Soft Drinks in Vietnam

SOFT DRINKS IN VIETNAM

OVERVIEW

…Every market has a pulse, like a characteristic. By understanding how this pulse works, then a plan can be formalized so it will function effectively. It is not only my organization that understands this pulse, but the adversary organizations that will be in the same market as well. In addition to knowing the market, I also need to know the nature of the other players. Having this understanding will give me the power to formulate a plan along with the efficacy of the decisions, and will depend on how well I understand the market, along with my own strengths and those of the competitors, so I can carry out decisions in a coherent way.

…Vietnam is a truly emerging market. Its growth rate is astounding; coming in at one of the highest in the world, but still has a poor economy according to the business reports from the U.S. embassy there. Although despite this, soft drinks still have performed well in the last three years with double-digit off-trade (consumed off premises) value growth. Mostly driving this demand is the efforts from the manufactures promoting new products. In addition, more investments have been made to improve manufacturing capacity and product quality, as can been seen by the increased growth to import machines, chemicals and software to run the machines. A big problem is the 19% inflation rate pestering the economy, and the government is tightening macroeconomic policies to try and address the problem with price stability controls. Another concern for FDI is Vietnam’s weak banking system because of a rise in non-performing loans, along with low foreign reserves, and current account deficit.

…Mergers & Acquisitions along with joint ventures has been active. For example, Suntory Holdings Ltd bought a 51% share in PepsiCo Vietnam in 2012. Also, Saigon Beverages (Tribeco) completely sold all of its shares to Uni-President Vietnam Ltd, which dissolved Tribeco and was taken over by Uni-President enterprises resulting in Saigon Beverages. Although the local companies are morphing, the international players PepsiCo Vietnam, Coke Vietnam, URC, and La Vie Joint Venture still lead the market with a 49% combined market share. This makes it a problem for new players to enter the market, and little room to grow for existing players. The current players have strong financials with modern technology. They also launch new products continuously, followed with marketing and promotion activities to strengthen their hold.

…Geography poses a distribution problem, but traditional distribution channels are still used. Small grocers were the most important ones, because of the convenience and buying habits of many of