Vietnamese coffee maker gets an energy boost

Vinacafe Bien Hoa (HoSE: VCF) is placed among the top three instant coffee producers in Vietnam, alongside Trung Nguyen and Nestle.

After reaching its peak in 2014, however, the company’s coffee segment went through a stiff drop in revenue which was recorded at VND1.7 trillion ($74.6 million) last year, a decline of VND300 billion year-on-year and VND550 billion compared to the record high in 2014.

Its portion of revenue generated by instant coffee has plummeted from 80 percent to 50 percent.

This trend is not unique, as revenues of Trung Nguyen, its major rival, have stayed flat in the last three years at around VND3.8 trillion ($166.8 million).

According to several market research firms, the market share of caffeine drinks is now being eaten up by energy-boosting alternatives to coffee, like energy drinks and bottled tea.

This trend has helped Vinacafe offset sluggish sales of instant coffee. It introduced the coffee-flavored energy drink under Wake-up brand in 2014. The new product quickly gained popularity in a market dominated by Thailand’s Red Bull, PepsiCo’s Sting and local Number 1.

Revenue of Wake-up 247 has gone up four-fold in three years. Last year, it was recorded at more than VND1.2 trillion ($52.7 million), an in crease of 55.5 percent from 2016. The gross profit of the energy drink was VND557 billion, corresponding to a gross profit margin of 45.5 percent, higher than the figure of coffee by 12 percentage points.

Vinacafe has targeted VND3.1-3.3 trillion in revenue this year, a 5 percent year-on-year decline. However, it aims at higher post-tax profit of VND450-500 billion, up 21-35 percent from 2017.

To achieve these targets, the company will focus on rebuilding its instant coffee brands by relaunching some products with new makeovers. For the energy drink, it seeks to expand production and distribution.

At the general meeting last April, Nguyen Tan Ky, general director of Vinacafe, said the company has changed its distribution model to secure a two-digit growth rate in face of stiff competition.

Its products are now sold through a nationwide network of its parent company Masan Beverage, a wholly owned subsidiary of consumer goods giant Masan Consumer under Masan Group.