Masan (MSN) accelerating towards full-year performance goals
One of Vietnam’s largest private conglomerates, Masan Group, grabbed double-digit growth across consumer-related business segments in the third quarter this year, paving the way for a full-year upbeat performance.
Consumers show favour towards MEATDeli‘s fresh products at VinMart stores
At VinCommerce (VCM), a core business segment of Masan Group, the profit turnaround game plan was validated with the
EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin improving since the beginning of the year, from -8.5 per cent in the second quarter due to COVID-19 restrictions to -2.8 per cent in the third quarter, solid on the way to reaching break-even momentum for the year’s fourth quarter.
Since taking over the VinCommerce system last December, Masan has been working on a plan to optimise this retail system. To optimise operation efficiency of VinMart and VinMart+ stores, closing underperforming locations and opening new ones on a selective basis were deemed as strategic steps.
More than 80 per cent of closed VinMart+ stores in Ho Chi Minh City and tier-2 cities showed their revenue per square metre was nearly 50 per cent lower than optimal levels required to achieve a store level break-even point. By contrast, this nine-month period saw the inauguration of one VinMart supermarket and 57 VinMart+ stores, of which three pilot models were launched in Ho Chi Minh City and Hanoi with a fresh innovative way of product display to elevate the customer experience.
After focusing on the last nine months to improve the fundamentals of the minimart model, Masan’s management is now revamping its supermarket platform and positioning it to be a critical aspect of its online grocery platform. Besides that, improving the product portfolio with the addition of more fresh food is one of the key drivers to attract customers to the VinMart and VinMart+ store system, with MEATDeli fresh pork products and VinEco safe vegetables among the most eminent items.
In the third quarter, retail revenue of the private label business in VinMart and VinMart+ stores picked up 10.3 and 11.3 per cent respectively and is expected to maintain growth momentum in the next 18 months, with the target of contributing more than 20 per cent of VCM’s revenue in the long term.
In the face of strong and efficient revamp measures, VCM remains solid on the way to achieve an EBITDA break-event target in the fourth quarter alongside posting over 10 per cent revenue growth compared to the third quarter.
“I believe our integrated consumer retail strategy is starting to bear fruit as we hit our first strategic milestone in the fourth quarter. This is just the very beginning of what we envision, to become online-to-offline champion,” said Masan chairman Dr. Nguyen Dang Quang.
Masan Consumer Holdings boasts a wide-ranging product portfolio
Healthy revenue growth
Masan Consumer Holdings (MCH) has delivered three consecutive quarters of strong double-digit growth in net revenues which reached VND6.08 trillion ($264.5 million) in the third quarter, a 32-per-cent jump compared to one year ago.
Consumer behaviour is changing during COVID-19, shifting preferences towards in-home consumption versus eating out, as exhibited by significant growth of convenience food and processed meat categories.
Masan believes this momentum and MCH’s innovative portfolio that brings traditional flavours and nutritional value will accelerate consumption growth of full meal solutions in Vietnam to reach the levels of its regional peers.
In the convenience goods category, full meal solutions continue to be a sustainable growth driver, soaring 90 per cent compared to the third quarter of 2019 and now accounting for 25 per cent of segment sales compared to just 17 per cent in the corresponding period of 2019.
The successful launch of five additional innovations in full meal solutions during the third quarter and completion of the “Chin-su 7-day breakfast” set with seven products attested to MCH’s ability in diversifying and innovating the convenience foods category.
These innovations are expected to further increase full meal solutions topline contribution to the convenience foods category, as MCH continues to upgrade its portfolio.
As for processed meat, premium brand Ponnie delivered 2.8-fold revenue growth in the third quarter compared to one year ago, and mainstream brand Heo Cao Boi delivered 52.2 per cent growth, bringing total category revenue up by 77 per cent in the same period. The premium brand now contributes over 31 per cent of segment revenues, while the segment itself contributed 3.7 per cent of MCH’s consolidated revenues in the third quarter of 2020, compared to only 2.8 per cent one year ago.
New innovative products contributed 55 per cent of MCH’s revenue growth in the third quarter and Masan management believe this is the key that will drive a similar growth level in the medium term.
Breaking into new segments
After being integrated into VCM’s retail system, Masan’s meat business has received a significant boost in its distribution network expansion. By the end of the third quarter, MEATDeli’s fresh pork products were sold in 1,500 retail outlets, 252 outlets extra compared to the second quarter, and present in over 1,100 VinMart+ stores in Hanoi and Ho Chi Minh City.
In the fourth quarter this year, Masan MEATLife and VCM will focus on improving same-store sales growth of MEATDeli in these sale points and make it a “hook product” in VCM’s fresh-focus strategy.
The integrated meat business (farm and meat) delivered VND583 billion ($25.3 million) in revenues in the third quarter and VND1.64 trillion ($71.2 million) in the nine-month period. The meat business’ 11 per cent growth in the third quarter compared to the previous quarter was largely attributable to 27 per cent revenue hike of packed MEATDeli’s fresh products.
In addition, it continued to grow the processed meat portfolio with the introduction of marinated chilled meat in the second quarter this year. Processed meat accounts for 7 per cent of meat revenue in the third quarter versus 5.5 per cent in the second quarter of 2020, with the aim to reach 10 per cent contribution in the fourth quarter.
To bring fresh and safe meat products at a reasonable price to consumers in Ho Chi Minh City and neighbouring provinces, Masan MEATLife also recently inaugurated its meat processing complex in the southern province of Long An. The complex reports VND1.8 trillion ($78.2 million) in total investment value and a design capacity of 1.4 million pigs per year. In the first phase, the complex has a scale of 155,000 tonnes of fresh and processed meat products.
Last month, Masan MEATLife also signed agreements to acquire a 51 per cent stake in 3F VIET, a leading domestic player in the poultry meat segment, via a primary capital injection of VND613 billion ($26.6 million).
According to a Masan MEATLife assessment, poultry is the second most important animal nutrition in Vietnamese family meals. The limitations of this market is similar to that of the pork market: low productivity, quality issues, and lack of new and breakthrough products.
With 3F VIET, Masan MEATLife will be entering the poultry category, a $5 billion market in Vietnam. 3F VIET branded and chilled products are already available in the majority of modern trade retailers in Ho Chi Minh City and neighbouring provinces, and will look to expand in the northern region this quarter to become a nationwide platform.
With 3F VIET’s acquisition, Masan now counts more than VND3 trillion ($130.4 million) in revenues from the meat business that is forecast to leapfrog in the near future after teaming up with VCM’s modern trade segment.