FOREIGN GROUPS LOCKING EYES ON F&B

Vietnam’s food and beverage sector is expected to see robust mergers and acquisitions amid the tough economic context.

Filipino food company Jollibee Food Corporation is in discussions to sell a minority stake in its Vietnamese coffee chain Highlands Coffee, noted Reuters at the start of December. The sale could pave a way for an initial public offering for the coffee chain, a move that Jollibee has been mulling for several years.

The group plans to sell 10-15 per cent of its stake in Highlands Coffee to an investor, the source shared with Reuters.

The previous month, Cool Japan Fund made a minority stake investment into Pizza 4P’s, following the successful divestment of Mekong Capital. The move aims to help Japanese ingredient producers and breweries expand internationally, particularly in Vietnam.

In September, Southeast Asian private equity firm Navis Capital pumped over $100 million in Dan-D Foods for the majority stake of the company. Headquartered in Canada, Dan-D Foods is a healthy nut producer with sourcing and processing facilities in Vietnam.

In July, Hong Kong conglomerate Swire Pacific announced that it has acquired Coca-Cola bottling operations in Vietnam and Cambodia for $1 billion. This deal marks a major milestone for Swire Coca-Cola to deepen its footprint in the region.

Besides foreign investors, local companies remain active in dealmaking activities in Vietnam’s food and beverage (F&B) market. The Sherpa Company, a subsidiary of Masan Group, increased its ownership in Phuc Long to 85 per cent. Meanwhile, The PAN Group bought a 39.9 per cent stake in Bibica for $22.6 million to raise its ownership of the confectionary company to 98.3 per cent. Likewise, restaurant chain operator Golden Gate completed a minority equity stake sale to a group of investors led by Temasek.

Huong Trinh, partner of BDA Partners, said, “We are still observing continuing interest from both strategic and financial investors, especially from Japan, South Korea, and Southeast Asia for F&B companies in Vietnam. The total value of merger and acquisitions (M&As) in Vietnam’s consumer sector reached $1.2 billion in the first 10 months of 2022, an increase of nearly 40 per cent on-year from the same period of 2021.”

In the second half of 2022, consumer confidence has been impacted by ongoing macro factors such as surging inflation and interest rates, Trinh said. “Nevertheless, we still expect a buoyant F&B market outlook, as Vietnam remains as one of the most attractive markets in the region with robust market fundamentals and a strong socioeconomic backbone,” Trinh added.

According to a report by VNDIRECT Securities Corporation, the F&B sector will recover and enjoy a higher growth rate going forward, mostly driven by the reopening of on-site catering services and the recovery of consumption. Food producers and drinks companies will be the main beneficiaries from such a recovery. The resilient growth of Vietnam’s F&B sector is being fuelled by higher people’s income and rising urbanisation, the report said.

In addition, Vietnam is also witnessing changing customer behaviour including a shift in spending towards fresh and packaged foods, increasing demand for luxury consumer goods, and a preference for shopping online. Companies with wide distribution systems and diverse product portfolios can quickly catch up with consumer spending trends.

Trinh of BDA Partners believes there are many opportunities for foreign financiers looking for potential targets of F&B companies in Vietnam, given the strong growth prospects. “Strategic investors will be on the hunt for Vietnamese F&B companies to expand their product portfolio, manufacturing capacity, and distribution network in the country,” Trinh said.

“Such funding will also provide strategic investors quick access to a highly potential F&B market with 100 million consumers with rapidly growing disposable income. This attractive market outlook will also appeal to financial sponsors, especially ones with strong track record of operational expertise in the sector.”

Additionally, in Vietnam, there is generally no restriction on foreign ownership applicable to F&B companies. This opens various opportunities for foreign investors to penetrate Vietnam market via M&A, especially for those who prefer to seek controlling stakes in the target companies.

Source: VIR