conditions and terms for future investment in companies operating in the FMCG sector in Vietnam with a maximum investment value of VND200 billion ($9.6 million) in each firm.

According to a report Masan Consumer released late last year, as of the end of 2011, the firm had the biggest local market shares in fish sauce (76 per cent), soy sauce (78 per cent) and instant coffee (44 per cent), and the second biggest ones in chili sauce (37 per cent) and instant noodles (16 per cent ).

Holding more than VND3.39 trillion in cash and cash equivalents as of the end of September 2012, plus more than VND4 trillion in new investment by KKR, the question is, which firm will be the next target of Masan Consumer in its plan to expand its FMCG empire?

Why FMCG?

The main reason for Masan to redirect its investment into FMCG is that Vietnam is a promising market with a growing young population and rising incomes.

According to a recent market research report from AC Nielsen, as of Q3/ 2012, Vietnam was the fastest-growing FMCG market in the 13 surveyed regional countries, with 15.8 per cent and 7.2 percent growth in volume and value year on year.

In particular, the report also said that, of the 6 main FMCG groups, beverages saw the highest growth, with 15 per cent and 28 per cent increases in volume and value, respectively, higher than dairy products, food, and cigarettes.

In addition, the increase in the price of bottled water is also the largest of the 37 items that ACNielsen surveyed, up to about 40 per cent, compared with an average of 5-10 per cent.

After acquiring a 53.2 per cent stake in Vinacafé Bien Hoa Corp (VCF), a leading instant coffee maker in Vietnam, Masan Consumer caught onto the trend and invested in another bottled water firm.

Accordingly, Masan Consumer will acquire a 24.9 per cent stake in Vinh Hao Mineral Water Co for VND170 billion. It has announced that it will buy stock in the firm at VND85,000 per share.

There are four major brands in the bottled water market in Vietnam, including Aquafina of Pepsi Co, La Vie of Nestlé, Dasani of Coca-Cola and Vinh Hao.

However, the real strength of Vinh Hao is the rising consumption of large-sized purified water bottles for households and businesses.

This may be partly due to the prices, as a 20-liter bottle of Vinh Hao ranges from VND35,000 to VND48,000 each, while one 19-liter La Vie is VND48,000. Aquafina and Dasani do not sell 19 or 20-liter bottles.

Vinh Hao also has a longer history than any of the other brands here. It was the first local mineral water brand to appear in Vietnam, with initial investment from a French firm.

Since 1930, Vinh Hao Mineral Water products have been exported to other regional countries and France.