09:11 (GMT +7) - Friday 26/05/2017

Business

Sweet deals

Released at: 08:07, 18/05/2017

Sweet deals

Photos: Viet Tuan

KIDO’s decision to sell a major share of its frozen food business belies the fact it only has expansion in mind.

by Ngoc Chi

The first days of summer have arrived in Vietnam’s north, the peak season for ice cream and soft drinks. The KIDO Group Corporation (KDC)’s new frozen food facility producing yogurt and ice cream opened last November in northern Bac Ninh province and is now running at full capacity. Another ice cream plant of the group in Ho Chi Minh City’s Tay Bac Cu Chi Industrial Park is also planning to increase capacity to 3 million liters this year. While the ice cream segment is entering its “harvest” season, KDC surprised many investors in March when it announced the sale of 35 per cent of its holding in the KIDO Frozen Food JSC (KDF), despite it being “the goose that laid the golden egg”. 

Ambitions & obstacles

At the group’s roadshow in Hanoi on March 31 introducing investment opportunities, Mr. Tran Quoc Nguyen, General Director of KDF, did not hide his ambition to hold a 50 per cent share of the ice cream market in Vietnam by 2020. There will be changes in the shareholder structure after the sale of 35 per cent of KDF, he acknowledged, but KDC will continue to hold 65 per cent. 

Insiders believe that this is a considered step by KDC because the ice cream and yogurt segment sees stable annual growth of 35 per cent. According to a report from the Ho Chi Minh Securities Corporation (HSC), KDC’s net revenue reached VND1.4 trillion ($61.6 million) in 2016, up 34.8 per cent against 2015. After-tax profit was VND143 billion ($6.3 million), up 85 per cent and accounting for 63 per cent of KDC’s profit. 

Ice cream market share, by company

Source: Euromonitor

With such results, the sale of 35 per cent of KDF is expected to bring a tidy sum to the group. HSC also estimated that KDC could record a substantial profit if the deal is completed by June this year. Its profit forecast of about VND238 billion ($10.4 million) is much higher than the company’s profit from business activities. Moreover, it is expected to increase in the years to come thanks to the new facility in Bac Ninh province, which is the largest of its kind in the north, with initial capital of VND400 billion ($18 million). 

Another reason, according to Mr. Nguyen, is that KDF needs to be popularized to have more external resources and make the shareholder structure more diverse. Popularizing and listing the shares on the stock market is a way for the group to raise capital, he explained. In the future, KDC needs a lot of money to expand its business, not only in ice cream but also in the frozen product industry, with it targeting to meet 85 per cent of demand among Vietnamese consumers.  

While valued at VND65,000 ($2.8) per share, KDF has determined that the starting price will be VND52,000 ($2.3). Mr. Nguyen said that KDF’s goal is to create as many opportunities for investors and potential partners as possible. “Based on our leading position in the frozen food market, we believe in creating value for our shareholders,” he said. 

In order to achieve the target of securing a 50 per cent share of the ice cream market in Vietnam by 2020, the company will focus on expanding distribution channels for frozen food, with a goal of 150,000 points of sale by 2020. “KDF currently has more than 70,000 points of sale in the country and we plan to increase this by 10,000 to 20,000 each year,” Mr. Nguyen said, adding that the company targets 2017 revenue of VND1.8 trillion ($79.2 million). 

KDF’s ambition of a 50 per cent share of the ice cream market will be anything but straightforward. According to Euromonitor, ice cream is a fiercely competitive industry with a host of names such as Vinamilk, Thuy Ta, and Trang Tien. KDF also faces international names such as Unilever, Fanny, and Monte Rosa. Notably, Nestle also jumped into Vietnam’s ice cream market at the end of 2015 with two brands: Milo and Kit Kat. 

With such fierce