The populous (nearly 100 million) Vietnamese market is important, and increasingly so, to Food Empire Holdings which achieved FY22 sales of US$50 million in the country. 

FOOD EMPIRE

Share price: 
$1.07

Target: 
$1.36

A 29-30 Aug visit to Ho Chi Minh arranged by the company has brought several analysts face to face with its products and given them an on-the-ground feel for the market and its factory operations.

Maybank Kim Eng analyst Jarick Seet reiterated his 'buy' call post-visit with an unchanged target price of $1.36 (current stock price: $1.07).


In his note titled "More positive after Vietnam factory visit", the analyst says, among other things, he:

CafePhoGold9.23New launch: Stronger and creamier version of Food Empire's hot-seller Cafe Pho.•  ... forecasts Food Empire’s sales in Vietnam to grow by around 13-15% in FY23,

•  ... learns that "modern trade" (ie, sales via supermarts) is  growing well, 

•  ... learns that a new Food Empire product, Hillway, a bubble tea 3-in-1, has enjoyed good uptake so far, and

• ... learns that Food Empire is likely to raise prices next month by 7-15% in two tranches, mainly to combat the impact of a weaker ruble, which has depreciated significantly in the past few months due to the war with the Ukraine.



Phillips Securities' Paul Chew has provided an insightful background piece on the Viet market dynamics and Food Empire's place in it. Excerpts: 

CONSUMER

•  Type: Around 90% of instant coffee is consumed in the morning and largely (~70%) served with ice. This will vary with North Vietnam's consumption of more hot coffee.

•  Age: The younger generation prefers tea and consumes coffee more at coffee shops as social drinkers. Instant coffee drinkers usually start in their mid-30s. To capture this group of customers, frequent taste tests, product display visibility and distribution is critical.

•  Taste: Consumers tend not to switch to new brands unless they offer something new. Consumers prefer strong tasting coffee. Café Pho provides a strong taste even when ice is added.


CafePho Cambodia8.23CafePho in Cambodia: This street scene is identical to that in Vietnam where Cafe Pho has very high visibility as it competes with other top brands. Food Empire is making forays into Cambodia, a relatively new market. Photo: Company

 COMPETITION

 

•  Market share: The top 5 instant coffee brands in Vietnam are Nescafe (22%), G7 (20%), Maccoffee (14%), Q café (13%) and CafeViet (10%). G7 is a long-established brand. It is strong in the North especially sold during test as a gifting product.

•  Distribution: The market is larger in general trade (street shops 50%, wet market 7%), followed by modern (Mini store 13%, hyper-supermarket 11%, specialty store 7%) and online (7%). Online is sold via two major platforms, Lazada and Shopee.

"Key to building up a wide street shop distribution network is the in-house sales force of 930 people that regularly visits these shops. Each sales staff visit almost 30 shops per day for sales updates, customer feedback and replenishment of inventory."
Product display visibility in the street shop outlets is Maccoffee’s key marketing strength.

Key to building up a wide street shop distribution network is the in-house sales force of 930 people that regularly visits these shops. Each sales staff visit almost 30 shops per day for sales updates, customer feedback and replenishment of inventory.

• New entrant: Flagship Café Pho only entered the market in 2013 but branded it as the coffee most suited with ice. The coffee is creamier, richer, denser and stronger tasting than its peers. The key is to replicate as closely to the taste of the coffee shops. The ready-to-serve category is a U$1bn market vs. instant coffee US$400mn.

» Full report by Phillip Securities is here. And Maybank's is here.
» See also our 2020 story: 
FOOD EMPIRE: Our visit to Ho Chi Minh City to check out its ops

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