Exciting times ahead in F&B and FMCG
Vietnam’s mergers and acquisitions market is abuzz in food and beverages, as well as in consumer goods, as the competitive landscape evolves and rivals reshape their portfolios.
The Vietnamese food and beverages (F&B) market has witnessed the latest mergers and acquisitions (M&A) deal in which the Philippine’s biggest restaurant chain, Jollibee Foods Corporation, spent $350 million acquiring Coffee Bean & Tea Leaf. Jollibee will invest $100 million for an 80 per cent stake in the Singaporean venture set up with Vietnamese partners, a spokesperson said in a stock exchange disclosure.
In addition, the remaining 20 per cent of the Singaporean venture will be bought by Viet Thai International JSC, Jollibee’s partner in Highlands Coffee and Pho 24. Jollibee also announced an additional $250 million investment to pay part of Coffee Bean & Tea Leaf’s debt, a decision which seems to have riled Jollibee investors. After the announcement, Jollibee shares fell by 8 per cent, the single largest drop in two years.
Whether or not Jollibee decides to follow through with a merger between the Coffee Bean & Tea Leaf and Highlands Coffee, the move has shaken up the coffee chain market. In the filing, Jollibee chairman Tony Tan Caktiong said, “Combined with Highlands Coffee, with business mostly in Vietnam, this acquisition will enable Jollibee to become an independent player in the large, fast-growing and profitable coffee business.”
Another notable M&A deal in the F&B sector occurred in the dairy sector when Vietnam’s largest dairy producer, Vinamilk, increased its holding in GTNFoods from 2.32 to 38.34 per cent. The investment means to consolidate Vinamilk’s position in the market. GTNfoods owns 74.5 per cent of the shares of Vietnam Livestock Corporation, which holds 51 per cent of Moc Chau Milk, an established dairy brand in the north, particularly in the rural area.
Seck Yee Chung, partner of Baker McKenzie Vietnam told VIR, “M&A activities in 2018 did not outpace 2017, which had two high-profile public company deals in the beverage sector. Nonetheless, M&A activities in the retail, consumer goods, and F&B sectors remain higher than in others and in 2019 we expect continued investment and growth in these sectors, including the technology and logistics platforms that support such growth.”
Within Vietnam’s consumer goods industry, convenience stores and mini-marts remain one of the fastest-growing segments, with insiders expecting continued investment. Several foreign retailers such as Lotte Mart and FamilyMart plan to expand their presence in 2020.
“We have seen and expect an increase in foreign investment into equitised state-owned enterprises (SOEs) due to the continued initiatives to relax the foreign ownership limit as part of the government’s desire to divest big consumer goods players,” Chung added. “We also expect leading local F&B companies continue to attract foreign investors like Masan which drew investment from Boon Rawd and SK Group.”
The upcoming equitisation of Vietnam’s leading cooking oil producer, Vietnam Vegetable Oils Industry Corporation (Vocarimex), is expected to further drum up investor interest. State Capital Investment Corporation (SCIC) has recently announced plans to put its entire 36.3 per cent in Vocarimex – some 44.2 million shares – on the Hanoi Stock Exchange on August 15 at the initial price of VND22,300 ($0.97) per share.
Vocarimex currently holds a 26.54 per cent stake in Tuong An Vegetable Oil, and a 40 per cent stake in Golden Hope Nha Be as well as large plots of land in prime locations across the country. Vietnam’s leading food company, Kido Corporation, remains the largest shareholder with a 51 per cent stake in Vocarimex.
Meanwhile, agriculture and food-focused The PAN Group is also stepping up its acquisition of Bibica Corporation, one of Vietnam’s leading confectionery businesses, offering to buy more than 7.7 million shares of Bibica, equivalent to a 49.93 per cent of stake at VND68,500 ($2.98) per share. If The PAN Group succeeds in the deal worth nearly VND530 billion ($23.04 million), it will wrest full control of Bibica from other major shareholders, including Lotte Confectionery.
Bibica’s two major shareholders – Lotte Confectionery and PAN Food – have been locked in conflict for years over Bibica’s development strategy, a deadlock PAN Food hopes to break with this latest move.
The equitisation of Vocarimex and The PAN Group’s buyout of Bibica will push up M&A activities in the fast-moving consumer goods (FMCG) segment. According to Nguyen Huy Hoang, commercial director of the Worldpanel Division at Kantar Vietnam, the past few years have witnessed a surge in M&A in multiple markets from real estate and finance to technology and pharmaceuticals. Within the FMCG segment, the value and number of M&A deals has been increasing, promising an exciting future.
“Major local-international M&A deals are shaking up the market, such as Mondelez’s acquisition of Kinh Do’s confectionery business, or Thai Beverage’s 53 per cent share buyout of Sabeco in 2017. It is not limited to manufacturers either. Foreign retailers have also entered the picture, with TCC acquiring Metro Cash & Carry, and Central Group buying out Big C at $1.1 billion,” he said.