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Sweets companies fall into foreign hands

Vietnamese investors develop their businesses well in the beginning stages of growth, but have difficulty after expansion, analysts say.

Sweets companies fall into foreign hands

In mid-2016, Kido, formerly named Kinh Do, sold the remaining 20 percent stake to the foreign partner, worth VND2 trillion, officially ending the 23-year period of developing the Vietnamese sweets brand.
Prior to that, in 2014, Kido sold 80 percent of the sweets manufacturing division to Mondelẽz International from the US in a deal worth $370 million, or VND7.846 trillion. 
Vietnamese investors develop their businesses well in the beginning stages of growth, but have difficulty after expansion, analysts say.

As such, the well known sweets brand, has officially become 100 percent foreign owned. The founder of Kinh Do brand repeatedly said that selling the sweets manufacturing division was a business strategy intentionally pursued by the group, and that this was not a hostile takeover deal.
Kido now gathers its strength in making ice cream, while it has jumped into the vegetable oil market.
The M&A deal is considered the largest in the confectionery industry in the domestic market.
In 2013, Kinh Do once successfully took over Vinabico, a brand established in 1974. With the deal, the company, which was a joint stock company, became a single limited company. And after the merger, Vinabico no longer has the independent legal status since early 2015.
Another Vietnamese sweets brand – Bibica – is also in the danger of being swallowed by foreign investors. 
Unlike Kinh Do and Mondelēz International, which had a stake transfer deal on a voluntary basis, Bibica has been the target of a hostile takeover intention from South Korea's Lotte Group.
After many years of collecting shares and struggling to obtain seats on the board of directors, Lotte now has two representatives in the board. The partner from South Korea has become the biggest shareholder in Bibica, representing 44 percent of the company’s charter capital.
Analysts noted that many big sweets brands have changed hands or disappeared in the last five years. 
According to Kantar Worldpanel, the Vietnamese cookies market grows by 7 percent per annum. BMI estimates that the total revenue would reach VND40 trillion by 2018. 
However, with the gradual disappearance of well-known local brands, the market will be controlled by foreign investors.
The senior executive of a Vietnamese sweets company admitted that domestic manufacturers were worn out from the competition in the home market. 
“The important characteristic of the industry is that the input materials, including wheat, sugar, flavor, cream and butter are all imports. Therefore, it is difficult to compete in prices and quality with foreign products,” he said.
While domestic enterprises are reluctant to renovate technology because of limited financial capability, foreign manufacturers have modern technologies and long-term strategies to conquer the Vietnamese market.


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