Domestic distributors act as stepping stones for foreigners to enter Vietnam

Domestic distributors act as stepping stones for foreigners to enter Vietnam

Globally known brands are taking steps to restructure their exclusive distribution partners in Vietnam, a part of their plans to become the number one in their fields in the Vietnamese market.

VTC News has reported that Abbott has officially completed the deal of buying 3A Nutrition, its partner which has been distributing Abbott’s products in Vietnam for the last many years.

Commenting about the deal, Dau tu wrote that the foreign partner used 3A Nutrition as a stepping stone which helped it to integrate more deeply into the Vietnamese market and strive for the number one position in the market.

3A Nutrition seems to voluntarily become a part of Abbott, affirming that the company sale to Abbott aims to help Abbott’s products cement their positions in the domestic market.

However, a question has been raised that why Abbott, a giant dairy producer in the world, which has more than enough money to build a distribution company of its own, still had to seek an exclusive distributor, when entering the Vietnamese market?

Eighteen years ago, Abbot chose 3A Nutrition as its distribution partner, because the then owner of the company was Dr Chris Quach, a Viet Kieu in the US, who had deep knowledge about the powder milk market in Vietnam with Japanese Meiji brand, the US Similac, Dutch Guigoz and German Dumex.

What impressed Abbott at that time was that the 3A’s boss really wanted to become a good marketing group for the products and strive to help reduce the malnutrition index of Vietnamese children to the deepest low.

Especially, in many years later, 3A did not operate as a business group, but an educator.

This was what Abbott wanted when penetrating the Vietnamese market. And 3A Nutrition did its job as the exclusive distributor too well. Every year, 3A even spent 2-3 billion dollars on the research and development activities.

Robert Tran, a senior executive of Robeny Group, a Canadian consultancy firm, believes that 3A really helped reduce the risks in debt collection, delivery and market research. If Abbott does not take over 3A at this moment, it would miss the golden opportunity.

If so, 3A would belong to some groups which could be the rivals of Abbott. Moreover, Abbott should take over 3A now, because it has got all necessary information about the market, which allows it to distribute products and easily expand the market.

The financial terms of the affair have not been revealed, but an executive of Abbott Nutrition said Abbott would use 20 million dollars as working capital to develop business in Vietnam.

Merger and acquisition experts have said that everything is very cheap at this moment, and that any one, who has money, would have the opportunities to buy the things they need.

In case of Abbott, the dairy producer has grabbed the opportunity to buy a company at a good price, which would help Abbott reinforce its strength in the nutrition product market in Vietnam.

The reports by market survey firms all showed that the powder milk consumption in Vietnam has increased by 17 percent, thus making the competition among dairy producers stiffer.

Foreign dairy producers now hold more than 70 percent of the market share. Abbott tops the list of the foreign producers, holding 32 percent of the market share. The remaining market shares are being held by domestic producers such as Vinamilk and Nutifood.

A similar case is happening with PSD, which was the distributor of Nokia. Some months ago, the Nokia-PSD alliance broke down, while Nokia decided to cooperate with FPT and Lucky to boost sales on the domestic market.

Right after the separation with Nokia, PSD has found a new foreign partner. Buu dien newspaper has reported that PSD has become the distributor for Samsung, which is the Number One in the smart phone market in Vietnam with 53 percent of the market share, and the Number Two on the mobile phone market in general.

Will it happen that Samsung, once obtaining its goal of dominating the market, it will take over PSD?

vietnamnet