Tan Hiep Phat may be little aid for Yeah1 recovery

Tan Hiep Phat and Yeah1 signed the agreement on March 12

Local media company Yeah1 Group (HSX: YEG) on March 12 signed an agreement on strategic co-operation with Tan Hiep Phat. The two sides will jointly develop applications on Yeah1’s digital platforms and roll out marketing programmes this year.

With its 15 years of experience in multimedia, Yeah1 could help Tan Hiep Phat to better approach young people of the X, Y, and Z generations. The local media firm has offered marketing solutions for big brands like Samsung, Heineken, Unilever, Grab, and LG, among others.

At the signing ceremony, Yeah1 chairman Nguyen Anh Nhuong Tong, said that under the strategic co-operation with the soft drink maker, Yeah1 expects to raise its revenue by 25.5 per cent to $78 million and profit by 134 per cent to $5.2 million this year. It expects cash and cash equivalents at $26.1 million and debts to stay at $9.9 million.

However, as Tan Hiep Phat has been struggling to recover its performance after the “fly” scandal five years ago, and its ability to support Yeah1 remains questionable.

Specifically, the public embarrassment cost the company VND2 trillion ($86.96 million) and Tan Hiep Phat has been ailing ever since.

In 2016, one year after the scandal, Tan Hiep Phat recorded VND6.1 trillion ($265.2 million), only a quarter of its revenue target of $1 billion in 2018. Notably, its off-trade market share narrowed down to 13.1 per cent in 2017 from 16.5 per cent in 2013, according to Euromonitor.

Off-trade is the key sales channel of the soft drink manufacturer, with thousands of stores and distributors across the country. The segment accounts for about 60 per cent of its performance, while the remaining 40 per cent is on-trade.

Tan Hiep Phat is lagging behind the annual growth of the beverage industry, which is reflected by its shrinking market share. Along with the scandal, the downturn in demand for bottled tea – the company’s main product – is another major reason behind its weak performance.

The average growth rate of the kind of goods in 2012-2017 was 14.7 per cent, but it fell to 2.8 per cent in 2016-2017. Euromonitor stated that consumers prefer healthy food and beverages. To ride the trend, companies like Coca-Cola and Pepsi have launched items with low calories and sugar content. Meanwhile, Tan Hiep Phat seems to have no intention to make a change.

Currently, the firm has yet to publish its business results for 2018 and 2019. More telling is that the firm maintains the $1 billion revenue target but changed the timeline to 2023.