2021 5月 27
BDA’s Huong Trinh talks to VIR on M&A activities in Vietnam’s F&B sector
Food and beverages move with the times
May 27th, 2021
Vietnam Investment Review
by Thanh Van
The Vietnamese food and drink mergers and acquisitions market has shown more robust activity in the early months of 2021, with investors buoyed by the market outlook.
In January, Japanese seafood giant Maruha Nichiro announced that it had taken over food processing company Saigon Food. Founded in 2003, Saigon Food produces and distributes frozen seafood and ready-to-eat food under the “SG FOOD” brand for local and export markets like Japan. The company has four factories with freezing warehouses in Ho Chi Minh City.
Focusing on the growing consumption market, Saigon Food has established itself as one of the leading brands of porridge and hot pot sets in Vietnam, and in recent years has also started selling baby food. Its products are mainly sold in supermarkets and convenience store chains like Co.op Food, Bach Hoa Xanh, Ministop, FamilyMart, Circle K, and others.
Maruha Nichiro decided to acquire Saigon Food in order to secure a new marine product processing base and to acquire a platform for the development, processing, and sales of processed foods.
“In the midst of changes in the food supply chain around the world due to COVID-19, Saigon Food has the ability to develop products that are simple, safe, and easy to store, as well as the ability to sell them to the consumer market,” a company statement said.
In April, Vietnamese agriculture and food company The PAN Group spent $4.3 million raising its ownership to 28.57 per cent of charter capital in Khang An Foods JSC. Following the deal, Khang An Foods will increase its charter capital from around $10 million to over $15 million with a view to constructing a food processing factory and a farming area in 2021. Khang An Foods, a member company of Sao Ta Foods JSC, is operating in processing and preserving seafood, buying and selling food, preliminary processed agricultural products, and production and export of agricultural products.
In another case, in early April, seafood processing company Vinh Hoan Corporation purchased an additional 1.8 million shares in Sa Giang Import Export Corporation to increase its ownership to 76.7 per cent. Sa Giang produces instant noodles and crackers made from crab and squid. The deal helps Vinh Hoan venture into the food and beverage (F&B) sector.
Huong Trinh, managing director of investment banking advisor BDA Partners in Ho Chi Minh City, told VIR that F&B will remain an attractive sector for mergers and acquisitions (M&A) in Vietnam, driven by favourable macroeconomic fundamentals. COVID-19 has also hurt trade activities and thus created higher demand for local foods.
“These elements create a stable investment environment and growth prospects for Vietnam’s F&B, and we believe M&A activities in this sector will continue to increase,” she said. “We have seen more such activities from local players following the consolidation trend when market conditions are challenging for small- and medium-sizes businesses. Recent notable transactions include the acquisitions of 3F Viet by Masan, GTNFoods by Vinamilk, International Dairy JSC by Blue Point, and Sa Giang by Vinh Hoan.”
Indeed, F&B has always been a magnet for M&A in Vietnam. In the previous decade around 245 deals with the total value of $12.5 billion were recorded, led by giants in the industry such as Masan, KIDO, and The PAN Group. After a lull period, buyers have become more active in the M&A scene.
A report by the British Chamber of Commerce Vietnam revealed that one advantage for foreign investors entering the market through M&A is that they would not be required to apply for the investment registration certificate when contributing capital or buying shares of a local company, according to regulations. Another advantage would be time reduction for the licensing process as sub-licences would have already been granted to existing Vietnamese establishments.
“However, such companies would be faced with other challenges to overcome involving different strategies, vision, and culture to Vietnamese companies, as well as compliance standards such as health, safety, and the environment, accounting and financial reporting, and taxes,” said the report.
With regards to local investors, M&A is also a powerful tool to create synergy of strengths for involved stakeholders. Tran Le Nguyen, general director of KIDO Group, said that the group has had actively conducted M&A strategies to increase the ownership in Tuong An Vegetable Oil and other subsidiaries like KIDO Frozen Foods and Vocarimex. The group is taking steps to merge with companies to optimise expenses for production, management, and distribution channels, thereby expanding its market share in the food industry.
At the same time, KIDO is joining forces with Vinamilk to extend its reach in the beverage sector. The two have formed a joint venture named Vibev producing and trading healthy drinks and teas. In the increasingly fierce competition, the tie-up is crucial for both companies to improve its brand awareness and consolidate market share.
Trinh from BDA Partners believed that the stable domestic demand for F&B consumption and Vietnam’s good control of COVID-19 which minimises disruption in production have helped food manufacturing to be resilient during the pandemic. In addition, Vietnamese food companies will be beneficial from the participation in many free trade agreements.
She also expected Vietnamese businesses with market familiarity to become more active in M&A. “Nevertheless, we do not think the execution of cross-border deals is an issue for foreign investors as people are getting used to the new normal and M&A is moving online with the support of conferencing solutions, cloud, and local forces of professional advisors on the ground,” she said.