|Restructuring through M&A can take advantage of the understanding local groups have of their markets, Photo: Shutterstock |
After 10 years of lengthy internal competition, South Korean Lotte Corporation will fully divest Bibica, selling 44.03 per cent or 6.8 million shares and making The PAN Group the largest shareholder in the Vietnamese confectionery maker.
The PAN Group has been vying for controlling stakes of Bibica to retain the Vietnamese confectionery brands in the market amid the aggressive expansion of foreign confectionery products.
In 2014, Kinh Do sold 80 per cent of its confectionery business Mondelez International, making it the biggest deal in the history of Vietnam’s confectionery industry. After five years of deals, KDC is making its comeback, resurrecting its snack business under the KIDO brand and rolling out its first moon cake products last year.
Meanwhile, Thai cement giant SCG Group has completed the acquisition of its seventh packaging company in Vietnam, Bien Hoa Packaging JSC, at a cost of VND2.07 trillion ($89 million). This purchase was commenced through a subsidiary of Thai Containers Group Co., Ltd. (TCG), a 70/30 joint venture between SCG and Japan’s Rengo Co., Ltd.
According to SCG’s annual report, the group boasts several local subsidiaries including Alcamax Packaging, AP Packaging, Packamex, Tin Thanh Packaging, and New Asia Industries. The company also holds controlling interests in Vina Kraft Paper, the largest packaging manufacturer in Vietnam.
The mergers and acquisitions (M&A) market has been buzzing with activity in retail, consumer goods, real estate, food and beverage sectors, in which growth is driven by the country’s large population and expanding middle-income class. However, the increasing number of deals comes with concern that Vietnamese brands may fade away once foreign investors buy into local companies.
Samuel Son-Tung Vu, partner at law firm Bae, Kim & Lee Vietnam, told VIR that there are many successful M&A deals conducted by global players which help to expand domestic brands to the global market. “An acquisition by international investors may create opportunities for domestic brands to reach out to the world and find a way to become global brands,” Vu said.
For instance, the popular Corona beer brand initially only targeted the domestic Mexican market. However, after AB InBev took over Grupo Modelo in 2012, Corona has grown from a local Mexican player to a global brand.
Likewise, after ThaiBev acquired a majority share in Saigon Beer Alcohol Beverage Corporation (SABECO), the Vietnamese company entered into a sponsorship agreement with Leicester City Football Club to promote the Bia Saigon brand on the team jerseys of for the 2018/19 English Premier League season. The effectiveness of these strategies is yet to be fully seen, but there is hope that Bia Saigon can one day become a global brand.
Vu added that corporate restructuring through M&A transactions, such as SCG in business to business enterprises, are common activities among enterprises in the global market. In addition, domestic enterprises have a better understanding of the market and habits of consumers. Therefore, domestic enterprises should focus on developing their brands and products in order to create resonate with consumers and promote brand awareness.
Masan Group has conducted several consecutive brand acquisitions in recent years such as Vinacafé, Net washing powder brand, and Vinh Hao mineral water brand.
With the support of major players such as Masan, the products have accessed markets through Masan’s nationwide distribution channels; accordingly, brand awareness has been expanded.
Speaking at the Vietnam M&A Forum 2020, Masan Group’s general director Danny Le stated that 25 years ago the group focused on the seasoning segment. “After that, we saw the potential in consumer goods so we decided to branch into the instant noodle and beverage segments,” Le stated. “Masan pursues M&A deals of potential brands to expand its product portfolio. Our acquisitions are aimed to expand its distribution network as well as build strong local brands in the domestic market.”
Similarly, Vinamilk also seeks to acquire the Moc Chau Milk brand from GTNFoods as a way to expand operations and market share in order to increase competitiveness.
According to Brand Finance, Vietnam was the fastest-growing nation in 2020 in brand value, skyrocketing to $319 billion. Emerging as a Southeast Asian haven for manufacturing, Vietnam defies the global trend, with its brand value up an impressive 29 per cent.
Vietnamese brands are clearly attractive to foreign investors. However, to avoid any conflicts related to brand development post-M&A, Vu suggested that foreign investors create a deep understanding on products, brands, and habits of consumers in the market.
Foreign investors should also focus on developing competitive distribution channels and smart, local marketing campaigns, consistent with the tastes of consumers. “A clear and market-relevant development strategy is a key factor in consolidating and developing corporate brand and intangible assets to find its own position in the market become a major player,” Vu stated.