Vietnam Food & Beverage Industry

VIETNAM FOOD & BEVERAGE INDUSTRY
June 2014
INDUSTRY COVERAGE
Total food consumption and growth
80
14.5% 15.3%
14.8%
12.3%
10.7%
10.0%
8.3%
7.3% 7.9%
60
40
20%
15%
10%
20
5%
0%
Food consumption (USD bn)

Source: Euromonitor International
Per capita disposable income & expenditure

1,500
7.0%
6.8%
7.0%
6.7%
6.6%
1,000
6.5%
6.5%
500
-
6.0%
2010 2011 2012 2013 2014F
Annual Disposable Income (USD)
Consumer Expenditure (USD)
Saving ratio (%)
Food staples sector performance

45
40
35
30
25
20
15
10
5
0
-505/13
-10
Food staples
08/13
11/13
VNINDEX
02/14
05/14
Source: Bloomberg
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Recently released 2013 macroeconomic data indicates GDP growth was

5.42% with curbed inflation, a strong inflow of overseas remittances and
FDI and the prospects of a relatively stable Vietnam dong. Along with the
economic recovery, the countrys golden demographic structure, rapid
urbanization, rising disposable income and iddle class as well as mass
retail network present the impetus for rising domestic consumption
power and continued economic growth.
In 2012, Nielsen ranked Vietnam as the most rapidly growing fast-moving
consumer goods (FMCG) consumption country in Asia with a rate of
24.3%, followed by India (18.3%) and China (14.6%). In 2013, Vietnams
FMCG experienced a stagnant growth due to consumers becoming more
and more prudent in the context of an unstable economy. Even so,
consumer confidence index was still on the rise and hit its highest level of
98 within the last two years in Q4 2013.
As of 2013, Vietnams food and beverage (F&B) consumption was
USD42.8 billion, accounted for 40.5% of total consumption and posted a
remarkable CAGR of 11% over the period 2010-2013. We believe the F&B
sector will continue to deliver double-digit annual growth during the
period 2014-2018. Amongst our focused F&B categories, dairy possesses
the strongest momentum to enter into a growth phase while other
categories including seafood, noodles, sauces and dressing condiments,
confectionery and bakery, alcoholic drinks, soft drinks and hot drinks are
reaching maturity with a slower growth pace.
Given the growing appetite for emerging market-based assets of global
investors such as Kohlberg Kravis Roberts (KKR) and Texas Pacific Group
(TPG) and the consolidation tendency among local players, we predict a
blooming of M&A activities in the F&B sector will be on-going in the
medium- to long-term.
Given the facts that: (1) the sector outperformed the VN-Index (22.8% vs
8% in the latest 12 months); (2) the sectors ROA (8.4%) and ROE (18.8%)
in 2013 were attractive; (3) the local peers were trading at cheaper prices
(PE 19.1x) relative to regional peers (PE 20.3x) and; (4) the availability of
some stocks exposed strong fundamentals and still cheaper values than
the sector multiples (VNM, KDC, VCF, MPC), we propose a
recommendation to contemplate accumulation of F&B stocks in
the medium to long term. Also, due to its nature as a defensive sector
which is essential for living, F&B stocks continue to remain a fundamental
component of a balanced investment portfolio.
Please see important disclosure information at the end of this report
Page | 1
CONTENS
CONSUMPTION MACRO DRIVERS ........................................................................................................... 3
Further GDP growth while inflation being curbed ............................................................................................................. 3
Robust inflow of overseas remittances and FDI ................................................................................................................ 4
Golden demographic structure............................................................................................................................................ 4
Rapid urbanization and lowest unemployment rate ......................................................................................................... 5
Disposable income and spending: slow but solid growth ................................................................................................ 5
Emerging middle income earners ....................................................................................................................................... 6
Tax reduced and extended................................................................................................................................................... 7
High density of retail outlets ................................................................................................................................................ 7
CONSUMER CONFIDENCE ....................................................................................................................... 8
Vietnam the fastest growing FMCG market in 2012 .......................................................................................................... 8
Growth more sluggish in 2013 ............................................................................................................................................ 8
Consumer confidence index still on the rise ...................................................................................................................... 8
Health is among consumers top concerns ...................................................................................................................... 10
Demand for more in-home enjoyment and more value in one product ....................................................................... 11
Buy more on promotion and switch to local brands in response to price increases ................................................... 11
Women are in control of spending decisions .................................................................................................................. 11
Advertising continues to influence buying decisions...................................................................................................... 12
Online purchasing is not common yet, but online behaviors herald significant potential .......................................... 12
FOOD AND BEVERAGE .......................................................................................................................... 14
PRICING MECHANISM ........................................................................................................................... 17
Determination of price ........................................................................................................................................................ 17
Price administration ............................................................................................................................................................ 17
FOOD ..................................................................................................................................................... 19
Food supply chain ........................................................................................................................................................... 19
Tax and duties on food ................................................................................................................................................... 20
Impacts of TPP on food .................................................................................................................................................. 20
Potential of focused categories ..................................................................................................................................... 21
SEAFOOD ............................................................................................................................................................................. 21
DAIRY ................................................................................................................................................................................... 25
NOODLES ............................................................................................................................................................................ 31
SAUCES AND DRESSING CONDIMENTS ......................................................................................................................... 32
CONFECTIONERY ............................................................................................................................................................... 34
BAKERY MARKET ............................................................................................................................................................... 37
BEVERAGES .......................................................................................................................................... 39
Beverage categories breakdown ................................................................................................................................... 39
Beverage distribution channels ..................................................................................................................................... 39
Tax and duties on beverages ......................................................................................................................................... 40
Impacts of TPP on beverages ........................................................................................................................................ 40
ALCOHOLIC DRINKS ........................................................................................................................................................... 41
SOFT DRINKS ...................................................................................................................................................................... 43
HOT DRINKS ........................................................................................................................................................................ 45
F&B STOCKS ON THE EXCHANGES ...................................................................................................... 48
CONCLUSION ........................................................................................................................................ 53
APPENDIX- M&A ACTIVITIES ................................................................................................................ 54
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Page | 2
CONSUMPTION MACRO DRIVERS

Further GDP growth while inflation being curbed
Vietnam has managed to retain its GDP growth apace at 5.42% in 2013, up from
5.03% in 2012, its lowest rate in the last 10 years. Meanwhile, inflation continued to
curb from a peak of 18.1% in 2011 to 6.04% last year. Among other sectors with rising
consumer price index (CPI) such as utilities, pharmacy and healthcare, food
frequently presented a negative CPI on a quarterly basis, a key factor that held back
the overall inflation rate. In Q1 2014, the GDP increased by 4.96%, slightly faster than
in the year-earlier quarter. In March 2014, CPI was negative 0.44%, the lowest rate in
5 years (relative to previous month and year-earlier month) and in 13 years (relative
to year-earlier December).
Vietnams economy continued to

recover with further GDP growth,
along with curbed inflation, strong
capital inflows and a stable
exchange rate.
GDP Growth versus Inflation

20
Neighbor countries GDP Growth (%)

25
19.9
18.1
15
12.6
10
5
9.5 8.4
6.6
20
15
11.8
6.8 6.0 6.2 6.6
6.5
7.7 8.4 8.2 8.5 6.2

5.3 6.8 5.9 5.0 5.4 5.6 5.8
2012
6.8 7.2
6.2 5.8
5.0 5.4
2013
5.6
6.4
4.7
3.7
10
5
2.9
1.3
GDP growth (%)
Inflation (%)
Source: Vietnam GSO, ADB
Source: Vietnam GSO
Month on month CPI (%)

8
Overall
Foods
Beverage & Cigarette
Apparels
Home Appliances
-2
Pharmacy & Healthcare

Source: Vietnam GSO
We expect the GDP to maintain its growth pace while inflation remains under control
due to the governments continuously improving measures on monetary and fiscal
policies, as well as measurable progress with banking system reforms. The gradual
economic recovery in the US and EU, two primary trade partners of Vietnam, is also
another factor taken into account. The Asian Development Bank (ADB) projected
Vietnams GDP growth to rise slightly to 5.6% in 2014 and edging up further to 5.8%
in 2015. While the Philippines and Indonesia were leading the pace, Vietnam still
remarkably outpaced Malaysia, Singapore and Hong Kong with their 2013 GDP
growth of 4.7%, 3.7% and 2.9%, respectively.
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Robust inflow of overseas remittances and FDI

Capital inflows from overseas remittances recorded consistent growth during the
period 2005-2013 with CAGR of 14.2% and reached USD11 billion in last year. Also,
the country mobilized USD11.5 billion in disbursed foreign direct investments (FDI) in
2013, a 10% increase, while committed FDI was USD21.6 billion, a significant increase
of 55% since 2012. These figures reflect rising confidence of overseas Vietnamese
and foreign investors in Vietnams macro economy that enjoys a stable local
currency and, which in turn, stimulates domestic consumption.
Oversea remittance
Remittance (USD bn)
10.5
9.4
8.6
7.2
6.7
Remittance to GDP (%)
8.9
7.2
7.8
8.2 8
11
9
7.5
7.4
6.25
5.2
3.8
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: BMI, EIU
Golden demographic structure

Being the third largest population among South East Asia (SEA) countries with 90
68% of the population is under aged million people as of 2013, Vietnam possesses a young population (68% or 60.7
40 and has an abundant work force. million under aged 40) and an abundant work force (76% or 68.2 million aged 15-60).
Since 2007, the population grew stably at about 1% or 1 million people every year.
The dependent population rateis 3:1
People aged 15-39 with 40.1 million or 45.2% of the population represents the highly
concentrated segment of the aging pyramid, indicating young people are the key
growth driver of the consumer goods sector.
Average population and growth
92
90
88
86
84
82
80
78
76
1.2
People aging pyramid, 2013

1.3
1.2
1.1
1.1
1.1
1.1
1.1
1.0
1.1
1.1
81.4 82.4 83.3 84.2 85.1 86.0 86.9 87.8 88.8 89.7
Female
1.2
70-74 yrs
1.2
60-64 yrs
1.1
50-54 yrs
1.1
40-44 yrs
1.0
30-34 yrs
1.0
20-24 yrs
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Male
10-14 yrs
0-4 yrs
Population (mn)
Population growth (%)

Source: Vietnam GSO
-6000
-4000
-2000
2000
4000
6000
Source: Vietnam GSO
According to the United Nations Population Fund (UNFPA), Vietnam has recently
entered into a period of golden demographic structure. A country has a golden
demographic structure when for every two working people or more, there is only
one dependent person. This ratio of Vietnam is now 3:1 while 30 years ago it was 1:1.
Two thirds of the burden, so to speak, has been unloaded and this, no doubt, will
certainly accelerate consumption. Further, the golden period is expected to last for
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Page | 4
the next 30-35 years (UNFPA). The demographic structure presents the impetus for
rising local consumption power and continued economic growth. It leads to
significant trends in consumer goods market structure from bigger demand for
convenience goods, age-panel focused goods, brand equity, product quality and
health safety to business consolidation of market players.
Rapid urbanization and lowest unemployment rate

From 2000, the urbanization rate rapidly rose 8.3 percentage points (ppts) and
reached 33.4% in 2013. Urban residents contributed 51.3% of the countrys GDP in
the year. The urbanization rate is expected to become the majority by 2040 (UNESCO,
2011). Further, with an unemployment rate of 2.2% as of the end of 2013, Vietnam
was one of the countries enjoying the lowest unemployment rate in the world.
Disposable income and spending: slow but solid growth

Annual disposable income
reached USD1,259 per capita,
11.1% CAGR during 2010-2013.
Vietnam consumers spent

40.5% of their expenditures on
food and beverage.
Despite the economic slowdown, per capita annual disposable income still posted a
double-digit CAGR of 11.1% between 2010 and 2013, recorded at USD1,259 in 2013.
Per capita consumer expenditures expanded slightly higher, by a CAGR of 11.2%
during the same period to reach USD1,176. Vietnam consumers spent 40.5% of their
expenditures on food and beverage in 2013. The savings ratio saw a slow decline
since 2010 from 7% to 6.5% in 2013. While low savings is supposed to boost
spending, it probably induces volatility in consumption upon fluctuations of
disposable incomes and market price. Also, the relative low current incomes caused
Vietnamese consumers to spend mostly for non-discretionary products. But the
demand for discretionary goods promises to increase as disposable incomes
increase over time.
Per capita annual disposable income (USD)

2,000
1,500
20%
15.3%
12.8%
15%
10.4%
7.6%
1,000
500
-
Per capita consumer expenditure (USD)
1,262
1,090
918
2010
1,059
5%
1,169
1,259
20%
15.5%
14.1%
1,343
15%
10.6%
1,000
7.8%
10%
6.7%
1,607
1,507
1,399
1,500
500
0%
2011
2012
2013
2014F
Annual Gross Income (USD)
Annual Disposable Income (USD)
Annual Disposable income Growth (%)
1,091
987
854
358
2010
409
446
1,176
476
6.8%
10%
1,256
506
5%
0%
2011
2012
2013
2014F
Consumer Expenditure (USD)
Consumer Expenditure on F&B (USD)
Consumer expenditure growth (%)
Saving ratio (%)

1,500
7.0%
6.7%
1,000
6.8%
6.6%
500
-
7.0%
6.8%
854
918
2010
987
1,059
2011
1,091
1,169
2012
1,176
6.5%
1,256
6.6%
6.4%
1,259
2013
1,343
6.2%
Annual
Disposable
Income (USD)
Consumer
Expenditure
(USD)
Saving ratio (%)
2014F
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However, due to retained concerns about the pace of gradual macroeconomic

recovery, the consumers continue to exercise prudence with their purchasing
decisions. As such, annual growth in per capita disposable income and consumer
expenditure is prudently projected to keep growing but at a slower pace in 2014 at
6.7% and 6.8%, respectively.
Emerging middle income earners

Within the social class distribution in 2012, class C accounted for the biggest share of
38% of the work force (25.9 million people). It was followed by class D which made
up 25% of the total earners (17.1 million people). The age band of 20-24 represents
for the class D, while those aged 35-39 mainly occupy class C. Since class C and D
represent almost two thirds of the work force, low-to-middle income earners are
dominant among Vietnamese consumers. Notably, there was a positive movement in
the structure of income earners among the social classes over the period of 20102012. Specifically, class C experienced an escalation in proportion from 27% (2010) to
32% (2011) and 38% (2012). Class B saw a rise of 7 ppts up to 21% while Class A had
an increase of 2 ppts up to 6%. Conversely, Class D descended 9 ppts to 25%, Class C
observed a decrease of 6 ppts and class E housed 8% of the work force. According to
the OECD, there will be a big rise in the number of Vietnams middle class
consumers, implying a higher standard of living along with demand for diversified
products and services. The middle class, consisting of 25.9 million people,
significantly contributed 47.5% or USD46 billion to the countrys total consumption in
2012. By 2020, the consumption of this class is dramatically forecasted to be worth
USD310 billion (6.7 times growth) by the OECD.
Age composition of social class, 2012
100%
51%
60%
40%
20%
0%
18%
17%
15%
20.7%
18%
18.3%
21%
80%
25%
25.5%
21.3%
21%
16.3% 16.3% 16.7% 18.3% 18.5% 20.5%

15.7% 15.4%
16%
20.3% 21.7% 21.7%

21%
21.2%
20%
15%
20.4% 19.2%
21.3% 22.7%
23%
17.5% 15.5%
20%
23.5% 22.3%
20.2%
11.4% 17.4%
8%
23.5% 24% 24.7% 25.3% 24.5% 24% 21.7%
15.1% 19.8%
4.6%
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
25%
C
B
20%
19%
65+
Composition of social class

2010
6%
2% 4%
Class A
9%
21%
14%
39%
34%
25%
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Class E
1,500,000 2,999,999
Class C
Class D
3,000,000 4,499,999
Class C
4,500,000 7,499,999
Class D
20%
14%
8%
2012
3% 2% 2%
Class F
Source: OECD
The social classes are classified based on gross monthly income band (VND) as follows:
Class F
01,499,999
Class B
38%
32%
27%
2011
Class B
7,500,000 14,999,999
Class E
Class A
>=
15,000,000
Page | 6
Tax reduced and extended

In 2013, taxation has been eased also to support domestic consumption and
economic growth. Therein, SMEs, small- and medium-sized enterprises (with less
than 200 labors and revenue below VND20 billion) and agriculture products
manufacturers (with more than 300 labors) were entitled to 6 months extension
period for CIT and VAT payments. SMEs also benefited from a favorable CIT of 20%
from July 1, 2013. Moreover, general CIT has been reduced to 22% from Jan 1, 2014
and will be cut further to 20% from Jan 1, 2016.
In addition, by raising monthly personal allowances (from VND4 million to VND9
million) and dependent allowance (from VND1.6 million to VND3.6 million per
dependent), there was more savings for personal income tax (PIT) which directly
support consumers disposable income and spending.
High density of retail outlets

Vietnam possesses a dense retail network, widely spread throughout the country,
including 424 supermarkets, 23 hypermarkets, 365 mini-marts and almost 779,000 of
traditional markets and small private shops. . While supermarkets and hypermarkets
account for the majority, the convenience store model is still in its infancy.
Grocery outlets are dominant with more than 636,000 units. The number of retail
outlets is reported to have increased every year at a rate of 1.2% during the period of
2009 through 2013. Also, existing prominent retailers and wholesalers such as
Saigon Coop, Big C, and Metro Cash & Carry have committed themselves to further
expansion not only in big cities but also in many provinces. The continuous growth
and expansion of mass retail outlets strongly encourages consumer purchasing and
increases consumption value.
Retail outlets by categories (units)
Grocery outlets
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
609,359
133,835
2009
619,674
138,271
2010
Non-grocery outlets
624,274
141,475
2011
631,208
142,110
2012
636,158
143,613
2013
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CONSUMER CONFIDENCE
Vietnam the fastest growing FMCG market in 2012
In 2012, Nielsen, the global market leader in consumer panels, ranked Vietnam as the
most rapid growing FMCG (fast-moving consumer goods) consumption country in
Asia with a rate of 24.3%, followed by India (18.3%) and China (14.6%). In a recent
research report published by Kantar Worldpanel, Vietnam households annual
spending on FMCG in 2013 was USD668 with annual purchasing frequency of 166
times, preceded only by Malaysia with that of USD969 on spending and 108
purchasing trips. Households in the Philippines, Thailand and Indonesia followed
with lower average FMCG annual spending of USD632, USD624 and USD475,
respectively.
FMCG market dynamics, 2012
Unit value change (%)
Annual household FMCG spending, 2013
Volume change (%)
Nominal growth (%)
1,200
1,000
800
24.3%
8.7%
4.6
668
14.6% 13.2%
9.1%
9.2%
8.8%
5.8%
8.3%
4.9%
200
11.1% 10.9%
6.5%
4.6%
7.2%
3.7%
4.7%
3.6%
1.1%
3.9%
2.3%
1.6%
4
414
215
166
108
4
475
346
400
3.6
624
632
600
18.3%
15.6%
969
4.5
3
2
1
0
Malaysia
Vietnam
Philippines
Thailand
Indonesia
Avg household spent / yr on FMCG (USD)

Annual purchase frequently FMCG (times)
Avg household size (members)
Source: Nielsen
Source: Kantar Worldpanel
Growth more sluggish in 2013

According to reports by Kantar Worldpanel and Nielsen, there was a slow-down in
growth of the FMCG market since Q4 2012. Two-digit growth was difficult to sustain
from Q1 2013 and a negative volume change of 2.6% in Q3 2013 even dragged the
FMCG growth down to only 0.3% in Q3 2013 from 14% in Q1 2013. The consumption
index reflecting a quick deceleration as consumers become more cautious when
making purchases in the context of economic instability
FMCG growth q-o-q
Unit value change (%)
18.7
20.4
19.9
21.2
5.9
12.8
5.8
14.6
4.4
15.5
6.5
14.7
Volume change (%)
25.1
26.8
27.6
12.2
16.8
20.4
12.9
10.0
Nominal growth (%)
18.3
14
0.3
8.4
11
2.9
5.4
7.2
3
3
(2.6)
Q1.2011 Q2.2011 Q3.2011 Q4.2011 Q1.2012 Q2.2012 Q3.2012 Q4.2012 Q1.2013 Q2.2013 Q3.2013
14
4.3
Source: Nielsen, Kantar Worldpanel, TNS
Consumer confidence index still on the rise
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Vietnams consumer
confidence index in Q4.2013 hit
its highest level of 98 in the last
two years.
According to a Nielsen survey conducted in Q4 2013, the Consumer Confidence Index

(CCI) of Vietnam rose to 98 in Q4 2013, 10 points higher than the year-earlier quarter
and hit its highest level in the last two years. The index also crossed over the global
CCI of 94. Relative to its neighbor countries, Vietnam recorded an index rise in the
last two quarters of 2013, second only to Indonesia, while other regional peers
experienced a reduction in pace over the same period. Consequently, purchasing
power plummeted; however, it is expected to continuously grow over the coming
quarters.
Indonesia enjoys the highest levels of consumer confidence worldwide with a CCI of
124, 30 points higher than the global index. The Philippines and Thailand
experienced a decrease yet remained in the top 10 of CCI countries with 114 (-4
points) and 109 (-3 points), respectively. Malaysia edged downwards three points to
98 and Singapore was at 97 (-1 point). South East Asia (SEA) consumers have more
confidence than other worldwide areas thanks to robust growth of middle-income
earners and faith in their ability to achieve economic recovery in the foreseeable
future.
Neighborhoods CCI
Q1.2013
122124120124
Indonesia
118121118114
Philippines
Q2.2013
115114112
109
Thailand
Q2.20132
Q4.2013
96 95 97 98
107103
101 98
95 95 98 97
Vietnam
Malaysia
Singapore
Source: Nielsen
Top 10 CCI nations Q4 2013

124
115
114
111
110
110
109
107
104
100
Source: Nielsen
Note: UAE United Arab Emirates
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CONSUMER BEHAVIORS
By conducting a survey in July 2013 with 700 respondents online and offline
throughout the country based upon age, gender and area, Nielsen was able to
identify the recent influences and impacts on consumers decisions and behaviors.
The study is helpful to market players in their efforts to determine the best ways to
deliver proper messages and promote products to consumers.
Health is among consumers top concerns

Following concerns about economic uncertainty and job security, consumers in
Vietnam view health as their third priority of consideration. When questioned about
daily activities to stay healthy, peoples responses of eat and drink in moderation
comprised the majority of the survey population (78%), followed by eating fresh or
natural food (47%) and physical exercise (46%). While consideration of nutrition
captures the fourth position (41%), people also noted the importance of keeping
ones mind relaxed as another path to well-being.
Understanding factors that influence shoppers buying decisions about nutritional
food helps producers tailor their message and content on product labels and
successfully achieve brand salience. As such, communicating sufficient nutritional
ingredients on healthy products was the consumers first element of consideration
which occupies more than one third of total participants. Reduced risk of diseases
and product affordability were the next two influencing aspects with 25% and 23%,
respectively. A product stamped with the approval by health professionals was also
on the cart of 8% of sample shoppers.
Consumers worries
Activities to stay healthy
Biggest concern
Second biggest concern

Keep mind relaxed
Debts 3% 3%
Parents' welfare2%
Increasing fuel prices
6%
5%
35%
Consider the meal's

nutrition
9%
Work/life balance
9%
8%
Increasing food prices
8%
11%
Increasing utility bills
11%
12%
Health
11%
12%
Job security
19%
The economy
19%
41%
Physical exercise
46%
Eat fresh / natural food
47%
Eat / drink in moderation
7%
78%
14%
Source: Nielsen
Source: Nielsen
Consideration of purchase nutritional food

8%
Sufficient nutritional ingredients
8%
36%
Reduced risk of disease

Affordable
23%
Approved by health professionals

25%
Others
Source: Nielsen
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Demand for more in-home enjoyment and more value in one

product
Since out-of-home entertainment comes in at the top of the list for spending cuts,
people then switched to products with messages about in-home enjoyment such as
CocaCola big bottle for family, Maggi oyster sauce tasty and bright as
restaurant (Masan), Rejoice bring spa to home and Comfort spa at home
(Unilever).
Also, by timely capturing the consumers trend to seek more value in one product,
manufacturers have launched a new series of multi-functional products from
ProBeauty yogurt with collagen (Vinamilk), Knorr all-in-one new multiple spices
(Unilever), Number One beverage with vitamin (Tan Hiep Phat), Nutri tastyhealthy nutritional beverage (Minute Maid CocaCola) to Olay CC cream (P&G)
and Ponds BB cream (Unilever) foundation plus moisturizer.
Buy more on promotion and switch to local brands in response

to price increases
Vietnamese people are lured by products with free gifts. Thus, people mostly tend to
buy more on promotion in the context of price increases, according to the Nielsen
study. Also, there was a shift from purchasing of foreign brands to Vietnamese
brands without switching cost thanks to improving quality of domestic products with
appropriate pricing. Buying bigger pack size to enjoy discounts and changing
shopping channels to pocket money for saving were the next reactions of consumers
in response to price increases.
List spending cuts
Cut out-of-home entertainment
Spend less on new clothes
Try to save on gas and electricity
Delay upgrading PC, Mobile
Cut out annual vacation
Cut down on telephone expenses
Delay replacement of household items
Cut down on take-away meals
Cut down on holidays/short breaks
Use my car less often
Switch to cheaper grocery brands
Cut down or buy cheaper alcohol
Cut down on smoking
Cut at-home entertainment
Consumer reaction to price rise

67%
65%
63%
49%
46%
44%
44%
41%
29%
22%
21%
19%
18%
15%
Buy more of private label brands

Buy more of smaller pack sizes
20%
22%
Change shopping channel to

save money
36%
Buy cheaper brands
37%
Buy bigger pack sizes
37%
Buy more Vietnamese brands

Buy more on 'promotion'
Source: Nielsen
41%
66%
Source: Nielsen
Women are in control of spending decisions

Demographic statistics indicate that the number of working women is on the rise.
The proportion of working females in the total female population posted a faster
growth than that of working males, presenting an increase from 58.5% in Q1.2012
to 67.8% in Q4.2013. 90% of women surveyed believe that their role and
responsibility is changing for the better according to the research.
Additionally, women in different generations definitely behave differently in their
shopping activities. Examples of that include: A daughter with an average age of 30
is the most impulsive among buyers and is a heavier media user while a mother
with an average age of 47 is prone to shop ahead, look for good value and enjoys
advertising. A grandmother with an average age of 67 is the most habitual shopper
www.VPBS.com.vn
Page | 11
and appreciates word-of-mouth importance. In general, women usually plan their

shopping list and follow advertising on TV and radio. Their brand loyalty is mainly
influenced by their perceptions of product quality.
Product or service providers have started to cater specifically to women. As such,
Sacombank offered Ladies First Credit Card, Women SME Service Package and 8th
March Branch, banking for women. Anlene developed calcium milk for modern
women which boast a content of four fold calcium by volume. Nhat Dang Nhi Da, a
spa and fitness center, was designed exclusively for women with six branches
nationwide.
Number of working female / male of female / male population
81.8%
58.5%
80.3%
56.0%
77.0%
58.3%
79.5%
63.3%
82.8%
60.5%
83.3%
63.3%
83.5%
83.0%
Working
Male
67.8%
65.5%
Working
Female
Q1.2012 Q2.2012 Q3.2012 Q4.2012 Q1.2013 Q2.2013 Q3.2013 Q4.2013

Source: Vietnam GSO
Advertising continues to influence buying decisions

68% of Vietnamese respondents confirmed that commercial advertising will increase
their brand preference. This ratio far crossed over that of global consumers (55%),
Singapore (49%) and Hong Kong (40%). It even slightly surpassed the rate of Asia
Pacific (67%). As the countrys social media channels keep growing, Vietnamese
people will continuously be captivated by commercial advertising that will affect their
purchasing decisions. Further, television and outdoor advertising remain the
strongest beacon of peoples attention, followed by news, magazines (online, papers)
and advertising panels at bus stations.
Commercials increase buyers brand preference
Taiwan
Hongkong
Singapore
Malaysia
Vietnam
Thailand
China
India
Indonesia
Philippines
Korea
Asia Pacific
Global
40%
40%
Seen advertising on media channels

LCD screen at coffee shop
49%
62%
68%
68%
72%
74%
74%
78%
79%
67%
55%
11%
Bus LCD screen
14%
LCD screen at building, office
15%
Advertising at bus station

News / magazine
Outdoor advertising
Television
38%
49%
74%
96%
% of respondents who strongly / somewhat agree
Source: Nielsen
Source: Nielsen
Online purchasing is not common yet, but online behaviors

herald significant potential
Amongst browsing activities to shop performed on any online connected devices,
there were more people usually conducting product research and looking for product
information online, which were implied by the survey results of 72% and 70% of total
www.VPBS.com.vn
Page | 12
respondents. The other online activities including reading a grocery retailers flyers,
comparing prices of grocery products and browsing a manufacturers website were
also done by the majority of research participants.
Despite the majority of respondents conducting online product and producer
research, less than half of the people were asked to make a purchase of a product
online. In general, most of the activities were carried out on weekly basis. In terms of
online purchase intent of product categories for the next six months, food and
beverage ranked fourth with 39% of total respondents; while apparel, footwear and
accessories followed by household appliances and cellphones remained in the top
three categories that consumers intend to buy.
The rate of internet penetration in Vietnam is low at fifth in Asia and has the potential
to increase in the future. Besides, Nielsens research also showed that 92% of
Vietnamese consumers are more likely to trust recommendations from people they
know and 63% are more likely to trust consumer opinions online. We believe these
indicators offer promise of ample growth for online purchasing in the long term.
Activities on online connected devices
None of above
6%
Other
11%
Use a digital shopping list
12%
Feedback on a grocery category
Purchase intents via online connected devices
27%
Purchase a product online
47%
Look for coupons online
48%
Look for deals online
49%
Browse a producer's website
36%
Travel service reservation
36%
Food & beverage

Mobile phone & accessories
39%
43%
53%
Compare prices of grocery product
59%
Read a grocery retailer's flyer
59%
Look up product information
70%
Conduct product research
72%
Source: Nielsen
www.VPBS.com.vn
Entertainment tickets
Household appliance
47%
Apparel / Accessory / Shoes /

Jewelry
47%
Source: Nielsen
Page | 13
FOOD AND BEVERAGE

Consumption in Vietnam is growing slowly as consumers are still very careful in
spending due to economic circumstances have not recovered. However,
developments of retail systems plus consumption habits show a promising market
for the retail industry in general and in particular food and beverage. The retail
market of food and beverage in Vietnam is highly fragmented, with the presence of
only a few large firms. The retail market is primarily driven by none organizations
retailers, including traditional retailers and independent grocers. The organized
retailers penetrate mainly limited in urban areas. There are few players dominate the
in food and beverage market, domestic including large enterprises such as Vinamilk
(dairy), Kinh Do (bakery), Masan Consumer (diversified products), Minh Phu (sea
food), Vinafood, Halico (beverage), Bibica (confectionery), Sabeco (beer). Foreign
companies are including Nestle (coffee); Nabati Indonesia (confectionery); Diageo,
Heineken, Carlsberg, SABMiller (alcoholic drinks); Kirin Beverage (soft drinks); AEON,
E-mart and Investment Co. U & I, FamilyMart, NTUC FairPrice (diversification of food
products). In addition, the large multinational companies are setting up independent
units and joint ventures to invest in areas such as coffee, candy, alcoholic drinks, soft
drinks, and retail distribution system.
In 2013, Vietnams food and beverage market was worth over USD 60.1 billion,
accounting for 40.5% of the total consumption of the country. In the same year,
Vietnams F&B consumption was USD42.8 billion, representing an increase of 8.2%
against 2012 and a CAGR of 11% during the period of 2010-2013.. Domestic
consumption in the country reached 42.8 billion accounted for 71.2% of the total
industry production value, 29% of the remaining exports (seafood, rice, coffee,
cashew nuts).
Food and beverage value breakdown
Exports
29%
Domestic
consumption
71%
Food
58%
Beverage
13%
Ngun: VPBS tng hp

Food consumption maintains double-digit growth. In 2013, food consumption was
USD34.8 billion, posting a remarkable CAGR of 11.4% over the period of 2010 to
2013. Despite recent slow growth in FMCG purchases, the combination effects of
continuous economic growth, golden demographic structure, rapid urbanization and
emergence of middle income earners as well as a mass grocery retail network, will
fuel the growth of overall food consumption in the medium- and long-term. Also, due
to its nature as a defensive sector which is essential for living, food is considered a
key component of a balanced investment portfolio over the investment horizon.
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Page | 14
Vietnam food consumption is projected to retain its double-digit growth of 11.4%

over the period of 2014 to 2018 by Euromonitor International.
Food consumption and growth
Food consumption per capita and growth
Food consumption (USD bn)
Growth (%)
70
Food consumption per capita (USD)

20%
60 14.5% 15.3%
50
10.7%
40
8.3%
30
20
10
14.8%
15%
12.3%
10.0%
10%
7.3% 7.9%
57.2
49.8
40.3 44.3
5%
32.2 34.8 37.4
29.0
25.2
0%
Growth (%)
800 13.1% 14.1%
13.5% 15%
9.6%
600
6.8%
400
200
11.0%
290
331
362
6.4%
412
387
7.2%
441
8.8%
480
10%
533
605
5%
0%
2010 2011 2012 2013 2014F2015F2016F2017F2018F
2010 2011 2012 2013 2014F2015F2016F2017F2018F

In 2013, agri-products, meats & eggs and seafood continued to be the biggest three
categories with USD26.7 billion or 76.8% value contribution to total local food
consumption. Agri-products including rice, maize, coffee, tea, pepper, cashew,
sugarcane, cassava, fruits and vegetables posted double-digit growth of 11.8%
compared with 2012. The following categories of dairy, oil and fats and noodles
notably surpassed USD1 billion of sales value each, in which dairy valued at USD2.9
billion market size, saw the highest growth of 16.5% against last year among other
categories. Also, confectionery and bakery together made up USD1.3 billion and
increased by over 8.2% from 2012.
Food market value and growth in 2013
17%
2013 Marke Value

Growth in 2013 (%)
12%
9%
8%
1.1
0.8
0.8
0.5
0.9
Sauce and Dressing

condiments(Masan
Consumer, Ajinomoto
Vit Nam)
Confectionery (Kinh Do,

Kraft Food, Hai Chau)
Bakery (Kinh Do, Nhu

Lan, Duc Phat)
Others
2.9
7%
Noodles (Acecook Viet

Nam, Masan Consumer,
Asia Food)
5.3
5%
Oil and Fats (Cai Lan,

Tuong An, Golden
Hope)
Meat, Eggs (Vissan, Cau

Tre, Ha Long)
0%
3%
Diary(Vinamilk, Nestle,
Abbott, Frestland)
9.5
5%
Seafood (Hung Vuong,

Vinh Hoan, An Giang)
11.9
Agri-products (Vinafood,
Vegetexco, Gentraco)
14
12
10
8
6
4
2
0
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Source: Vietnam GSO, Euromonitor International, VPBS estimates

Note: (*) Agri-products including rice, cassava, maize, coffee, tea, pepper, cashew, sugarcane, fruits
and vegetables
In the beverage market side, alcoholic drinks are the largest sector with 70%
contribution to total market value. Revenue from this sector increased by 6.3% to
USD 5.6 bil, the lowest growth rate compared to the other drinks. Beer accounts for
the largest share of alcohol consumption, Sabeco, Habeco is domestic company's
which dominate Vietnam beer market.
www.VPBS.com.vn
Page | 15
Soft drinks saw the highest growth of 12.4% to reach $ 1.7bn sales in 2013, while hot
drinks is the smallest segment carries about 0.7 billion in sales. In soft drinks market,
Coca-Cola and PepsiCo dominate the carbonated soft drinks market, Tan Hiep Phat
array occupies none gas soft drinks. Hot drinks are the smallest segment which
brought only USD 0.7 billion in revenue. Hot drinks market under the control of
Nestle and VinaCafe.
In 2013, retail sales of the beverage sector in Vietnam reached USD8 billion, a 7.6%
rise compared with 2012. According to forecasts of the key players, in the period 2014
and 2015, beverage market value is expected to increase by 7.5%. So as consumers
switch to beverage products with higher value, expected profits in this sector would
increase by 10.5% in 2016.
Beverage market value and growth in 2013
2013 market value

6
5.6
2013 growth
14%
12%
12%
10%
4
3
7%
6%
8%
6%
1.7
4%
0.7
1
0
2%
0%
Alcoholic drinks (Sabeco,

Habeco)
Soft drinks (Pepsi,Coca Cola, Hot drinks (Nestle, Vinacafe,

Tan Hiep Phat, URC Vietnam)
Vinatea)
Sources: Euromonitor International, VPBS
www.VPBS.com.vn
Page | 16
PRICING MECHANISM
Determination of price
Circular 25/2014/TT-BTC dated February 17, 2014 provides pricing methods for
products inbound that are both manufactured and imported. There are two methods
of determination based on comparison and expenditures.
The comparison method is defined as pricing products based on analysis and
comparison results of price levels, usage, quality, origin and economic technology
legal features between the target and the comparable products currently trading in
the domestic market, with reference to the regional and global market if available.
Expenditure method is defined as pricing products based on reasonable and valid
production costs and a profit estimated in line with current market prices and
relevant government policies. The pricing formulas provided as follows:
Inbound manufactured products
Price = production costs + estimated profit (if any) + special sales tax (if any) + valued
added tax and other taxes (if any)
Imported products
Price = import price (*) + selling, administration and financial expenses (if any) +
estimated profit (if any) + valued added tax and other taxes (if any)
(*) Import price = CIF price + import tax + special sales tax (if any) + other fees and
taxes (if any) + other regulated cash payments (if any)
Price administration
According to Direction 05/CT-BTC dated December 24, 2013, Price Administration
Bureau has primary duties to (1) closely watch goods price fluctuation in domestic,
regional and global markets (2) supervise price declaration and registration of
enterprises (3) provide solutions for tax and financial mechanism, price
administration and stabilization (4) coordinate with Investigation Bureau to conduct
unexpected examinations (5) report to the Ministry of Finance on a weekly, semimonthly and monthly basis.
Coordinating with Price Administration Bureau, Finance Department is responsible
for (1) tracking market demand, supply, price and tax revenues (2) timely proposing
appropriate measures for price stabilization without any shortage or speculation of
goods (3) controlling budget and monitoring the execution of price stabilization
program (if any) and (4) reporting to the Ministry of Finance on a weekly, semimonthly and monthly basis.
Directed by the Ministry of Finance, National Food Reserves Bureau makes proper
stocks release and top-up to balance of stock reserves. Local enterprises are
encouraged to participate in the stabilization program by purchasing additional
goods for reserves with or without interest support and loans provided by the state
budget.
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Page | 17
Regulatory reporting lines

Ministry of Finance
Investigation
Bureau
Price Administration
Bureau
Corporate
Finance
Tax
Affair
Budget
Affair
National Food
Reserves Bureau
Finance
Department
Tax
Bureau
Custom
Food Reserves
Bureau
Treasury
Province People Committee, local companies and entrepreneurs, consuming market

Reporting to
Directing to / supporting
Coordinating with
Source: Direction 05/CT-BTC
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Page | 18
FOOD
Food supply chain
In 2013, the majority of input materials for food production was locally produced with
a farming value of USD44 billion including cultivation, fisheries and livestock. Also,
there was spending of USD6.5 billion for import of key inputs such as raw feed, dairy
materials, seafood, oil and fats, wheat, fruits and vegetables. During the year, the
countrys food production was estimated more than USD52.1 billion in which local
consumption accounted for 66.8% or USD34.8 billion and key commodities for export
(seafood, rice, coffee, cashew, etc.) comprised most of the remainder at USD17.3
billion. Domestically, food has been consumed mainly through commercial and
traditional trade channels .Traditional channels including nearly 779,000 traditional
markets and small private shops which are suitable for small quantity and highfrequency food purchases. Traditional channels accounted for 75% of food retail
value, the remaining 25% belongs to commercial channels including 447
supermarkets, hypermarkets, convenience stores and food service operators with
significant presence of 560,000 restaurants and food outlets and 12,500 hotels.
Food supply chain
2013 KEY IMPORTS
USD6.5 bn
Raw feed
Dairy materials
Seafood
Oil & fats
Wheat
Fruits & vegetables
% Contribution
46.4%
16.8%
10.7%
10.7%
9.4%
6.2%
2013 KEY EXPORTS

USD17.3 bn
2013 FOOD PRODUCTION

Over USD52.1 bn
Seafood
Rice
Coffee
Cashew
Cassava
Fruits & vegetables
Pepper
Tea
2013 LOCAL FARMING

USD44 bn
Cultivation
Fisheries
Livestock
% Contribution
38.9%
17.2%
15.5%
9.6%
6.3%
6.0%
5.2%
1.3%
LOCAL CONSUMPTION
USD34.8 bn 2013
% Contribution
54.8%
24.6%
20.6%
Wholesalers /
Distributors
Retailers
424 supermarkets
23 hypermarkets
365 minimarts & convenient stores
778,959 traditional markets & private shops
Food service operators
560,000 restaurants
and food outlets
12,500 hotels
Consumers - 90 million (by end of 2013)
Source: GSO Vietnam, Euromonitor International, VPBS research
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Page | 19
Tax and duties on food

VAT Tax Law Amendment 31/2013/QH13, Decree 209/2013-ND-CP and Circular
164/2013/TT-BTC effective from January 1, 2014 regulated VAT and Import Export Tax
for cultivation, livestock and aquatic products.
Inbound manufactured products
1. Raw or preliminary treated products
Raw o preliminary treated products which produced / fished and sold by individuals
or organizations are not subject to VAT.
Raw or preliminary treated products which traded among VAT deduction registered
enterprises / cooperatives are not subject to VAT.
Raw or preliminary treated products which are sold by VAT deduction registered
enterprises / cooperatives to other enterprises / entrepreneurs / individuals are
subject to 5% VAT.
2. Processed products produced and traded by VAT deduction method enterprises /
cooperatives are subject to 10% VAT.
3. Processed or unprocessed products traded by enterprises / cooperatives /
entrepreneurs / individuals registered VAT direct method are subject to VAT of
1% of revenue.
Imported products
Imported raw or preliminary treated products are subject to Import Tax only.
Imported processed products are subject to Import Tax and VAT.
Import Tax = Import tax rate x Import price
VAT = VAT rate x (Import price + Import tax)
Tax and duties on imported products

Seafood
Dairy
Livestock
Meat
Eggs, honey
Import Tax
0-30%
0-20%
0-5%
7-40%
0-30%
Coffee, tea, pepper

Grains
Oil & fats
Sugar
Raw feed
Import Tax
15-40%
0-40%
3-30%
0-40%
0%
VAT
10%
10%
10%
10%
10%
Source: VAT Law 31/2013/QH13, Decree 209/2013/ND-CP, Circular 164/2013/TT-BTC
Exported products
Products for export are not subject to Export Tax and subject to 0% VAT.
Impacts of TPP on food

TPP technically allows the member countries to have free tariff when trading among
others. As such, while Vietnam has limitations or even unavailability of Sanitary and
Phyto-sanitary Measures (SPS); technical barriers to trade (TBT) comprised of
requirements on packaging, records, logistics, etc. and; commercial defense
measures such as anti-dumping, anti-subsidy, etc.; the countrys domestic food
market will confront significant competitive pressure from TPP countries in terms of
technology, quality and even price.
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Page | 20
As an agriculturally focused country in general, Vietnam has become one of the

largest agri-products export countries in the world and is likely to exert demands on
TPP partners to open their markets apart from the free trade tariffs. However, TPP
appears to have no limitations on rights of using the SPS, TBT and the commercial
defense measures for import countries. A chapter of discussion about these
instruments is available in TPP but mainly emphasize the cooperative manner in
dealing with complaints (if any) amongst the countries. In fact, there was a tendency
observed globally that the other protective measures will be escalated in response to
tariffs being removed.
Thus, we envision that Vietnam is in need of effectively improving its protective
measures such as roadmap of custom tariffs (not strict but feasible in TPP), Tariffs
Rate Quota (the most feasible and widely accepted in TPP), SPS and TBT. Although
SPS and TBT are very popular in the United States, Australia and New Zealand,
Vietnam, however, is facing obstacles in execution of these two measures. It is due to
(1) too high standards causing difficulty for local products and (2) insufficient
resources to assure compliance of products exported to Vietnam. As such, technical
support commitments in particular matters should be required for TPP countries.
Potential of focused categories

Within the focused categories, dairy possesses the strongest momentum to enter
into a growth phase thanks to low milk consumption per capita and accelerating
habits of drinking milk as an essential daily nutrition among Vietnamese consumers.
Meanwhile, other categories including seafood, noodles, sauces and dressing
condiments, confectionery and bakery are reaching maturity with a slowdown in their
growth rate. This is attributable to the majority of consumers being fully aware and
using the products for a long term (noodles, sauces and dressing condiments) and
due to the nature of discretionary goods (confectionery and bakery). For seafood,
Vietnam is the third largest country in fishery and aquaculture (after China and India).
Although, around 60% of total seafood production is for export, local people have
also consumed a large volume of seafood with extreme hikes in the period 2009 to
2012. However, these categories remain attractive as they are driven by a golden
population demographic, rapid urbanization rate, economic growth, rising disposable
income and high density of retail outlets.
SEAFOOD
Production growth plummeted due to wide-spread Early Mortality
Syndrome on shrimp farming
Vietnam possesses an interlacing system of rivers and a 3,260 km long coastline. It is
ranked third in 2013 among the largest countries for fishery and aquaculture
activities, preceded only by China and India. Fishery volume (mainly from tuna) has
recently grown every year thanks to favorable weather conditions and a new fishing
technique of using high pressure lamps, which helps double productivity and saves
15 to 30% of the fishing time. The decline in growth of production value during 2012
and 2013 was due to approximately 100,000 hectares of shrimp farms, which account
for 15% of the countrys total shrimp farms, suffering from Early Mortality Syndrome
(EMS). The disease, however, has been controlled since Q4 2013 and is no longer a
threat. In 2013, seafood production rose 3.4% to reach 6 million tons in volume and
grew 7% to reach USD11.4 billion in value.
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Page | 21
Seafood production volume and growth

8,000
5.8%
6,000
4,000
2,000
5.6%
5.9%
Seafood production value and growth
6.9%
8%
6%
2,933
3,115
3,216
2,590
2,728
2,281
2,414
2,514
2,705
2,804
2009
2010
2011
2012
2013
4%
3.4%
2%
0%
Catch ('000 tons)

Growth (%)
34.4%
12
10
24.9%
8
6
4
2
0
Aquaculture ('000 tons)

Source: VASEP, GSO Vietnam
40%
6.0
11.0%
3.4
4.5
2.4
2.8
3.7
2009
2010
2011
Catch (USD bn)

Growth (%)
6.3
6.8
8.9%
30%
20%
4.3
7.0%
4.6
2012
2013
10%
0%
Aquaculture (USD bn)

Source: VASEP, GSO Vietnam
Low quality of breeding seeds

Breeding seeds play a critical role in the value chain of seafood production and have
strong influence on the latter stages of production. However, quality of breeding
seeds remains low in Vietnam. For pangasius, seed parents are mainly sourced from
local farmers with uncertain quality and limited technological know-how, which led
to the recent phenomenon of degeneracy. For shrimp, the parents mostly depend on
natural fishery with inequitable quality and not many passed through quarantine.
Administration on breeding seeds remained undisciplined with vague regulation on
farming, quarantine and inspection. Consequently, shrimp have been subject to low
immunity toward diseases, such as the recent EMS disturbance. Currently, qualitycontrolled shrimp seeds are mostly distributed by CP Vietnam and Uni-President
Vietnam with a capacity of 1 to 2 billion seed parents per annum.
Raw materials for aquatic feed production mainly imported

According to the Vietnam Association of Seafood Exporters and Producers (VASEP),
there are 130 aqua-feed manufacturers providing 3.8 million tons of feed per year,
meeting 85.6% of local demand. Of these, 96 factories produce feed for pangasius
and the remaining factories produce for black tiger shrimp and white legged shrimp.
Import of finished aqua-feed has been decreasing over time but 50% of the raw
materials for the feed production (soybean, soya oil cake, maize, fish meal, group of
acid amines, etc.) still depend on imports. At the moment, the aqua-feed market is
largely dominated by Uni-President and CP Thailand with 35 to 45% of market share.
Domestic seafood consumption reached USD5.3 billion in 2013

The domestic market made a minor contribution of less than 5% of the revenue of
local seafood producers. This was attributable to lower selling prices relative to
export prices, while cost of production, logistics and promotion advertising were still
high. Further, Vietnamese consumers are acquainted with purchasing fresh seafood
from traditional wet markets while the local producers concentrate on frozenprocessed seafood. In 2013, domestic consumption of seafood reached USD5.3
billion, accounting for 43.9% of total local production and import value, which was
USD12.1 billion. According to the Center of Planning and Development of Aquatic
Products, domestic consumption will increase annually at 5.4% on average for the
period from 2011 to 2020.
www.VPBS.com.vn
Page | 22
Seafood local consumption value and growth

6
100%
77.1%
80%
63.9%
60%
38.9%
4.2
2
2.6
1.8
Local consumption
(USD bn)
5.1
22.7%
5.3
40%
3.8%
20%
Growth (%)
0%
2009
2010
2011
2012
2013
Source: VASEP, VPBS research
Export value recorded USD6.7 billion in 2013

According to General Department of Vietnam Customs, in 2013, export of aquatic
products recorded USD6.7 billion, rising 9.8% relative to 2012. The US, EU, Japan,
China, Hong Kong and Korea were primary export markets of the sector, together
occupying 71% of the export value. However, only the US and China had a fast
growth pace of more than 25% last year. In terms of aqua-product categories, the
country exported USD3.11 billion of shrimp, which accounted for 46% of total export
value, followed by USD1.76 billion of pangasius (26%) and USD526.7 million of tuna
(8%).
Seafood export value and growth
8
6
18.4%
4.3
21.6%
6.1
5.0
6.7
9.8%
4
2
6.1
Top 10 seafood exporters, 2013 (USD mn)
0.3%
-5.6%
0
2009
2010
2011
Export (USD bn)
2012
25%
20%
15%
10%
5%
0%
-5%
-10%
2013
Growth (%)
Source: VASEP
Sao Ta (FMC)
Au Vung
Hung Vuong (HVG)
Agifish (AGF)
Minh Phu - Hau Giang
Cases
Quoc Viet
Seapimex
Vinh Hoan (VHC)
Minh Phu (MPC)
103
104.1
105.6
112.7
128.8
132.2
147.8
158.8
166.3
411.6
Source: VASEP
Almost 73% of total seafood export value belongs to 100 seafood processing
companies, in which the top 10 contributed 22.8% to the export value in 2013. Minh
Phu was the leader with USD411.6 million. If its subsidiary, Minh Phu Hau Giang, was
counted, the Company would account for 8% of the export value and left the other
peers in its wake such as Vinh Hoan (USD166.3 million or 2.5%) and Seapimex
(USD158.8 million or 2.4%). Hung Vuong and its subsidiary, Agifish, together, are
considered to be the biggest producer of pangasius. If standing alone, Hung Vuong is
the second largest after Vinh Hoan in pangasius production.
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Page | 23
Seafood export markets, 2013
Seafood export value by categories, 2013

Pangasius
US
EU
20%
22%
Japan
China & HK
3%
6%
17%
7%
8%
Black tiger shrimp

26%
Australia
Others
Source: VASEP
White leg shrimp

Tuna
8%
Squid & octopus
Korea
Asean
17%
1% 8%
2%
3%
6%
Other shrimps
21%
25%
Crab
Molluse
Others
Source: VASEP
High anti-dumping tax

According to VASEP, the US Department of Commerce has recently announced the
final results of the ninth anti-dumping duty administration review between August 1,
2011 and July 31, 2012 towards frozen processed pangasius imported from Vietnam.
Therein, Vinh Hoan was entitled to the most favorable rate of USD0 per kg instead of
USD0.03 per kg previously. Hung Vuong retained the last levy of USD1.2 per kg. The
tax rate significantly increased from USD0.42 per kg since the end of March 2014 to
USD1.2 per kg at present. The general rate of USD2.11 per kg is applied for other
Vietnam exporters. The representative of VASEP asserted that this was an
unreasonable, inconsistent and protective judgment that caused disadvantage to
Vietnams pangasius. We project that the countrys export of pangasius will
slowdown in the foreseeable future.
Export price of pangasius declined while that of shrimp hiked

The export price of pangasius in 2013 was USD2.2 per kg, a decrease of 9.1% due to
fierce competition among 230 local exporters while it was expected to increase by
1.8% to USD1.7 per kg because of reduction in output volume in the year.
The export price of shrimp rose 20% in 2013, which was attributed to the outbreak of
EMS worldwide. EMS spread through the major shrimp producing countries of
China, India, Vietnam and Thailand which caused global shrimp output to drop
precipitously 23% in the year. However, as mentioned earlier, the disease has been
brought under control and a gradual reduction in price is expected as production
recovers.
TPP offers not much benefit on tariffs, but challenging local

competition
Theoretically, TPP allows aquatic products from Vietnam to enjoy a tariff of 0% when
exporting to TPP countries, especially the US and Japan. These two key markets
accounted for 39% of total seafood export value in 2013. However, this tariff benefit
seems, in fact, to be insignificant. For instance, import tariffs for the US market are
relatively low (0.3% for raw seafood, 4.7% for processed seafood); the rates for Peru
and Canada are roughly 0%, while Malaysia, Singapore, Australia have removed
tariffs in accordance with ASEAN free trade agreements. For the Japan market, the
import tariffs for Vietnams aquatic products were lower than that of other countries
(3.5% for raw seafood, 7.3% for processed seafood). Thus, TPP brings more of a
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Page | 24
competitive edge to Vietnam, relative to other countries, when exporting into Japans
market.
In terms of imports, Vietnam currently imposes quite high tariff barriers of 15% for
raw seafood and 30% for processed seafood. Companies in TPP countries exporting
aquatic products into Vietnam will be entitled to have the barrier totally removed,
which will undoubtedly bring huge competitive pressure for the local players. For
domestic companies using imported raw materials, TPP does not make big changes
because taxes imposed on imported materials for exported goods will be refunded.
Obviously, if taking a particular consideration, these companies will save opportunity
cost on tax reimbursement procedures and tax payments, which is seen as an
advantage but not remarkable. Thus, TPP offers insignificant benefits on customs
tariffs for aquatic-product-export enterprises while creating significant competition
for domestic-market-focused enterprises.
DAIRY
Strongest momentum to enter growth phase; powdered milk and
drinking milk dominated dairy market
According to Nielsens research, per capita milk consumption in Vietnam was just 15
liters per annum, far behind Thailand (34 liters / year), China (25 liters / year) and the
UK (112 liters / year) in 2012, an indication of colossal market growth opportunity for
dairy products. The Vietnam Department of Livestock Production estimates
Vietnamese people will consume 28 liters of milk per year by 2020. Moreover, the
customer base for dairy products has broadened thanks to the manufacturers
continued efforts to target different demographic segments, such as female
professionals and seniors. Thanks to low per capita milk consumption, rising health
consciousness, new habits of drinking milk, and a growing customer base, we
believe this category possesses the strongest momentum to enter a growth phase.
Dairy sales value and growth
100
20%
80
60
12%
13%
25%
20%
17%
13%
40
20
23%
15%
42.0
47.3
53.3
62.2
2010
2011
2012
2013
74.6
91.7
10%
Value (VND tn)

Growth (%)
5%
0%
2014F
2015F
Source: Euromonitor International, VPBS Research
The dairy sector, valued at VND62.2 trillion (USD2.9 billion) in 2013, is among the
fastest-growing in Vietnams non-discretionary consumer sector, with an increase of
16.5% in 2013 and a CAGR of 14% over the period 2010 to 2013.Vietnam dairy
revenue comes mainly from two segments: powdered milk and drinking milk. These
two segments revenue accounts for 74% of the total market value which is USD 2.2
billion (VND 45,900 billion). According to Euromonitor International, Vietnams dairy
market value will have increases of 20% and 23% for the year 2014 and 2015. Yogurt
is reckoned to be the segment which will bring high profit thanks to undeveloped
market either in demand or supply.
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Page | 25
Dairy category volume breakdown
Dairy category value breakdown
Y2013 (000 tons)
70 30 5
6% 3% 0%
200
16%
Yogurt
670
55%
245
20%
7.7
13%
Condensed milk
Y2013 (VND tn)
3.2 0.2
5.1
5% 0%
8%
Drinking milk
Powdered milk
Drinking milk
27.9
45%
Yogurt
Condensed milk
Powdered milk
18.0
29%
Ice-cream
Cheese
Source: Euromonitor International, VPBS research
Ice-cream
Cheese
Local raw fresh milk supply only meets less than one-third of
production demand,
The sector faces supply and demand imbalances in raw fresh milk as domestic herds
(184,216 cows) were able to provide only 420,000 tons of raw milk, about 28% of total
domestic demand for production in 2013. Vietnam is ranked in the top 20 countries
worldwide importing input materials for dairy production. In 2013, the country
imported around 1.2 million tons of raw milk powder valued at USD841 million. Thus,
heavy dependence on imported materials brings the attendant risk of profit margins
being squeezed out due to global price fluctuation. However, this risk is mitigated by
strong consumer loyalty for prominent brands and because milk products are
exposed to low price elasticity of demand relative to other categories. The
Department of Livestock Production estimates local milk production will surge to
856,000 tons in 2017 (326,000 cows herd) and 1,000,000 tons (500,000 cows herd) by
2020, yet the supply will only meet 30% of local demand.
Milk cow herd (cows)
Raw fresh milk local production
Thousand Cows
Growth (%)
600
77.0%
500
53.4%
400
300
200
100
0
15.3%
14.5%
133
2010
Thousand tons
100%
1,200
80%
1,000
60%
40%
152
10.0%
167
10.3%
184
326
500
2011
2012
2013
2017F
2020F
856
800
600
400
20%
200
0%
Source: Department of Livestock Production
Growth (%)
103.8%
1,000
320
15.1%
368
15.0%
2010
2011
382
420
3.8%
9.9%
2012
2013
120%
100%
80%
60%
16.8%
40%
20%
0%
2017F
2020F
Source: Department of Livestock Production
Market concentrated on Vinamilk and Friesland Campina

Out of the 20 local milk producers, only TH Milk ultimately enjoys internal control in
raw fresh milk for production. The company currently owns a herd of 45,000 cows
farmed on 8,100 ha of land that produce 400 tons of fresh raw milk on a daily basis.
TH Milk has set targets to own the largest herd of 137,000 cows by 2017 and 203,000
cows by 2020 nationwide. The other players such as Vinamilk, Nutifood Friesland
Campina Vietnam, Moc Chau can partly supply fresh milk. Their shortage in input
material is overcome by purchases from domestic farmers and imports. Vinamilk is
now the largest fresh milk collector, purchasing more than 60% of fresh milk from
farmers across the country. The second largest fresh milk collector is Friesland
Campina Vietnam (Dutch Lady brand milk). The company has purchased nearly
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Page | 26
82,000 tons of fresh milk from local farms in 2013, accounting for about 20% of total
domestic fresh milk production. These two companies dominate the local market
with 46% and 20% market shares respectively. We expect fiercer competition among
existing players due to the increasing number of brand substitutes and low threats of
new entrants as the category has relatively high barriers to entry.
Dairy market shares, 2013
Vinamilk
34%
46%
Friesland Campina
Others
20%
Downtrend in world price of raw milk powder benefits local

producers
Milk production in Vietnam comes from two sources: from cow farms and imports.
Imported dairy ingredients include milk powder and raw milk products. Raw milk
products are imported not only to produce milk but also to produce such as
confectionery, functional foods, nutritional foods milk. etc.... Vietnam imports raw
milk products mainly from New Zealand, America, Australia and Europe. Costs of raw
milk accounts for approximately 65 to 70% of total input costs. Thus, any change in
world production could cause price volatility and shortages that would negatively
affect local production.
USDA skim milk powder spot price (USD/MT)
USDA whole milk powder spot price (USD/MT)
6000
6000
5000
5000
4000
4000
3000
3000
2000
2000
1000
1000
0
1-Jan-09
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Source: Bloomberg
0
1-Jan-09
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Source: Bloomberg
After a hike in Q2 2013, the price of skim milk powder (1.25% butterfat) and whole
milk powder (26% butterfat) has decreased significantly to this date. The skim milk
powder spot price was down 19.6% y-o-y from USD5,225 per metric ton (MT) to
USD4,200 per MT as of the end of May 20, 2014. Also, the whole milk powder spot
price dropped 22.5% y-o-y from USD5,600 per MT to USD4,337.5 per MT as of May
20, 2014. USDA expects the downward trend will be on-going through the end of
2014 due to world production increases through herd expansion and higher yield
outputs per cow. Therefore, we believe the favorable trend in world prices of raw
milk powder will favorably benefit the gross margin of local producers in 2014.
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Page | 27
Imposed ceiling prices on milk products for children under 6 years

old
According to Decision 1079/QD-BTC, effective from June 1, 2014, 25 milk products for
children under 6 years of age have had ceiling prices imposed for both wholesale and
retail distribution. The wholesale ceiling price has ranged from VND72,000 to
VND610,000 for different brands including Dielac Alpha, Frisolac Gold, Nan,
Lactogen, Enfagrow, Enfamil, Abbott, Similac and Grow G-Power. The retail ceiling
price was determined by the sum of wholesale ceiling prices and other relevant
expenses (capped at 15% of the wholesale ceiling price) and regulated by the Price
Administration Bureau.
Powdered milk and drinking milk

Robust appetite for powdered milk and drinking milk
We saw robust consumption in powdered milk and drinking milk over the period of
2010 to 2013. Powdered milk, which made up 45% of Vietnams dairy market, posted
a CAGR of 10.1% and VND27.9 trillion (USD1.32 billion) worth in 2013. Drinking milk
accounts for 29% of the dairy markets value, or VND18 trillion (USD851.6 million), in
2013. The sub-category recorded a remarkable CAGR of 18.9% during the same
period. As the majority of input materials for powdered milk and drinking milk are
sourced from overseas, local producers will benefit from the capability to pass on
incremental costs to end users when import prices rise.
Powdered milk value and growth
30
20.9
22.3
24.0
20
Drinking milk value and growth

27.9
15.9%
10
6.8%
7.0%
7.6%
0
2010
2011
Value (VND tn)
2012
20%
20
15%
15
10%
10
5%
0%
2013
Growth (%)
12.9
20.4%
10.7
15.5
18.0
25%
20%
20.6%
15%
15.8%
15.5%
10%
5%
0%
2010
2011
Value (VND tn)
2012
2013
Growth (%)
Foreign players control powdered milk, leaving drinking milk for local
competitors
With the advantages of worldwide large-scale farming of cow herds, big production
capacity and modern technologies, foreign players firmly controlled the local
powdered milk market with 53.1% market shares in 2013. As such, Abbott was
leading with 24.5% value share, followed by Mead Johnson and Friesland Campina
with that of 14.4% and 14.2%, respectively. However, Vinamilk also had significant
presence in the powdered milk market with 19% value share.
Conversely, local players dominated the drinking milk market which was led by
Vinamilk with 45.5% market shares in 2013. While Friesland Campina owned a
considerable market share of 20.3% and Nestle had a modest share at 7.4%.
www.VPBS.com.vn
Page | 28
Powdered milk key players

Abbott
Vinamilk
Drinking milk key players
Mead Johnson
Friesland
Others
Vinamilk
Friesland
Nestle Vietnam
Others
7.4%
23.5%
27.1%
7.3%
22.3%
26.8%
7.4%
20.3%
38.7%
40.9%
43.3%
45.5%
2010
2011
2012
2013
30.5%
29.3%
28.8%
27.9%
28.9%
28.2%
13.9%
14.3%
18.0%
14.1%
14.3%
18.5%
14.0%
14.3%
18.7%
14.2%
14.4%
19.0%
7.2%
25.2%
23.3%
23.8%
24.2%
24.5%
2010
2011
2012
2013
Yogurt
Yogurt registered the fastest growth among other dairy categories
Yogurt is traditionally perceived by Vietnamese consumers to be a healthy food that
provides digestion benefits after meals. Due to growing attention to food safety and
hygiene, consumers have quickly shifted to branded yogurt on the shelves as a
strong alternative to unbranded ones. Hence, yogurt registered the fastest value
growth rate of 34.3% to VND7.7 trillion (USD364.7 million) in 2013, producing an
impressive CAGR of 32.7% during 2010-2013.
Vinamilk dominant yogurt market
In 2013, Vinamilk continued to lead the yogurt market, with 73% value share, in which
eating yogurt commanded a 95% value share. Local consumers are said to be loyal
towards the strong national brand given its long reputation for product quality and
dense marketing campaigns.
Yogurt market value and growth
10
8
36.5%
29.7%
Yogurt market shares, 2013

34.3%
27.4%
30%
6
4
2
3.3
4.5
5.7
40%
7.7
20%
2011
Value (VND tn)
2012
Vinamilk
6%
IDP Ba Vi Milk
8%
TH Milk
10%
0%
2010
13%
73%
Others
2013
Growth (%)
Condensed Milk
Growing maturity, condensed milk remains a key dairy product of lowincome earners
In spite of low nutritional content, condensed milk held 8.3% value share within the
dairy market thanks to its long prevalence among Vietnamese consumers, especially
low-income earners. However, as the performance of drinking milk and powdered
milk posted robust growth, demand for condensed milk is confronting the maturity
stage. The categorys growth slowed to 2.5-3% y-o-y in value during 2010-2013 as
consumers disposable income has increased and they began a shift to more nutrient
rich dairy products.
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Page | 29
Condensed milk market value and growth

5.2
5.0
2.5%
2.7%
3.0%
5.1
5.0
4.8
4.6
3.0%
Condensed milk market shares, 2013

4%
3%
20%
2%
4.9
4.7
Vinamilk
1%
4.4
Others
0%
2010
2011
2012
Value (VND tn)
80%
2013
Growth (%)
Vinamilk in control of the condensed milk market

Vinamilk, with its two prominent brands Longevity and Southern Star, have long
dominated the condensed milk market and accounted for approximately 80% of the
total sale value. Friesland Campina remained the second largest player with two key
brands of Dutch Lady and Completa.
Ice cream
Steady growth in demand- Thanks to the escalating number of youth who
perceive ice cream to be a tasty dessert or snack and the growing number of modern
style coffee shops that serve a variety of flavors and sizes, demand for ice cream has
grown steadily to VND3.2 trillion (USD152.8 million) and reported a CAGR of 12.8%
over the period 2010 to 2013.
Ice cream still dominated by local brands, yet foreigners rising footprints
In 2013, Kinh Do retained its leading position in the Vietnamese ice cream market
with its two brands of Celano and Merino accounting for a 29% market share.
Vinamilk and Thuy Ta followed in second and third places. Kinh Dos competitive
edge is attributed to their strong brand awareness, deep market penetration in terms
of preferences and tastes of the local consumer as well as regular sweepstakes and
discounts. In fact, Kinh Do also enjoyed the highest retail value growth of 27.8% in
2013 for ice cream. There is, however, an increasing presence of foreign brands in
the manner of franchise including Baskin-Robbins, Snowee, HaagenDazs, New
Zealand, Buds, Monte Rosa, Fanny, etc. Although the ice cream market is dominated
by local players with very competitive prices and attractive packaging, urban
consumers are becoming more captivated by foreign brands thanks to their plentiful
flavors and modern style outlets.
Ice-cream market value and growth
4
3
10.2%
11.5%
12.9%
14.0%
15%
29%
10%
2
1
Ice-cream market shares, 2013
2.2
2.5
0
2010
2011
Value (VND tn)
2.8
3.2
Vinamilk (VNM)
5%
0%
2012
2013
Value growth (%)
www.VPBS.com.vn
Kinh Do (KDC)
57%
10%
4%
Thuy Ta
Others
Page | 30
NOODLES
Despite slow growth, noodles hit USD1 billion sales in 2013
According to the Word Instant Noodle Association (WINA) Vietnam ranks number
four in instant noodles consumption with a demand of 5 billion units each year (56.2
instant noodles units/person/year) behind China, Indonesia and India. Currently
Vietnam has about 600 noodles brands which are distributed in a system of
supermarkets such as Co.opmart, Maximark, and Lotte Mart. Domestic production
accounts for 95% of market share. In 2013, noodles recorded a slower increase in
both volume and value, but the sales value surpassed USD1 billion (VND21.7 trillion),
with the volume of 432 thousand tons. The growth for noodles was attributable to its
convenience as an alternative to rice and has plenty of flavor, their pack size and
price as well as marketing communication efforts of the market players.
New launch of Kokomi of Masan Food, a brand targeting the low-income segment,
was one of the most successful combinations of running effective commercial
advertising, boosting store displays and competitive pricing. Both international and
local producers retained their positive perception of the noodle markets potentiality.
Noodles market volume & growth
600
8.2%
500
8.0%
7.5%
7.0%
400
Noodles market value & growth
6.1%
300
200
100
347
375
2010
2011
432
403
458
5.1%
481
2012
2013
Volume ('000 tons)
2014F
10%
30
8%
25
6%
4%
20
15
19.1% 18.6%
17.4%
20.1
17.1
14.4
21.7
23.3
8.3%
7.0%
0%
5.9%
10%
0%
2011
2012
Value (VND tn)
Growth (%)
20%
5%
2010
2015F
25%
15%
10
2%
24.6
2013
2014F 2015F
Growth (%)
Instant noodles occupy almost all of the total noodle consumption, of which pouch
instant noodles was the major packaging with 92% contribution to the sales value.
However, high convenience in daily usage led cups or bowls of instant noodles to
stay popular among Vietnamese consumers, especially youngsters, workers and
busy officers. This type of packaging reported a volume growth of 8.4% in 2013.
Noodles sales value breakdown, 2013 (VND bn)
61
0.3%
Instant noodles sales value breakdown, 2013

1,801
8%
Instant Noodles
Pouch instant
noodles
Plain Noodles
21,686
99.7%
Cups / bowl
instant noodles
19,885
92%
According to our analysis, Vietnam consumes a high amount of noodles partly due to
the desire to save money in unstable economic situations and also because noodles
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Page | 31
meet the local peoples taste: spicy and sour However, we reckon that the noodle
market will see a slowdown in growth because of trends towards more healthy
nutrition while instant noodles are not considered to be a healthy food.
Acecook Vietnam, Masan Food & Asia Food own 80% of noodle
market
As one of the pioneers in the production of instant noodles in Vietnam, Acecook
Vietnam maintained its leading position in the last three years with 51.5% market
share in 2013 with twenty noodles brands in 2013. Popular brands of Acecook
Vietnam including brands in economic segment (VND 2500-5500/ pack) as Hao Hao,
Vina Acecook and Hao 100 are already common staples of many consumers and
accounted for almost half of the entire noodle brand share. The companys
competitive strategy is to build strong brands with high product diversification to
meet preferences and tastes of consumers.
Masan Consumer was the second biggest player with 16.5% value share in the
noodle market thanks to the companys focus on different market segments as
Omachiand Kokomi noodles and on-going marketing activities with attractive
messages. As such, the Kokomi brand targets the low income segment with a very
low price VND3,000 (USD0.14) per pack and a message of Dai Ngon Tung Soi
(Chewy Noodle Strand).Meanwhile, Asia Food gains market presence through its
series of social donation activities. For instance, for each pack of Gau Do instant
noodles sold, the company will contribute VND10 (USD0.04 cent) to a fund for
underprivileged children. The Gau Do ranked fourth (9.3%) in 2013 noodle brand
share. Asia Foods main products include instant noodles, instant porridge and
noodle soup ("Gau Do", "Hello", "Vifood" and "Hao Hang", etc). In particular, the Hello
product lines give Asia Foods participation in the high class segment and account for
12.1% of the market today
Noodles market shares, 2013
16.5%
Hao Hao (Acecook VN)
Acecook Vietnam
9.4%
5.1%
5.4%
12.1%
Noodles brand shares, 2013
Masan Consumer
51.5%
Asia Food
Vifon
Saigon Vewong
22.6%
19.8%
Hao 100 (Acecook VN)

Gau Do (Asia Food)
5.1%
19.4%
5.7%
8.0%
9.3% 10.1%
Others
Vina Acecook (Acecook VN)
Omachi (Masan Consumer)

Tien Vua (Masan Consumer)
A-one (Saigon Vewong)
Others
SAUCES AND DRESSING CONDIMENTS

Most condiments have reached maturity
Fish sauce, Mono Sodium Glutamate (MSG) and soya sauce remain very popular and
irreplaceable condiments in the daily meals of Vietnamese people. Together, these
accounted for nearly 89% of the category sales valued at VND16.9 trillion (USD800.6
million). However, the value growth rate of sauces and dressing condiments in
Vietnam has dramatically dropped from 16.9% (2012) to 5.4% (2013). These
categories have reached maturity as consumers are fully aware of and have already
www.VPBS.com.vn
Page | 32
used them for a long time. While fish sauces, MSG and soya sauces are mature
nationwide, bouillon cubes and powder, as modern alternatives, are poised to
become mature in urban areas.
Sauces & dressing condiments volume & growth
600
500
400
300
200
100
0
6.6%
Sauces & dressing condiments value & growth

8%
6.5%
5.3%
4.9%
4.5%
4.1%
506.2
527.1
411.5
438.4
461.6
484.4
2010
2011
2012
2013
2014F
Volume ('000 tons)
20
6%
15
4%
10
2%
0%
2015F
Growth (%)
Sauces & dressing condiments vol. breakdown
74.9
16%
97.5
20%
Y2013 ('000 tons)
15.416.3
3% 3%
Fish sauces
MSG
280.3
58%
16.4%
11.7
17%
13.7
Others
16.9
17.7
18.4
20%
15%
5.4%
4.6%
4.2%
10%
5%
0%
2010
2011
2012
2013
Value (VND tn)
2014F
2015F
Growth (%)
Sauces & dressing condiments val. breakdown

1.3
0.6
8%
1.63%
9%
Soya sauces
Spicy chilli / pepper
16.9%
16.0
4.8
29%
Y2013 (VND tn)

Fish sauces
8.6
51%
MSG
Soya sauces
Spicy chilli / pepper
Others
Accelerating use of bouillon cubes as an alternative to MSG in rural

areas
There was rising consumer usage of bouillon cubes for cooking as an alternative to
MSG in rural areas. By successfully delivering the natural taste message, bouillon
cube producers have led rural people to enjoy meals with the natural sweetness of
stock meat instead of consuming pure MSG. The Maggie 3 Ngot bouillon cube
(Maggie 3 sweets) of Masan Food has gained significant market presence.
Masan Consumer and Ajinomoto Vietnam control the market

Sauces, dressings and condiments are largely controlled by Masan Consumer and
Ajinomoto Vietnam with 65% market sales value. Among many popular brands, Nam
Ngu fish sauces, Tam Thai Tu and Chinsu soya sauces of Masan Food are leading
brands in the market with 43.4% market shares. Ajinomoto Vietnam was prominent
with Ajinomoto MSG brand accounting for 20.7% market shares.
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Page | 33
Sauces & dressing condiments market shares
Sauces & dressing condiments brand shares

Y2013
Y2013
Masan Consumer
28.9%
23.1%
Ajinomoto Vietnam
43.5%
Ajinomoto (Ajinomoto VN)
35.9%
Nam Ngu II (Masan Consumer)
Miwon Vietnam
3.0%
Acecook Vietnam
3.1%
5.5%
5.8%9.0%
Others
21.5%
Nam Ngu (Masan Consumer)
20.7%
Tam Thai Tu (Masan Consumer)

Chin-su (Masan Consumer)
Others
C
ONFECTIONERY
Despite slower growth, Vietnams
outpaced its regional peers
confectionery
market
still
In 2013, Vietnams confectionery market grew at a slower pace given its nature of
being a discretionary item in the context of slowing purchasing power. In 2013, the
category sales were VND16.6 trillion (USD0.79 billion), a rise of 9.4% versus 2012.
Despite this, Vietnams confectionery market still remains attractive in the SEA region
as it substantially outperforms the average growth of 3% in the region and that of
1.5% in the world.
Confectionery market volume and growth
300
10.6%
10.3%
250
9.4%
8.6%
8.1%
200
150
100
50
168
186
2010
2011
203
221
239
Confectionery market value and growth
7.6%
257
2012
Volume ('000 tons)
2013
2014F
12%
25
10%
20
8%
15
6%
4%
0%
Growth (%)
11.1%
10
2%
2015F
11.0%
15%
10.3%
9.4%
9.2%
8.9%
13.8
15.2
16.6
18.2
19.8
12.4
2010
2011
2012
2013
2014F
2015F
10%
5%
0%
Value (VND tn)
Growth (%)
The category is appealing in the long run thanks to increasing awareness of Western
culture and lifestyle among the Vietnam consumers and the much lower
confectionery consumption per capita of 1.8kg per annum relative to the global
average of 2.8kg. Euromonitor International expects the slow growth of the
confectionery market to continue in 2014 and 2015, however, the CAGR for the period
of 2013 to 2017 is projected to hover between 10% and 11%.
Biscuits, cookies, crackers and savory snacks are key drivers

In 2013, biscuits, cookies and cracker consumption reached 118.5 thousand tons or
VND6.9 trillion (USD0.33 billion), followed by savory snacks with that of 54.2
thousand tons or VND5.5 trillion (USD0.26 billion). These two sub-categories
dominated the confectionery market with 75% market shares, leaving the remaining
www.VPBS.com.vn
Page | 34
minority to sugar and chocolate confectioneries with VND4.1 trillion (USD0.19

billion).
Confectionery volume breakdown
Confectionery value breakdown

Y2013 (VND tn)
Y2013 ('000 tons)

3.7
44.2 2%
20%
Biscuits, cookies, crackers

118.5
54%
54.2
24%
Savory snacks
2.9
18%
1.2
7%
Biscuits, cookies, crackers
6.9
42%
Savory snacks
Sugar confectionery
Sugar confectionery
Chocolate confectionery
5.5
33%
Chocolate confectionery
Biscuits, cookies and crackers

Savory biscuits / crackers and plain biscuits are the most consumed thanks
to less sugar and more vitamin content
Accounting for 42% of the confectionery market value, biscuits, cookies and crackers
recorded VND6.9 trillion (USD0.33 billion) sales in 2013, posting a CAGR of 9.2%
during 2010 to 2013. Since savory and plain biscuits and crackers contained less
sugar and more vitamins, these two segments are considered healthier products
among the other sub-categories. They remained the most consumed with reported
sales of VND5.3 trillion (USD0.25 billion) or 76% of total category value in 2013.
Market concentrated on Kinh Do
Kinh Do maintained the leading position in the sub-category with 30% market share
in 2013. The next competitors were far behind Kinh Do in grasping the market
including, Bibica (10%), Hai Chau (7%), Kraft Food (7%) and Hai Ha (6%). The AFC
from Kinh Do and Ritz from Kraft Food are well recognized brands of savory biscuits,
while Cosy Marie from Kinh Do was the most popular plain biscuit brand in Vietnam
thanks to its tasty flavor and reasonable price.
Biscuits, cookies, crackers value & growth
Biscuits, cookies, crackers market shares
10
8
15%
9.6%
9.8%
9.1%
8.6%
8.5%
8.0%
8.1
6
4
2
5.3
5.9
6.4
6.9
7.5
2010
2011
2012
2013
2014F
10%
5%
0%
Value (VND tn)
2015F
Y2013
26%
4%
5%
5%
6%
30%
10%
7% 7%
Kinh Do
Bibica
Hai Chau
Kraft Food
Hai Ha
Quang Ngai
Dong Khanh
Huu Nghi
Others
Growth (%)
Savory snacks
Demand remains strong despite unit price increases
With a 33% contribution to the confectionery market value, savory snacks reported
VND5.5 trillion (USD0.26 billion) sales in 2013, recording a higher CAGR of 9.5%
during 2010 to 2013 than biscuits, cookies and crackers. Despite increases of unit
www.VPBS.com.vn
Page | 35
price over the period, the sales posted a higher and flat growth rate, suggesting
demand for savory snacks remains strong. Extruded snacks and nuts accounted for
58% of the sub-category sales, equivalent to VND3.3 trillion (USD156.2 million) in
2013.
Market fragmented
The savory snack market is fragmented among the huge number of players each with
minority market shares. In 2013, these players included Tan Tan with 9.7% market
share, Tuyen Ky (7.6%) and Liwayway Food (a Philippines company 7.3%). The
avory snack segment is not a focus of Kinh Do where its market share was only 4.3%.
Savory snacks value and growth
Sweets and savory snacks market shares, 2013
8
6
5.0
4.6
4.2
9.6%
9.1%
9.2%
2010
2011
Tan Tan
9.7%
7.6%
10%
10.0%
4
2
11%
6.1
5.5
10%
9.6%
7.3%
9%
9%
2012
2013
Value (VND tn)
5.0%
4.4%
4.3%
61.7%
2014F
Tuyen Ky
Liwayway Food
Seaspimex
Bibica
Kinh Do
Others
Growth (%)
Sugar confectioneries
Sugar confectioneries facing intense competition from savory snacks
Revenue growth of the sugar confectionery segment was 9.5% in 2013, which was
much slower than the levels recorded in 2011. This was attributed to rising consumer
awareness of health issues related to the level of sugar intake, such as high blood
pressure, obesity and diabetes. Thus, it led sugar confectioneries to confront strong
competition from savory snacks which are considered to have lower sugar content.
Pastilles, gums, jellies and chews continue to be the most popular sugar
confectionery category in Vietnam, accounting for 58% of the value or VND1.6 trillion
(USD75.7 million).
Sugar confectionery market value and growth
4
3
14.1%
11.5%
2.1
2.4
2010
2011
Perfetti Van Melle
20%
15.4%
9.5%
2
1
Sugar confectionery market shares, 2013
2.9
2.7
8.1%
3.2
10%
5%
0%
2012
Value (VND tn)
2013
Hai Ha
15%
2014F
Growth (%)
20.1%
25.6%
Bibica
Hai Chau
2.7%
3.2%
4.3%
6.9%
19.0%
Lotte
Mars
18.2%
Kinh Do
Others
Perfetti Van Melle, Bibica and Hai Ha are dominant market players
Perfetti Van Melle is still leading the sugar confectionery segment in Vietnam through
its Mentos, Alpenliebe and Golia brands, accounting for 20.1% of market share in
www.VPBS.com.vn
Page | 36
2012. Bibica and Hai Ha closely followed the leader, taking second and third places
with market shares of 19% and 18.2%, respectively. While local companies target
low- and middle-income segments, international peers confine their focus to the
high-end segment.
BAKERY MARKET
Growth in the expansion of modern style bakery outlets
The bakery market enjoyed a CAGR of 7.6% over the period of 2010 to 2013, reaching
VND10.4 trillion (USD0.5 billion) by the end of 2013. This was due in part to a new
style of bakery outlet expanding quickly across Vietnam since 2010 and becoming
more and more popular as a place for people to gather, similar to coffee shops.
Kidos Bakery, Onor Bakery, Tous Le Jour, Paris Bagguette, Bread Talk and Brodard
bakery are some examples of this new style of bakery in Vietnam.
Bakery market volume and growth
600
7.3%
7.4%
7.5%
6.9%
400
200
Bakery market value and growth
6.6%
362
389
418
447
476
6.4%
506
2010
2011
2012
2013
2014F
2015F
0
Volume ('000 tons)
15
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
7.6%
7.8%
7.8%
7.0%
10
5
8.4
9.0
9.7
10.4
2010
2011
2012
2013
6.6%
6.6%
11.1
11.8
0
Value (VND tn)
Growth (%)
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
2014F 2015F
Growth (%)
Bread retained the biggest sales among other bakery products

As one of the popular alternatives to rice and noodles, bread retained its status as a
primary consumption bakery product compared to other sub-categories (such as
cakes and pastries) with VND8 trillion (USD378.7 million) sales in 2013, equivalent to
76.8% of total bakery market revenue.
Bakery categories breakdown
2.2
21%
Y2013 (VND tn)
0.2
2%
Bread
Cake
8.0
77%
Pastry
Unpackaged baked goods growing presence

Thanks to the rising number of bakery outlets, sales value of unpackaged or artisanal
products has grown gradually, reaching VND4.1 trillion (USD195.2 million) and
accounting for 39.6% of total bakery sales. In 2013, packaged baked goods sales were
VND6.3 trillion (USD297 million). However, there is a low probability that unpackaged
products will have a strong impact on the revenue of packaged goods, as each
category serves different benefits. While packaged baked goods offers great
www.VPBS.com.vn
Page | 37
convenience for busier lifestyles, consumers can enjoy more delicious taste of
unpackaged or artisanal products served in the modern bakery outlets.
Fragmentary market
The bakery market is highly fragmented, in which Kinh Do notably retained its first
place with 13.4% market shares in 2013 while other typical competitors such as Nhu
Lan, Duc Phat, Orion Food Vina and Bibica presented an average of 5.1% market
share each.
Bakery market shares, 2013
Kinh Do
13.4%
Nhu Lan
5.9%
5.5%
4.5%
4.3%
66.4%
Duc Phat
Orion Food Vina
Bibica
Others
Sugar price trends downward, wheat price bounds back

Sugar and wheat flour significantly account for about 35 to 40% of material costs of
confectionery and bakery production. Thus, any change in world production could
cause price volatility and shortages which in turn negatively affect local production.
In 2013, the favorable trend of world sugar and wheat price strongly supported the
gross margin of local players. 2013 was a third consecutive year world sugar prices
dropped due to production exceeding consumption demand. The USDA forecasts
sugar production will reach 175 million MT worldwide and the oversupply situation
will continue in 2014, a prospect for a fourth year of price descent. Relative to the
beginning of 2013, Sao Paolo refined sugars spot price decreased 16.9% to USD640
per MT as of May 20, 2014.
Sao Paolo refined sugar spot price
US wheat spot price

USD/MT
1200
500
1000
400
800
300
600
200
400
100
200
0
1-Jan-09
USD/MT
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Source: Bloomberg
0
20-Feb-09
20-Feb-10
20-Feb-11
20-Feb-12
20-Feb-13
20-Feb-14
Source: Bloomberg
Vietnam was not an exception; its refined sugar wholesale price was down 18.7% yo-y to VND13,000 per kg in the third week of May 2014. In contrast to sugar, wheat
prices depend on the weather conditions in main areas of world wheat production,
such as North America and Canada, Brazil, Australia and were affected by political
turmoil in the Ukraine. Wheat prices were USD334 per MT as of May 20, 2014, an
increase of 15.2% compared to the beginning of the year. In 2014, the confectionery
business may not have as high a gross profit margin as in 2013 but we expect it will
not be too low as long as sugars price downtrend continues.
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Page | 38
BEVERAGES
Beverage categories breakdown
In 2013, retail sales of the beverage sector in Vietnam reached USD8 billion, a 7.6%
rise compared with 2012. Alcoholic drinks were the largest category with 70%
contribution to total beverage market value. It modestly grew 6.3% up to USD5.6
billion, the lowest growth rate amongst other beverage categories. Soft drinks posted
the highest growth of 12.4% to record USD1.7 billion in sales value, while hot drinks
was the smallest segment with USD0.7 billion revenue in 2013.
Beverage categories sales and growth
2013 Sales
2013 growth
Key players
Beverage
categories
USD8 bn
7.6%
Alcoholic
USD5.6 bn
6.3%
Sabeco, Habeco
Soft drinks
USD1.7 bn
12.4%
PepsiCo, Tan Hiep Phat, URC VN
Hot drinks
USD0.7 bn
6.9%
Nestle, Vinacafe, Vinatea
Beverage distribution channels

The majority of alcoholic drinks were distributed through on-trade channels due to
rising common perception of drinking to socialize. Soft drinks followed the same
pattern but at a less steep ratio of 60:40 relative to the ratio of 80:20 of the alcoholic
drinks due to its convenience and high frequency of use. In contrast, hot drinks were
mainly consumed through off-trade channels as Vietnamese consumers consider hot
drinks a daily necessity and usually are consumed at home. In general, for each of
beverage category, there was 65% of off-trade sales value gone through the
traditional channels with almost 779,000 of traditional markets and private shops.
Beverage distribution channels
On-trade
17.4%
82.6%
Off-trade
40.4%
59.6%
58.4%
41.6%
Alcoholic Soft drinks Hot drinks

drinks
On-trade
560,000 caf /
bars, restaurants
and food outlets
12,500 hotels
Off-trade
Modern trade
424 supermarkets
23 hypermarkets
365 minimarts &
convenient stores
35% off trade
Traditional trade
778,959 traditional
markets & private
shops
65% off trade
www.VPBS.com.vn
Page | 39
Tax and duties on beverages

1. Inbound manufactured products
Local manufactured products are subject to special consumption tax (SCT) and VAT
as follows:
[Special consumption tax (SCT) = SCT rate x Selling price before VAT (*)
[VAT = VAT rate x (Selling price before VAT (*) + SCT)
(*) Including package value

2. Imported products
Imported products are subject to Import Tax, Special Consumption Tax (SCT) and
VAT as follows:
Import Tax = Import tax rate x Import price (*)

Special Consumption Tax (SCT) = SCT rate x (Import price (*) + Import tax)
VAT = VAT rate x (Import price (*) + Import tax + SCT)
(*) Including package value

Tax and duties for beverages
Import Tax
Special Consumption Tax (SCT)
VAT
Current
Current
From July 1, 2015 (Draft)
Current
Wine > 20% alcohol
45%
50%
65%
10%
Wine < 20% alcohol
50 - 55%
25%
35%
10%
Beer
35%
50%
65%
10%
Soft drinks (carbonate)
20 - 40%
0%
10%
10%
Source: Special Consumption Tax Law 27/2008/QH12, Circular 216/2009/TT-BT
Impacts of TPP on beverages

TPP offers new opportunities for (1) increasing export value (currently insignificant),
(2) applying self-certifying mechanisms on the products origins (3) attracting more
FDI from the US and TPP countries for local beverage sector and (4) participating in
the regional / global value chain (GVC) of local enterprises.
However, TPP also brings significant challenges to (1) huge competition of global
giant beverage groups when tax barriers are removed (2) deep market penetration of
foreign competitors through the GVC (3) squeezed out market shares of local alcohol
producers due to some segments of Vietnamese consumers preference for imported
alcohol brands..
Potential of beverage categories Beverages in Vietnam are reaching their

maturity phase, as such, all of the categories experienced slower growth. Despite
this, soft drinks posted a double-digit growth of 12.4% in 2013, the highest relative to
alcoholic drinks and hot drinks thanks to its high convenience and health benefits.
Further, alcoholic drinks are still considered as high potential due to Vietnamese
social customs of drinking as a means to establishing relationships for life and
business. These consumers ever growing exposure to worldwide drinking cultures
and the growing establishment of on-trade channels are also seen as crucial supports
for the categorys growth.
www.VPBS.com.vn
Page | 40
ALCOHOLIC DRINKS
Drinking culture adoption stimulates growth
As increasing Vietnameses exposure to drinking cultures around the world couples
with their popular perception of drinking to socialize, Vietnam alcoholic drinks
consumption continues growing y-o-y and has gained the biggest retail sales among
other beverage categories. Further, rising numbers of tourists and expatriates living
in big cities also incentivize alcohol-serving retailers to expand, which in turn
stimulates local consumption as rising adoption of western lifestyle becomes more
prevalent.
In 2013, Vietnamese people drank a remarkable 3.15 billion liters of alcohol,
equivalent to VND119.5 trillion (USD5.6 billion), representing double-digit CAGR of
10.1% and 10.6% during 2010 to 2013. Despite its slowing growth since 2012 because
of reaching maturity, alcoholic drinks remains one of the potentially lucrative markets
in Vietnam. It is expected to reach USD6.3 billion in 2015 by Euromonitor
International.
Alcohol consumption volume and growth (liters /%)
4
3
13.8%
2.36
12.6%
2.66
2.92
9.9%
3.15
3.38
7.9%
7.0%
3.59
6.3%
1
2010
2011
2012
2013
Volume (bn liters)
2014F
Alcohol consumption value and growth (VND trillion)

15%
10%
150
15.9%
100
88.5
5%
50
0%
Growth (%)
104.8
112.5
119.5
7.3%
6.3%
133.1
20%
15%
5.7%
10%
5.4%
0%
2011
2012
Value (VND tn)
126.3
5%
2010
2015F
18.4%
2013
2014F
2015F
Growth (%)
Beer dominating the alcoholic market

Alcoholic beverage consumption is largely driven by the beer category which
accounted for 98% of sales volume and 91% of sales value in 2013. Spirits and wine
accounted for only 2.3% volume share (74 million liters) and 8.8% value share
(VND10.4 trillion or USD492 million). In 2013, beer consumption recorded more than
3 billion liters, equivalent to VND109.1 trillion (USD5.2 billion).
Alcohol categories volume breakdown
39 35
1.2% 1.1%
Alcohol categories value breakdown
Y2013 (mn liters)
Y2013 (VND tn)
Beer
Beer
Spirits
Spirits
Wine
Wine
3,079
97.7%
www.VPBS.com.vn
5.7 4.7
4.8%4.0%
109.1
91.3%
Page | 41
Vietnam ranked fourth for beer consumption per capita in Asia

While Vietnam was leading in the SEA region with 29 liters of beer consumption per
capita in 2012, the country captured the 4th position for the entire Asia region, only
after Japan (64 liters), South Korea (45 liters) and China (37 liters). According to
Vietnam Breweries Associations (VBA), beer consumption per capita rose
approximately 10% up to 32 liters in 2013. As such, Vietnam is considered one of the
beer loving countries and is among the most attractive destinations for international
breweries.
Beer consumption per capita in selected Asia countries, 2012
64
45
Japan
South Korea
37
China
29
27
Vietnam
Thailand
Liters per capita
Source: VPBS research
The Vietnam beer market had a CAGR of over 10% in volume and value during the
period from 2010 to2013. However, as the market becomes saturated, growth cannot
be as fast as it was prior to 2011. Beer is forecasted to grow at a slower pace with an
average 5.3% per annum and the sales will be USD5.7 billion by 2015.
Beer consumption volume and growth
4
13.9% 12.7%
9.9%
7.9%
7.1%
2
1
0
2.3
2010
2.6
2011
Beer consumption value and growth
2.9
2012
3.1
2013
Volume (bn liters)
3.3
6.3%
3.5
15%
150
10%
100
5%
50
0%
2014F 2015F
Growth (%)
25%
16.2%
20%
19.6%
15%
7.3%
6.1%
5.5%
5.2%
10%
121.1
5%
80.1
95.8
102.8
109.1
115.1
2010
2011
2012
2013
2014F 2015F
Value (VND tn)
0%
Growth (%)
Lager dominating other types of beer

Lager is the main type of beer in Vietnam since Vietnamese consumers are already
familiar with the taste of lager and are reticent to try new tastes. Thus, other types of
beer such as dark beer, stout and low-alcohols have only a limited presence in the
market. Standard lager holds the lions share its biggest shares of 67% of total lager
due to still low disposal-income per capita. Also, there was a large gap of at least
43% higher in unit price range of each segment including premium, standard and
economy.
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Page | 42
Lager beer categories value share, 2013
52,000
12.4
11%
23.8
22%
Price range by beer segment, 2013 (VND)
Standard lager
36,000
36,000
23,000
Economy lager
22,000
16,000
Premium lager
73.0
67%
Premium
Standard
Economy
Sabeco and Habeco maintain markets leading position

Domestic players control the local beer market, in all three segments of premium,
standard and economy. This is attributable to their long establishment and wide
distribution of domestic products as well as affordable prices, even for the premium
segment. The average unit price of foreign premium brands was normally 33% - 50%
higher than that of local premium brands.
Sabeco continued to lead the beer market with 47.5% value share in 2013. Its
prominent brands such as Saigon Export, 333export and Saigon Lager accounted for
46.8% market shares by brands. Vietnam Brewery and Habeco hold the second and
third positions with market shares of 18.2% and 17.3% respectively. While Hanoi beer
brand of Habeco took 15.8% of brands share, Heineken and Tiger of Vietnam Brewery
occupied 11.5% of the pie. The top three players Sabeco, Vietnam Brewery and
Habeco, together, hold 83% of value sales of beer in 2013.
Beer market shares, 2013
Beer brand shares, 2013

Saigon Export (Sabeco)
Sabeco
9.2%
7.8%
17.3%
Vietnam Breweries
47.5%
24%
Others
Hanoi (Habeco)
333' export (Sabeco)
Habeco
Hue Breweries
18.2%
29.7%
Saigon lager (Sabeco)
15.8%
7.7%
8.4%
14.4%
Heineken (Heineken /
Vietnam Breweries)
Others
With a minimal presence in Vietnams beer market, foreign players mainly focused
on the premium segment, with brands introduced including San Miguel, Corona,
Carlsberg, Budweiser and Asahi. We anticipate foreign players will continue to fuel
the local beer market dynamics as they continue to exhibit interest in the market
potentiality and actively seek entry opportunities.
SOFT DRINKS
Highest growth rate amongst other beverages
Thanks to the growing health conscious of Vietnamese people and demand for more
convenient in todays busier lifestyles, soft drinks with health benefits saw a
remarkable growth, such as RTD (ready to drink) tea, energy drinks and fruit /
www.VPBS.com.vn
Page | 43
vegetable juice. Consumers also have concerns about food safety and the hygiene of
unpackaged drinks. Thus, products like bottled water, as a daily necessity, enjoyed
good performance since it has more benefits of convenience and cleanliness than
common tap water.
Among other beverages, soft drinks enjoyed the highest value growth rate of 12.4%
in 2013 and the strongest CAGR of 12.2% over 2010 to 2013. It was also the only
category that recorded double-digit growth of 15.9% in 2013 and CAGR of 17% over
2010 to 2013 in terms of sales volume. In 2013, soft drinks reported 2.4 billion liters
consumption, equivalent to VND36.2 trillion (USD1.7 billion).
Soft drinks sales volume and growth
4
18.8%
17.5%
17.1%
15.9%
Soft drinks sales value and growth

14.6%
3
2
1
1.5
1.8
2.7
2.4
2.1
13.4%
3.1
20%
50
15%
40
2011
2012
2013
2014F
Volume (bn liters)
25%
11.6%
30
10%
20
5%
10
0%
2010
22.6%
12.9%
20%
12.4%
11.4%
40.3
25.6
28.5
32.2
36.2
2010
2011
2012
2013
10.6%
44.6
15%
10%
5%
2015F
0%
Growth (%)
2014F
Value (VND tn)
2015F
Growth (%)
RTD tea dominating the soft drinks

Tea is perceived as one of Vietnams traditional drinks and enjoys a long history.
With the advantages of convenience, refreshing and thirst-cooling characteristics,
RTD tea is the best choice for the tropical country with high humidity. Further, it also
offers good health benefits with low sugar content and more vitamins and minerals
relative to carbonates. As such, RTD contributed 58% to soft drink revenue while
carbonates took only 16% shares in 2013.
RTD tea enjoyed a rapid increase in 2009 to 2010 and then slowed down, yet still
maintained two-digit growth. In 2013, RTD tea reported VND21 trillion (USD994
million) value of sales, an increase of 12.2%, and 1 billion liters volume of sales, rose
13.3% compared to 2012. It represented a robust CAGR of 15.9% in volume and
14.9% in value over the period of 2010 to 2013.
Soft drinks categories value breakdown
Y2013 (VND tn)
5.7
16%
2.1 1.0 0.4

6% 3% 1%
6.0
16%
RTD tea
Carbonates
21.0
58%
Bottled water
Fruit/Vegetable juice
Sport/energy drinks
Others
www.VPBS.com.vn
RTD tea sales value and growth

30
25
20
15
10
5
0
39.8%
13.8
16.4
18.5%
18.7
21.0
23.4
25.7
50%
40%
30%
14.1%
12.2%
11.4%
9.8%
20%
10%
0%
2010
2011
2012
Value (VND tn)
2013
2014F
2015F
Growth (%)
Page | 44
Tan Hiep Phat ranked second in soft drinks but first in RTD tea
In 2013, PepsiCo was leading the local soft drinks with 25.5% market share, closely
followed by Tan Hiep Phat (THP) with that of 22.7%. PepsiCo is prominent among
carbonates with brands such as Pepsi, 7-up and Mountain Dew, while THP was the
pioneer of RTD tea with Zero Degree and Dr. Thanh brands which led to a booming
demand for this herbal product during 2009 to 2010. The company highly dominated
the RTD tea market itself with 41% market shares. Its strong competitor is Universal
Robina Corporation (URC), with C2 brand which is also well-recognized by its taste
and handy bottle size.
Soft drinks market shares, 2013
PepsiCo
24.7%
Tan Hiep Phat
25.5%
URC Vietnam
3.4%
CocaCola
10.5%
Vinamilk
22.7%
13.3%
Others
RTD tea market share
RTD tea brand shares

Tan Hiep Phat (THP)
9.2%
6.1%
URC Vietnam
41%
10.8%
Interfood
Tan Quang Minh (TQM)
12.1%
Zero degree green tea (THP)

9.4%
5%
9.1%
46.4%
10.2%
Tribeco
20.8%
Others
C2 cool & clean (URC VN)
19.6%
Wonderfarm (Interfood)
Nuta green tea lemon (TQM)
Tribeco (Tribeco)
Others
HOT DRINKS
Instant format drives hot drinks to grow
Hot coffee and tea are long-standing traditional drinks of Vietnamese people. These
require time to serve by boiling ground coffee or tea leaves with water in a coffee
filter or teapot. Thus, development of instant products offers a perfect solution not
only to maintain the traditional drinking habit but also ensure convenience and timesaving for busy lifestyles. A variety of formulas were successfully introduced with 3in-1 and 2-in-1 instant format for both coffee and tea. As such, the growth of hot
drinks is largely driven by instant products. Although the growth rate was not as high
as soft drinks, hot drinks recorded revenue of VND14.1 trillion (USD667.5 million),
rose 6.9%, and consumption volume of 117.1 thousand tons, grew 7.3%.
www.VPBS.com.vn
Page | 45
Hot drinks sales volume and growth

150
100
94.5
7.6%
101.6
109.1
117.1
Hot drinks sales value and growth

125.6
134.7
7.5%
50
7.4%
7.3%
0
2010
2011
2012
2013
Volume ('000 tons)
7.2%
7.2%
2014F
2015F
7.8%
20
7.6%
15
7.4%
10
7.2%
7.0%
10.2%
12%
10%
8%
6%
4%
2%
0%
7.1%
7.1%
6.9%
6.7%
6.4%
11.5
12.3
13.1
14.1
15.0
16.0
2010
2011
2012
2013
2014F
2015F
Growth (%)
Value (VND tn)
Growth (%)
Growing presence of coffee shops also an impetus

Most hot drink products were sold through off-trade channels which took 58.4% of
total sales value, with an increasing presence of on-trade channels such as coffee
chains with modern styles such as Highlands, Trung Nguyen, Gloria Jeans, The
Coffee Bean, Angel-in-us and Starbucks, all of which have bolstered this sectors
growth. Their growth can also be attributed to the common cultural practice of
gathering and socializing at coffee shops in Vietnam.
Coffee accounted for the majority of hot drinks

Coffee continued to lead the hot drinks market with 60.8% share of total category
revenue (VND8 trillion or USD378.7 million), followed by tea with 28.2% shares
(VND3.7 trillion or USD175.1 million). Vietnam continues to be, no doubt, a strong
coffee drinking country.
In 2013, coffee posted a higher value growth of 7.7% than the overall hot drinks
category, of 6.9% thanks to robust accelerating demand for instant coffee which
currently accounts for 75% of the total sales value of coffee. While 3-in-1 products
(mixture of coffee, milk and sugar) have been widely accepted by consumers since
their initial launch in 2011, there has been a gradual shift to the 2-in-1 format (coffee
with sugar or milk), instant cappuccino and latte (Italian taste) as alternatives. There
is also a minimal presence of 4-in-1 instant coffee with ginseng or other nutritional
additives.
Hot drinks categories value breakdown
Y2013 (VND tn)
1.5
11.0%
Coffee sales value and growth

10
8
Coffee
3.7
28.2%
Tea
8.0
60.8%
Others
12.1%
6.3
6.9
7.4
9.2
15%
10%
8.5%
8.2%
7.7%
7.3%
6.8%
2011
2012
2013
2014F
2015F
2
0
5%
0%
Value (VND tn)
www.VPBS.com.vn
8.6
2010
8.0
Growth (%)
Page | 46
Market concentration on local players

The domestic hot coffee market was largely controlled by local companies including
Vinacafe Bien Hoa, Trung Nguyen and Viet Thai International, which together
occupied 56% market share in 2013. The competitive advantage of these competent
players is their deep penetration of the Vietnamese coffee culture and the benefits of
consumers preferences and tastes. However, with a colossal budget allocated to
marketing and promotion, Nestl Vietnam has firmly captured consumers brand
awareness and holds the first position with 33% market share.
In 2013, Vietnam National Tea (Vinatea) continued to lead the local tea market, with
32% of the sales value, followed by Unilever Vietnam with that of 15.5%. Vinatea is
long-established with its industry experience and technology. Between 2010 and
2013, the tea category saw robust branding strategies come to the fore with
international companies. This has led to the rising market share of Unilever Vietnam
with well-recognized Lipton brand including Yellow Label and Clear Green.
Coffee market shares, 2013
11%
5.3%
18.1%
Tea market shares, 2013

Nestle Vietnam
33%
Trung Nguyen
Viet Thai International
32.6%
Vinatea
Unilever Vietnam
52.5%
15.5%
Others
Others
www.VPBS.com.vn
32%
Vinacafe Bien Hoa
Page | 47
F&B STOCKS ON THE EXCHANGES

Currently, there are 45 food and beverage (F&B) companies listed on the HSX and
HNX with a total market cap of VND199.3 trillion (USD9.4 billion), representing 19.6%
of the total aggregate market cap of both exchanges.
The return-on-assets (ROA) and return-on-equity (ROE) for the F&B sector appear
attractive, averaging 8.4% and 18.8% in 2013, respectively. As of May 20, 2014, the
sector peers index was trading at an average PE of 19.1 times, which was slightly
below that of the regional peer index at PE of 20.3 times. Also, the F&B sector trading
return outperformed the VN-Index in the latest twelve months (LTM) at 22.8%
compared with 8%.
Selected local peer group comparison (VND bn)
Net revenue
No. Ticker
Exchg
1
2
3
4
5
6
7
8
9
10
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
HSX
VNM
MSN
KDC
VCF
HVG
MPC
VHC
SBT
TAC
NHS
Average 45 peers
Market cap
Products
101,679
67,244
8,805
3,694
2,760
2,277
1,957
1,808
913
656
Net profit
Y2013 Chg %
Dairy
F&B, Mining, Banking
Confectionery
Coffee
Fisheries
Fisheries
Fisheries
Sugar
Oil & fats
Sugar
30,949
11,943
4,561
2,299
11,043
11,112
5,095
2,220
4,291
1,044
Y2013
16.5%
14.9%
6.4%
8.7%
43.6%
40.0%
20.5%
13.2%
6.4%
11.7%
17.6%
6,534
1,307
493
260
296
294
176
239
66
101
Y2013
Chg % Net margin

12.3%
3.7%
39.2%
-12.7%
13.7%
1644.9%
-16.4%
-35.4%
3.2%
23.5%
1.8%
Trailing
ROA
ROE
DE
PE
21.1% 28.6% 37.2%

2%
10.9% 2.8%
9.1% 125%
10.8%
7.7% 10.1%
12%
11.3% 16.1% 23.0%
20%
2.7% 3.0% 12.7% 188%
2.6% 3.8% 18.5% 298%
3.5% 6.9% 12.0%
41%
10.8%
7.4% 13.0%
59%
1.5%
5.4% 16.1%
73%
9.7%
5.4% 11.3%
92%
9.4% 8.4% 18.8% 134.2%
15.6
149.0
17.8
14.2
11.1
8.4
12.4
7.6
13.9
6.5
19.1
PB
5.8
4.7
1.8
3.3
1.2
1.4
1.3
1.0
2.2
0.7
3.6
Source: Bloomberg, data as of May 20, 2014
Business results of selected F&B companies, 2013

120
100
21.1%
101.7
25%
20%
67.2
80
30.9
40
20
11.3%
10.8%
60
3.8%
11.9
15%
10.8%
8.8 4.6
3.7 2.3
2.2%
11
2.8
KDC
VCF
HVG
2.4%
2.3
11.1
1.5%
1.8 2.2
0.9 4.3
0.7 1.1
VHC
SBT
TAC
BBC
0
VNM
MSN
Mkt Cap (VND tn)
MPC
4.3%
3.1%
2.0 5.1
Net sales (VND tn)
10%
5%
0%
Net margin (%)

Source: Bloomberg
F&B stock price index versus VN-Index

No. Ticker
1 VNM
2 MSN
3 KDC
4 VCF
5 HVG
6 MPC
7 VHC
8 SBT
9 TAC
VNIndex
Food Staples
F&B stock price index versus VN-Index
Price
YTD
12-month
Avg daily trading
Avg daily trading
(VND)
movement
return
(shares - LTM)
(VND bn - LTM)
-9.6%
11.5%
3.9%
2.2%
-7.8%
37.5%
37.9%
0.8%
13.7%
5.3%
5.8%
-3.2%
-16.4%
7.1%
-39.6%
6.9%
26.0%
50.4%
-11.3%
26.6%
8.0%
22.8%
234,981
241,791
58,281
1,701
297,261
7,316
6,701
335,167
4,918
81,155,258
32.7
22.3
3.2
0.3
7.7
0.2
0.2
4.4
0.2
1,262
122,000
92,000
53,000
139,000
22,600
33,000
32,400
12,500
48,100
532
www.VPBS.com.vn
50
Food staples
VNINDEX
40
30
20
10
0
05/13
-10
08/13
11/13
02/14
05/14
Page | 48
Selected regional peer group comparison (USD mn)

Net revenue
No. Ticker
Exchg
1
2
3
4
5
6
7
8
9
10
Hong Kong
Singapore
Hong Kong
Singapore
Hong Kong
Shanghai
Bangkok
Bursa Malays
Indonesia
Bursa Malays
151 HK Equity
WIL SP Equity
322 HK Equity
THBEV SP Equity
2319 HK Equity
600600 CH Equity
CPF TB Equity
PEP MK Equity
INDF IJ Equity
FGV MK Equity
Average 70 peers
Market cap
18,577
16,320
16,065
12,045
9,813
9,793
6,487
6,050
5,351
5,154
Products
Confectionery
Food Diversified
Flour&Grain
Brewery
Dairy
Brewery
Food Diversified
Food Diversified
Food Diversified
Flour&Grain
Y2013 Chg %
3,818
44,085
10,941
5,075
7,053
4,239
12,683
1,045
5,573
3,993
13.7%
-3.0%
18.8%
-2.1%
23.6%
13.4%
10.3%
7.3%
4.1%
-4.3%
3.5%
Net profit
Y2013
Y2013
Chg % Net margin
687
1,391
494
619
299
321
306
315
330
361
24.1%
5.1%
-10.9%
-32.0%
28.5%
15.2%
-61.9%
14.4%
-30.5%
19.5%
-8.0%
18.0%
3.2%
4.5%
12.2%
4.2%
7.6%
2.4%
30.1%
5.9%
9.0%
5.9%
Trailing
ROA
ROE
DE
15.8%
3.0%
5.9%
11.0%
4.5%
7.1%
2.7%
6.1%
5.1%
5.7%
5.3%
35.3%
9.3%
17.2%
21.5%
11.8%
13.9%
9.1%
6.6%
17.0%
18.0%
13.5%
64.7%
174.6%
58.2%
72.1%
77.0%
14.6%
169.8%
2.7%
116.3%
66.2%
38.6%
PE
27.1
11.7
32.5
19.5
32.8
30.5
21.2
19.2
16.2
14.3
20.3
PB
9.6
1.1
5.6
4.2
3.9
4.2
1.9
1.3
2.8
2.6
2.7
Due to the tensions in the East Sea between Vietnam and China, Vietnams stock
exchanges have responded as expected with many listed stock prices losing their
accumulation since the end of 2013. However, stocks with strong fundamentals have
gradually recovered in price.
VNM: Vietnam Dairy Products JSC, Vinamilk - The leading

dairy producer
Established in 1976, Vinamilk was originally named Southern Milk-Coffee Company
which operated two dairy-processing factories, Thong Nhat and Truong Tho. Since
being re-named as Vinamilk in 1992, VNM has built and acquired ten additional dairy
factories, resulting in a national footprint of twelve diary processing facilities in
Vietnam. The company also recently purchased stakes in three overseas companies
to secure raw materials supply and to reach new markets. Its acquisitions include
Miraka in New Zealand, Driftwood in the United States, and Angkor in Cambodia.
Starting with condensed milk production in 1976, VNM has rapidly become a market
leader in Vietnam's dairy sector with a diversified product range of more than 200
SKUs. Most of its revenue comes from dairy-based products comprising liquid milk
(Twin Cows, ADM+, Flex, Fino Star, powdered milk (Dielac, Sure Prevent, CanxiPro,
Diecerna), yogurt (Susu, Kefir, Star, Probeauty, Probi) and condensed milk (Southern
Star, Longevity) while other beverages such as juice (Vfresh), tea (Lincha), mineral
water (Icy) and soy milk (GoldSoy) account for 5% of revenue.
The Company currently operates five model cow farms with over 8,000 heads of
cattle which were imported from Australia and provide 90 tons of milk per day. It has
also built relations with more than 5,000 households who are breeding more than
65,000 cows across the country that supply 460 tons of milk per day. VNM also has
an extensive distribution network with over 224,000 points of sale throughout the
country and accounts for 46% of dairy market share in 2013.
Vinamilk was honored by Forbes Asia for its Top 200 Best Under A Billion in Asia
2012. This was the first and uniquely Vietnamese company to be honored in the
Forbes Asia list.
Listed on the Ho Chi Minh Stock Exchange since Jan 2006, VNM is the largest market
capitalized company (USD5.5 billion) in the F&B sector, followed by Masan Group
(MSN) and Kinh Do Corporation (KDC). The Company continued to lead the pace with
outstanding performance relative to peers in term of revenue, net margin (21.1%),
ROA (28.6%), ROE (37.2%) and a very low DE ratio of 2.1%. In 2013, VNM reached net
www.VPBS.com.vn
Page | 49
consolidated revenue of VND30,949 billion (USD1.46 billion), a 16.5% increase, and

net consolidated profit of VND6,534 billion (USD309.3 million), a growth of 12.3%.
The cash dividends of 2013 were approved at 48% on par, out of which 28% on par
had been paid out in 2013. In 2014, VNM targets VND36,298 billion (USD1.72 billion,
+15.9%) in total consolidated revenue and VND5,993 billion (USD283.7 million, -8.3%)
in net consolidated profit. VNM was trading at a relatively cheap PE of 15.6 times
compared to the sectors average PE. VNMs share price slightly declined 3.2% as of
May 20, 2014 relative to the year-earlier day.
KDC: Kinh Do Corporation The leading confectioner

Established in 1993, Kinh Do Corp is now a leading confectionery company in
Vietnam with about 200 SKUs such as biscuits (Cosy) cookies (Korento), crackers
(AFC), cakes (Solite), moon cakes, bread (Aloha), bun (Scotti), etc. It also produces ice
cream (Celano, Melano) and yogurt (Well Yo). As the leading player in the
confectionery field, the company has gained significant market share (2013) in
cookies (30%), crackers (56%), and especially in the seasonal moon cake (76%)
segment. Strong brand equity helps the company to maintain its market leadership in
sales and facilitates stronger market penetration for any new product launches.
The company has established an extensive distribution network nationwide with
159,600 retail outlets and 30,000 ice-cream chilled storage points of sales spread
throughout the country. KDC is operating three factories in the north and south of
Vietnam.
KDC has an M&A growth strategy that include the acquisition of Nutifood, Vinabico
and Tribeco during the period of 2007 to 2008. The company also made shares
issuance to strategic investors such as Ezaki Glico (a Japanese confectionery
producer that owns a 5.06% stake in KDC) and a recent group of local strategic
companies (Thap Lang Ha Co.Ltd., Dong Tam JSC, An Thinh Loc Real Estate
Investment Co.Ltd., Truong Thinh Phat Investment JSC). The Company was honored
by the Trade Promotion Bureau, Department of Commerce & Industry for Top 10
Vietnams Best Brands 2011 award.
In 2013, KDC reported net revenue of VND4.6 trillion (USD215.9 million), an increase
of 6.4% y-o-y, and net profit of VND492.8 billion (USD23.3 million), an increase of
39.2% y-o-y. It also displayed a strong net margin of 10.8% (relative to that of 3-4% of
confectionery peers), ROA of 7.7%, ROE 10.1% and a low DE ratio of 11.7% in the
year. Biscuits, cakes, moon cakes, bread and snacks made up the majority of their
revenue with 84%, while yogurt and ice-cream brought 15% of revenue in 2013.
Among its competitors, KDC has allocated the biggest budget for marketing
campaigns and promotion in the last few years.
Listed on the Ho Chi Minh Stock Exchange since 2004, KDCs current market
capitalization is USD440 million. KDC was trading at PE of 17.8 times, lower than the
sector multiples. Despite frictions over the East Sea, KDCs share price as of May 20,
2014 has still ascended 7.1% compared to the year-earlier day.
Masan Group (HSX: MSN) The conglomerate of food and

beverage, banking and mining
Masan Group is one of Vietnams largest private sector companies focused on
building market-leading businesses that capitalize on Vietnams structural
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Page | 50
consumption, banking and resources stories. The Group owns majority interest in
Masan Consumer (77.7%), Masan Resources (77.7%) and minority in Techcombank
(30.4%). Masan consumer was also prominent in M&A activities including acquisition
of 53.2% stake of Vinacafe Bien Hoa, 63.5% stake of Vinh Hao Mineral Water and 40%
stake of Proconco Animal Feed.
Commenced operation in 2000, Masan Consumer is one of Vietnam's largest local
diversified FMCG companies with 30% market share. The Company manufactures
and distributes a range of food and beverage products, including soya sauce (ChinSu), fish sauce (Nam Ngu), chili sauce (Tam Thai Tu), instant noodles (Omachi,
Kokomi), instant coffee (Vinacafe), instant cereals (Kachi) and bottled beverages (Vinh
Hao).
Masan Resources is one of the largest private sector natural resources companies in
Vietnam, currently developing the world-class Nui Phao polymetallic project in
Northern Vietnam. Nui Phao will be a globally significant producer of tungsten,
fluorspar and bismuth niche industrial minerals that are significant enough to
establish a private sector leader. Techcombank is currently one of the largest Joint
Stock Commercial Banks in Vietnam in terms of total assets, loans, deposits,
customers and distribution network. In the 20 years since its establishment, it has
developed a diversified range of financial products and services to cater to the
financial needs of Vietnams 50 million strong labor force and 305,000 private
enterprises.
In January 2013, Kohlberg Kravis Roberts (KKR) followed up their US$159 million
investment in Masan Consumer, which closed in April 2011, with a further
investment of US$200 million, marking the largest private equity deal ever in
Vietnam. In August 2013, Texas Pacific Group (TPG), who had previously invested in
the Company, invested over US$50 million in Masan Agri, our newly established
subsidiary of Masan Consumer focused on the agricultural sector.
The core drivers for MSNs growth lie in factors including the faith in Masans
Consumers, shortening M&A period from 10 years to 3 years and allocation of
USD1.2 billion capital from world-class investors and partners (65% to business &
investment, 12% to M&A activities and 23% to cash balance).
In 2013, the company recorded a revenue of VND11,943 billion (USD565.3 million),
14.9% above that of 2012, while its net profit has declined 33% to VND1,307 billion
(USD61.7 million) due to surging product development expenses, branding costs and
falling financial revenue from its associate, Techcombank. MSN retained its zero
dividend policy for 2013 and the Group is poised to exceed US$1 billion in revenues
in 2014. Listed on the Ho Chi Minh Stock Exchange since October 2009, MSNs
current market capitalization is USD3.34 billion.
VCF: Vinacafe Bien Hoa The second coffee manufacturer

VinaCafe Bien Hoa is the second key player in coffee production with a market share
of 32.6%, closely following Nestl Vietnam. VCF is operating three factories with a
total capacity of 4,080 tons of instant coffee per annum. The key products are instant
coffee (3-in-1, Wake-up Saigon, Caf Phinn), nutritional cereal (Kachi) and coffeeenergy drink (Wake-up 247). Instant coffee made up the majority of the companys
net revenue with an 80% contribution. After Masan Consumers acquisition of VCFs
stake in Q4.2011, both companies consolidated their nationwide distribution
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Page | 51
networks including 140 points of sales and 185 distributors. Currently, Masan
Consumers holds 53.2% ownership interest in Vinacaf. The Company was received
the following awards: Vietnam Golden Star 2013, 2013 National Quality Silver
and High Quality Vietnamese Product for the 18th year.
In 2013, VCF successfully re-launched VinaCaf as a traditional brand with
contemporary attributes and introduced a new brand of coffee-energy drink Wake-up
247. Its products are mainly consumed domestically while exports to key markets
such as the United States, the European Union, Japan and Australia accounted for
only 8.3% of total net revenue.
In 2013, the company recorded VND2,341 billion (USD110.8 million) net revenue, up
9.3% and VND260.4 billion (USD12.3 million) net profit, down 12.7% in 2013. The
decrease was due to expenditures allocated for re-launch of VinaCaf and Kachi
brand and a new brand development of coffee-energy drink. However, it saw a strong
net margin of 11.3%, ROA of 16.1%, ROE of 23% and a relatively low DE ratio of
20.4% in the year. In 2014, VCF plans revenue of VND3,000 billion (USD142 million,
+28.2%) and net profit of VND400 billion (USD18.9 million, +53.6%). Listed on the Ho
Chi Minh Stock Exchange since 2011, VCFs current market capitalization is USD174.9
million. VCF was also trading at 14.2 times, a lower multiple than sector average PE.
VCFs share price as of May 20, 2014 was significantly down 39.6% since the yearearlier day.
MPC: Minh Phu Corporation The largest shrimp exporter

Established in 1992, after 20 years of continuous development, Minh Phu has become
the largest shrimp exporter nationwide and possesses strong creditability in Asia and
worldwide. In 2013, the Company recorded USD411.6 million in export revenue and
accounted for 6.1% of Vietnams seafood export value of USD6.7 billion. MPCs
product portfolio includes fresh shrimp (RPTO IQF, RPD IQF, HLSO Block, EZP IQF,
etc.), steamed shrimp (CPTO IQF, CPD IQF, CEZP, etc.) and premium products
(nobashi, tempura, sushi, etc.). Almost 100% of MPC products have been export to
key markets such as the United States, the European Union, Canada, Japan, Korea
and Australia. Minh Phu has the biggest production capacity in Vietnam, with that of
76,000 tons per annum (TPA) including two factories in Ca Mau (36,000 TPA) and Hau
Giang (40,000 TPA). It also has the largest aquaculture operation countrywide with
one farm of breeding seed in Ninh Thuan (5 billion posts per year), two industrial
farming areas in Kien Giang (600 ha) and Vung Tau (300 ha) and one ecological farm
area in Ca Mau (320 ha).
In 2013, MPC posted VND11,112 billion (USD526 million) in net consolidated revenue,
up 40%; and VND294 billion (USD13.9 million) in net consolidated profit, a surge of
16 fold, thanks to dramatic increases in export revenue. As such, MPC showed a 2.6%
net margin, 3.8% ROA and 18.5% ROE in the year. While the 2013 DE ratio of MPC
was mostly three times, it is effectively reduced to 1.7 times thanks to huge cash
balance of USD94.7 million. In 2014, the Company targets USD550 million net
consolidated revenue (+4.6%) and USD20 million net consolidated profit (+43.6%).
Listed on the Ho Chi Minh Stock Exchange since 2006, MPCs current market
capitalization is USD107.8 million. MPC was trading at a PE of 8.4 times, less than
half of the sector average PE. Despite frictions over the East Sea, MPCs share price
as of May 20, 2014 strongly rose 26% relative to the year-earlier day.
www.VPBS.com.vn
Page | 52
CONCLUSION
Among the focused food categories, dairy has the strongest momentum to enter into
growth phase while other categories including seafood, noodles, sauces and
dressing condiments, confectionery, bakery and beverages are reaching maturity
and, as such, experienced slower growth. However, the synergy effects of continuing
economic growth, golden demographic structure, rapid urbanization, rising
disposable income and the middle class, tax supports and a high density of grocery
retail networks will drive up the overall F&B consumption in the medium to long
term. We believe the sector continues to deliver double-digit growth over the next
five years.
In 2013, the countrys F&B sector witnessed two global private equity firms, Kohlberg
Kravis Roberts (KKR) and Texas Pacific Group (TPG), closed landmark deals in
Vietnam with their additional investments in Masan Consumer of USD200 million
and USD50 million, accordingly. Masan Consumer, itself, was also prominent with its
majority acquisition of Vinacafe Bien Hoa and Vinh Hao mineral water during the
year. Given the growing appetite for emerging market-based assets of global
investors and the consolidation of local players, we predict the blooming in M&A
activities in food and beverage sector will continue in the medium to long term.
Another company which is very active in M & A is a joint stock company KDC. The
company has received about VND1,700 billion from strategic partners, raised its cash
to total VND4.000 billion. With this amount of cash, the market would have predicted
that KDCs strategy is to expand retail distribution system and participate in markets
other than confectionery.
The F&B sector remarkably outperformed the VN-Index in the latest twelve months
(as of May 20, 2014) at 22.8% against 8%. In 2013, the sectors ROA (8.4%) and ROE
(18.8%) appeared very attractive. The local peer group was trading at slightly cheaper
prices (PE 19.1 times) relative to regional peers group (20.3 times). Also, there are
some stocks exposed strong fundamentals and still cheaper values than the sector
average multiples such as VNM, KDC, VCF and MPC. Based on the above factors, we
propose a recommendation to contemplate accumulation of F&B stocks in the
medium to long term. Furthermore, due to its nature as a defensive sector that is
essential to daily life, F&B stocks continue to be a preferred target for a balanced
investment portfolio. However, we would like to note investors about the impact of
TPP on F&B industry. Vietnams import tariffs for F&B are considerably high, while
the country has limited (and at time unavailable) SPS (Sanitary and Phyto-sanitary
Measures), TBT (Technical Barriers to Trade) and commercial defense measures for
the sector. As such, the on-going negotiation of TPP would lead the domestic market
to confront a huge competition of TPP members in terms of technology, quality and
even price when tax barriers are removed. In contrast, other TPP countries possess a
strong system of defensive and protective measures rather than just the tariffs
themselves. Also, the partnerships seem not to have any restrictions on rights of
using these defensive instruments for the import countries. Hence, TPP is not only a
challenge for Vietnams F&B local market but also for the export markets
www.VPBS.com.vn
Page | 53
APPENDIX- M&A ACTIVITIES

M&A transactions F&B
No. Time
Target
Acquirer
Seller
Gaoling Fund, YHG Investment
VinaCafe
4-May-13 Phu Yen Beer - Pybeco
Masan Consumer
Pybeco
1-Feb-13 Vinh Hao Mineral Water
Masan Consumer
Vinh Hao
9-Jan-13 Masan Consumer
Kohlberg Kravis Roberts & Co
Masan consumer
2-Dec-12 Go Dang Seafood - AGD
Panga Holdco
AGD
Proconco
20-Dec-13 VinaCafe Bien Hoa - VCF
10-Oct-12 Proconco
Masan Consumer
15-Jun-12 Hanoi Liquor - Halico
Streetcar Investment Holding - Diageo na
15-Mar-12 Cholimex Foods
Nichirei Foods
Cholimex
14-Mar-12 Interfoods - IFS
Indochina Beverage Holdings
IFS
10
18-Jan-12 Kinh Do - KDC
Ezaki Glico
KDC
11
14-Nov-11 Shrimp Feed mill
Cargill Vietnam
Higashimaru Co.Ltd
12
28-Oct-11 Hue Breweries
Carlsberg
Huda
13
11-Oct-11 VinaCafe Bien Hoa - VCF
Masan Consumer
Beta Securities, Mr. Tran Quang Loc
27-Jul-11 Viet Thai International
14
Jollibee Foods Corp.
Viet Thai
15
30-Jun-11 CP Vietnam
CP Pokphand China
Charoen Pokphand Group (Thai)
16
16-Jun-11 Yen Viet
Vietnam Opportunity Fund - VOF
Yen Viet
17
18-May-11 Nutifood
DI Asian Industrial Fund (DIAIF)
Nutifood
18
9-May-11 Hanoi Liquor - Halico
Streetcar Investment Holding - Diageo Vietnam Opportunity Fund (VOF)
19
20-Apr-11 Nghe An Tate & Lyle Sugar
TH Milk Food JSC
Tate & Lyle (UK)
20
24-Mar-11 Masan Consumer
Kohlberg Kravis Roberts & Co
Masan consumer
21
11-Mar-11 Interfoods - IFS
Kirin Holdings
IFS
Dang Thanh Co.Ltd
SBT
Deal Value % Acquire % Stake

41.6
12
29.3
24.5%
na
63.5%
24.5%
na
63.5%
200
8%
8%
18
25.6%
48.9%
96
40%
40%
21.8
10.6%
29.6%
6.25
19%
19%
undisclosed
23%
23%
34.1
10%
10%
3.9
100%
100%
90
50%
100%
53.3
50.1%
50.1%
49%
25
49%
609
71%
71%
7.1
32%
32%
3.7
25%
25%
62.5
34.9%
34.9%
52
100%
100%
159
10%
10%
92
57%
57%
21.3
24.8%
24.8%
68.5%
22
1-Dec-10 Societe De Bourbon Tay Ninh
23
18-Nov-10 Societe De Bourbon Tay Ninh
Undisclosed
SBT
45.9
68.5%
24
16-Nov-10 Thai Hoa Coffee
VinaCapital
Thai Hoa
undisclosed
10%
10%
25
14-Sep-10 Vinamilk-Saigon Coffee Factory Trung Nguyen
Vinamilk
40
100%
100%
Source: VPBS Research
M&A transactions FMCG

No. Time
Target
Acquirer
Seller
10-Oct-11 AA Corporation
LD Invest / Maj Invest Asia
Mekong Enterprise Fund II
25-Aug-11 Diana Vietnam
Unicharm
Diana

undisclosed
27%
128
95%
27%
95%
10-Aug-11 International Consumer ProductsMarico

Corp - ICP
Mekong Enterprise Fund II, Bankinvest Individuals

60
85%
85%
31-May-11 Saigon Paper
Daio Paper Corp & Bridgehead
Saigon Paper
10.7
38%
38%
30-May-11 Vietnam Fan JSC
SEB Group
Vietnam Fan
6.4
51%
51%
M&A transactions Retails & Distribution

No. Time
Target
Acquirer
Seller
Q2.2013 JV Vina Familymart
Phu Thai Corp.
Itochu, Familymart
Q1.2013 Thai An Corp. (Northern retail)
Berli Jucker Corp. - BJC
Thai An
24-Jun-13 Phu Thai Corp.

undisclosed
49%
49%
32
65%
65%
Berli Jucker Corp. - BJC
Phu Thai
undisclosed
65%
65%
2-Aug-12 3A Nutrition
Abbott
3A
undisclosed
100%
100%
3-Apr-12 Huong Thuy Trading
Sojitz Group
New Land Corp.
9.5
26%
51%
3-Apr-12 Huong Thuy Trading
Kokubu
New Land Corp.
19%
19%
www.VPBS.com.vn
Page | 54
Disclaimer
Barry David Weisblatt

Head of Research
barryw@vpbs.com.vn
Le Mai Thuy Linh
Director - Fundamental Analysis
linhlmt@vpbs.com.vn
Nguyen Thi Minh Trang
Associate Director - Fundamental

Analysis
trangntm@vpbs.com.vn
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VIETNAM FOOD & BEVERAGE INDUSTRY

Food consumption (USD bn)

Per capita disposable income & expenditure

Food staples sector performance

Recently released 2013 macroeconomic data indicates GDP growth was

Please see important disclosure information at the end of this report

CONSUMPTION MACRO DRIVERS

Vietnams economy continued to

GDP Growth versus Inflation

Neighbor countries GDP Growth (%)

7.7 8.4 8.2 8.5 6.2

GDP growth (%)

Source: Vietnam GSO

Month on month CPI (%)

Beverage & Cigarette

Pharmacy & Healthcare

Robust inflow of overseas remittances and FDI

Remittance to GDP (%)

Source: BMI, EIU

Golden demographic structure

People aging pyramid, 2013

Population growth (%)

Source: Vietnam GSO

Rapid urbanization and lowest unemployment rate

Disposable income and spending: slow but solid growth

Vietnam consumers spent

Per capita annual disposable income (USD)

Per capita consumer expenditure (USD)

Source: Euromonitor International

Source: Euromonitor International

Saving ratio (%)

Source: Euromonitor International

However, due to retained concerns about the pace of gradual macroeconomic

Emerging middle income earners

16.3% 16.3% 16.7% 18.3% 18.5% 20.5%

20.3% 21.7% 21.7%

Source: Euromonitor International

Composition of social class

Tax reduced and extended

High density of retail outlets

Source: Euromonitor International

Annual household FMCG spending, 2013

Volume change (%)

Nominal growth (%)

Avg household spent / yr on FMCG (USD)

Source: Kantar Worldpanel

Growth more sluggish in 2013

Volume change (%)

Nominal growth (%)

Source: Nielsen, Kantar Worldpanel, TNS

Consumer confidence index still on the rise

According to a Nielsen survey conducted in Q4 2013, the Consumer Confidence Index

Top 10 CCI nations Q4 2013

Health is among consumers top concerns

Activities to stay healthy

Second biggest concern

Consider the meal's

Increasing food prices

Increasing utility bills

Eat fresh / natural food

Eat / drink in moderation

Consideration of purchase nutritional food

Sufficient nutritional ingredients