Metro hands baton to Thailand’s BJC

August 18, 2014 | 17:00
Philippe Bacac, chairman and managing director at Metro Cash & Carry Vietnam (MCC VN) explained to VIR why the German giant wholesaler has decided to sell on its 12-year operation in Vietnam to Thai retailer BJC.

Vietnam seemed to be a successful market with major potential, so why are you selling a business that still has room to develop further?

Metro and BJC have been in talks over our business in Vietnam, during which we carefully and thoroughly reviewed the business before making the positive decision. We believe that the Vietnamese market has strong growth potential that is why we have been investment in this market throughout the past 12 years. At the same time, we believe that this transaction will enable our business to further strengthen its competence and secure its future growth, as the new owner, BJC, has significant experience operating modern supply chains and distribution infrastructure in the region and is committed to further expansion in Vietnam. We are convinced that this deal will take our business to the next level and allow it to realize its full potential.

Do you see your venture in Vietnam over the past 12 years as a success story, or was it a long struggle?

Metro Cash & Carry Vietnam (MCC VN)’s operation has been a success story since its entry into the market in 2002. We have become the largest international player in the modern grocery market, operating a nationwide network of 19 stores across 14 cities and serving more than 900,000 professional customers.  MCC VN is one of the largest employers in the market with around 3,600 employees.  We have also acted as a responsible corporate citizen supporting the country’s social and economic development through programmes fostering sustainable supply chains in agriculture, modern trade infrastructure development and hygiene and food safety. MCC VN’s sales in the fiscal year 2012-2013 were 516 million euro.

Does Metro consider that the Vietnamese economy has lost momentum and the business climate is no longer attractive to foreign investors?

We believe that Vietnam is a market that has big growth potential, being the third largest nation in the region in terms of population, with low modern grocery penetration of only 4 per cent relative to an average across South East Asia of 42 per cent. An increase in modern grocery penetration towards the regional average is forecast to drive modern grocery market growth of almost 18 per cent per annum over the next five years. This will be supported by forecast growth in Vietnam’s GDP of 6.5 per cent over the next five years, a rapidly expanding labour force and fast growing middle class, as well as a significant increase in consumption expenditure on food and non-alcoholic beverages.

Metro says that BJC is the right firm to carry on its business in Vietnam

Why has Metro decided to sell to BJC and not someone else? Have there been other interested parties?

BJC has established modern and sophisticated supply chain infrastructure in the region and exhibits clear ambitions and strategic direction for expansion in grocery distribution and wholesale. We believe our wholesale operations will further grow under BJC management with significant potential for further expansion – as such, we believe BJC is a good home for the MCC VN business.

As was published in the media in January this year, you turned down an offer from Thailand’s SP Group. Why did Metro change its mind on the sale of the company within half a year’s time?

Any approaches or proposals to METRO are always carefully and diligently reviewed as a matter of proper form and decisions made based on the results of this review.

Would the exit of Metro be related to transfer pricing?

In all countries where Metro Cash & Carry is present, we are strictly compliant with the company’s rules and local laws and regulations. The competent government agencies and relevant authorities have had access to all relevant information related to our business performance in Vietnam.

What does the deal involve, and how much time will be needed to close it?

The deal includes the store network of MCC VN (19 stores), its warehouse and logistics facilities including warehouses, cross-docking platforms, sourcing platforms for fruit and vegetables and fisheries, as well as the pre-paid rent for the store leases for the next 20 to 37 years. The transaction is subject to customary closing conditions and approvals such as merger control clearance from relevant authorities. The closing of this transaction is expected for the first half of 2015.

What will happen after that?

At present we continue operating our business as usual. The important thing is that all of us are committed to remain focused on our business in every aspect. Until the completion of the transfer there is no change in the employment terms and conditions as well as there is no change to the current business processes of MCC VN and connection with corporate headquarter. After the closing, BJC has expressed an intention to continue to grow and develop the business as part of its enlarged presence in the region, and looks forward to working with all of the MCC VN employees.  Metro Group will continue to support its operations in Vietnam via a transitional services agreement for up to 24 months to ensure a smooth transition.

What does the change of ownership mean for Metro’s employees in Vietnam?

The well-being and interests of MCC VN’s employees has been high on the agenda for Metro Group during its talks with BJC. BJC has exhibited impressive ambitions in recent years to strengthen its position in the region’s manufacturing, distribution and retail sector. Acquiring MCC VN will enable BJC to further grow its business presence in Vietnam, which requires the knowledge and experience of the well-trained staff of MCC VN. BJC has expressed its intention that it looks forward to working with all of the MCC VN employees, and welcomes the new MCC VN team into the broader BJC community.

What kind of business does BJC run? How will the acquisition of MCC VN change its portfolio?

BJC is a leading Thailand-based manufacturing, marketing and distribution investment company, listed on the Stock Exchange of Thailand. It commands strong competence in diversified supply chains in the region. The acquisition of MCC VN stores will give it broader access to the grocery distribution sector in Vietnam and expand its network in the region to be better positioned and pursue further growth and expansion opportunities in the region.

How big is the impact on MCC VN’s suppliers and business partners, particularly in terms of payments and contracts?

We will be in close and constant contact with our local suppliers and business partners, in a fair and transparent way, to properly address any issues arising from this transaction. A smooth transition period is in every party’s best interest and we will make all efforts to ensure this.

There are some concerns that Thai products could flood Metro’s distribution outlets after the deal, can you comment on that?

The nature of the business requires us to build up and optimise our assortment based on the latest customer trends and needs so that the goods on our shelves duly address the Vietnamese customers’ expectations and demands, which we track and analyse closely. It is a customer-driven sourcing from both domestic and international suppliers to meet the demand of customers. We will share with BJC our expertise in the field of customer-driven category management. On the other hand, BJC also wishes to be a partner in progress of Vietnam and continue to support local communities and suppliers.  It is worth noting that given BJC’s regional footprint in supply chain management, there may be opportunities for domestic suppliers to access other markets outside of Vietnam via that supply chain.

Will the training programmes for local farmers and producers continue after the transaction?

Training local farmers and dedicated know-how transfer have been one of the success factors of our operations in Vietnam. The approach has proven useful and welcomed by the local community and the government. Now we are ready to share our experience with BJC. We understand that BJC also wishes to be a partner in the progress of Vietnam and to continue to support local communities and suppliers.

Does BJC plan to take over all the initiatives launched by MCC VN as well?

Within the transition period all the activities will continue to be carried out and we will ensure comprehensive communication and a well-organised handover with BJC in this regard. We understand that BJC is committed to growing and expanding the business and plans to implement a series of initiatives to achieve this.

Will Metro continue to source  products from Vietnam in future for its European market?

Since our primary target is to satisfy our customer needs we are sourcing all kind of products from all over the world in line with customer demand. As Vietnamese culinary culture is growing more and more popular especially on Western and Eastern European markets we offer Vietnamese products in our assortment. In addition, Metro Group has already established its own sourcing offices in Ho Chi Minh City and the region for several years and these offices will continue to operate. The products sourced from Vietnam will continue and it has developed significantly. In 2014 the total purchasing value of food products from Vietnam is planned to double as compared to 2013.

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