FOOD AND BEVERAGE INDUSTRY Positive outlook
OVERVIEW FOOD AND BEVERAGE INDUSTRY IN 2020
Vietnam among Asia's most attractive F&B market According to BMI, Vietnam has become one of the most attractive food and beverage markets globally (ranked 10th in Asia) in 2019.
Revenue of food and beverage 2018-2024 billion dong
Source: BMI, Euromonitor PHFM collect
Total revenue of food and beverage products reached VND 975,867 billion (+3.8% YoY) in 2020. And the contribution of the food and beverage industry to GDP was approximately 15.8%.
1,600,000 1,400,000 1,200,000 1,000,000
Food and beverage spending currently accounts for the highest proportion in the monthly expenditure structure of consumers (about 35% of spending).
800,000 600,000 400,000
200,000 2018
2019
2020
Sales of food
2021F
2022F
Sales of beverage
2023F
2024F
It is estimated that there will be about 17 million middle-class households in Vietnam by 2030. Vietnam is expected to become the third-largest urban market in terms of consumer numbers and the fifth largest in terms of total spending in Southeast Asia by 2030.
OVERVIEW FOOD AND BEVERAGE INDUSTRY IN 2020 % YoY FMCG Value Change 35% 30% 25% 20% 15% 10% 5% 0% -5%
Social distancing
Source: Kantar, PHFM collect
F&B industry holds positive growth thanks to essential products in Covid-19 pandemic
The outbreak of Covid-19 pandemic caused the Vietnamese people to tighten their spending.
Urban
Rural
% Value change in consumer spending of Vietnamese people in 2020 Source: Kantar, PHFM collect Number of goods/purchase occasion Average price/unit Spending/purchase occasion Number of transactions
Customers cut back on some products like beer, wine, and soft drinks. Instead, they increase their shopping and stockpiling of essential foods at home during the social distancing period. YoY Value Change across Sectors Source: Kantar, PHFM collect
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% FY 2019
FMCG spending 0% 2% 4% 6% 8% 10% 12% 14% Sau giãn cách xã hội
2020
2019
YTD 2020
Post MCO
Dairy products
Beverage
Packaged food
Personal care products
Fast Moving Consumer Goods (FMCGs) market recorded double-digit growth in the first 10 months of 2020 in both urban and rural. In particular, in March and April - social distancing period, the urban sector posted a spike of 31% and 22%, then decreased to 7% in December. The rural sector also witnessed a 20% robust increase in the period from March to April, then dropped to 5% in December.
Home care products
3
OVERVIEW FOOD AND BEVERAGE INDUSTRY IN 2020 Impact of Covid-19 pandemic on production of enterprises Source: VietnamReport, PHFM collect
01 Logistic problems
05
02 Product demand is low during the epidemic period
03 04 Labor shortage
Very serious impact
Moderately severe impact
F&B industry
DIFFICULTIES OF FIRMS IN F&B INDUSTRY
Breaking the supply chain of raw materials
60% 50% 40% 30% 20% 10% 0% Negligible impact
Food industry
Beverage industry
F&B industry outlook in 2H2020 Source: VietnamReport, PHFM collect
Failure to ensure health and safety at work 35%
60% 5% More difficult
No impact
No change
Most of the manufacturing companies in F&B industry have weak financial competence. Therefore, they faced with a common economic shock caused by Covid-19 pandemic More than 85% of enterprises had difficulty in inventory management, distribution and human resource management in an economic downturn. However, 94.7% of enterprises realized their weaknesses and modified their production structure. Moreover, 68.4% of enterprises applied modern technology in production and distribution to create competitive advantages and enhance the customer shopping experience during the crisis. The recovery time for production and trading of enterprises is forecasted positively with 56.3% of firms estimated to take approximately 6 months, 25% within the next 7-12 months and 18.7% for more than 12 months.
Better
4
DRIVING FORCES FOR GROWTH OF FOOD AND BEVERAGE INDUSTRY 2021
VIETNAM GDP growth could rank second in the region: IMF forecasts Vietnam will be the second fastest growing economy in ASEAN with GDP growth of 6.5% in 2021, higher than the global average of 6% and thereafter recover to 7.2% in 2021
Recover of Household spending from Covid has been well controlled: According to Fitch Solutions, Vietnam's household spending growth rate in 2021 is forecasted to be 7% year-on-year, an increase of 0.8% percentage points compared to last year.
GDP growth forecast 2021
Household spending growth rate
Source: IMF, PHFM collect
Source: Fintch solution, PHFM collect 12.00%
10.00%
10.00% 8.00%
PUSH
6.00%
0.00% Vietnam
Indonesia
ThaiLand
Philippines
Malaysia
4.00% 2.00% 0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F
-10.00% 2020
2021F
2022F
5
DRIVING FORCES FOR GROWTH OF FOOD AND BEVERAGE INDUSTRY 2021 Emerging channel formats continue growing share with a fast pace, which speeds up growth industry % YoY Change across key channels
% Change in total FMCG across channels during Tet (Excluding Gift)
Source: Kantar, PHFM collect
Source: Kantar, PHFM collect
Market share of retail channel Source: Kantar, PHFM collect 120.0%
Grocery store 100.0%
80% Wet market
70%
80.0%
60%
Supermarkets
60.0%
50% Specialized stores
40%
Mini supermarket
20%
8.8%
8.8%
54.0%
52.9%
52.7%
2019
2020
After social spacing
40.0%
30%
20.0%
10%
Online
-20%
8.9%
0.0%
0%
0%
20% 2020
40% 2019
60%
80% -10%
Online
Minimarket Specialty stores Value spend
Hyper& Super
Transaction
Wet market
Stress stores
Wet market
Specialized stores
Cash & Carry
Mini supermarket
Online
Others
Emerging shopping channels, such as online channels, mini supermarkets, and convenience stores, continue to maintain positive growth rates after social distancing. These channels soared more than 20% in 2020 and contributed 30% to FMCG growth.
6
DRIVING FORCES FOR GROWTH OF FOOD AND BEVERAGE INDUSTRY 2021 Manufacturers and retailers change product listings/distribution methods to meet new consumer trends “post-Covid-19” 1. Rise of organic products
VNM pioneers organic milk Organic vegetable growing model of MWG production
2. Increase consumption of fresh food
MSN increases sales of cool meat products
BHX increases sales of fresh products
3. Spend more money on quality products
Prefer cool meat of Meatdeli brand and MSN's highend spice product line, even though the price is 2030% higher than the traditional market.
4. Personalize diet
F&B industry trends 2021
Launching products that attract young people such as energy drinks, bottled milk tea
5. Ecommerce's development
Developing BHX online
MSN cooperates with Alibaba to develop online platform
6. Manufacturing towards sustainability
Manufacturing enterprises such as VNM and SAB are committed to saving energy and protecting the environment
FORECASTING FOOD AND BEVERAGE INDUSTRY GROWTH 2021
Food and beverage industry growth forecast 2021 Source: PHFM estimates 16.00% 14.00%
Purchasing power for essential products such as milk and dairy products, instant noodles, and frozen foods could see double-digit growth in 2021 as household spending increases the well-controlled Covid-19 pandemic in Vietnam. We estimate growth for the food industry in 2021 at around 15%YoY.
12% 12.00%
However, the complicated developments of the Covid-19 pandemic caused many restaurants, bars, and karaoke to temporarily close and large festivals were forced to cancel. This will negatively affect beverage consumption in 2021, especially alcoholic beverages.
10.00% 8.00% 6.00%
We estimate the growth rate of the beverage industry in 2021 at around 2-4%YoY.
4.00% 2.00% 0.00% BMI forecast
Nielsen forecast
PHFM forecast
We forecast the growth of Vietnam's food and beverage industry to reach 12% in 2021. According to BMI and Nielsen, the growth rate of Vietnam's food and beverage industry ranges from 14-15% in 2021.
8
FOOD AND BEVERAGE INDUSTRY OUTLOOK IN THE LONG TERM Vietnam will see flourishing F&B industry in the long term
Food industry could maintain double-digit growth
01
Average annual growth rate of food spending in the period 2020-2024 will reach 11.3%. In the future, consumers will focus on healthy products.
03
02
Alcohol drinks is expected to be resilient in the long-term Beverage spending in Vietnam will expand by an average of 9.5% annually, outpacing volume consumption growth, which is set to expand by 7.5% over the same period.
Growth driver of the non-alcoholic beverage industry – healthy nutritional drinks Revenue of non-alcoholic drinks could grow at an impressive annual average rate of 12.5% by 2020 and 10.5% by 2024. The hot beverage segment will see the strongest growth, benefiting from significant popularity in young consumers.
9
FOOD AND BEVERAGE INDUSTRY OUTLOOK IN THE LONG TERM 1. Food industry could maintain double-digit growth
Net Income
Food Sales Vietnam 2018-2024
billion dong
Source: BMI, PHFM collect
1
22
Household income will increase by about 40% in the next 5 years (20192024)
1,200,000 1,000,000 800,000
Growth of MAC Growth of MAC (middle and affluent class) group in Vietnam is expected to reach 11.4%/year
600,000
Robust performance of the food industry will be sustained by
400,000 200,000 2018
2019
2020F
Bread, rice and cereals Fish and fish products Fresh and preserved fruit
2021F
2022F
2023F
2024F
Meat and Poultry
M&A
Food consumption will continue to see strong growth driven by the increase of purchasing power in the rural area and the enhancement of retail selling model.
5
Oils and Fats Others
Food sales reached VND 738,115 billion (+ 14.7% YoY) in 2020. Average annual growth rate of food spending in the period 2020-2024 will reach 11.3%. In the future, consumers will focus on healthy products such as fruits, vegetables, dairy products.
The growth potential of the Vietnamese food industry attracts many foreign businesses.
3
Purchasing power
4
Mass grocery retail The ongoing expansion of the mass grocery retail (MGR) will drive up per capita food consumption levels, provided goods sold through such outlets remain competitively priced
10
FOOD AND BEVERAGE INDUSTRY OUTLOOK IN THE LONG TERM 2. Alcohol drinks is expected to be resilient in the long-term Alcohol drinks market Source: Euromonitor, PHFM collect
billion dong 350,000
6,000
300,000
5,000
250,000
4,000
200,000 3,000 150,000
01
Tourist
Young population 32.5% of the population aged from 20-39
Rising tourist numbers ensuring the prevalence of beer in the alcoholic drinks market
2,000
100,000
1,000
50,000 -
2017
2018
2019 2020F 2021F 2022F 2023F 2024F
Alcohol consumption
04
02
Sales of Alcoholic Drinks
Beer industry could take up to two years to recover to pre-Covid-19 and pre-Decree 100 level. By 2024, spending on alcoholic beverages could reach VND 299,010 billion, with a CAGR for 2020-2024 of 9.5 %. Beer, in particular, is set to benefit and will continue to dominate the alcoholic drinks sector, accounting for the vast majority of volume sales. This sector has been attracting from both local and international brewers.
Wine and spirits consumption is set to average 7.7% and 9.2% annually, over the medium-term
Grocery retail Growing grocery retail
Ecomomic Positive outlook
economic
03
network in Vietnam.
11
FOOD AND BEVERAGE INDUSTRY OUTLOOK IN THE LONG TERM 3. Growth driver of the non-alcoholic beverage industry – healthy nutritional drinks
billion dong
The youth demographic (aged 0-14 years) is an underlying driver of soft drinks consumption
Non-Alcohol drinks Sales 2017-2024 Source: BMI, PHFM collect
50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 2017 2018 2019 2020F 2021F 2022F 2023F 2024F Coffee, teas and other hot drinks
Carbonated drinks
Fruit and vegetable juices
Others
Revenue of non-alcoholic drinks grew at an impressive annual rate of 12.5% in 2020 and could increase by 10.5% in 2024. Carbonated beverages will also see strong sales growth, averaging 11.9% annually over the medium term, from 14.0% in 2020.
Local soft drink manufacturers are now gradually calibrating their portfolios towards healthier and functional beverages
Vietnam's strong economic growth forecast over the next few years will also continue to fuel the demand for higher value beverage products 12
OUTSTANDING ENTERPRISES IN THE INDUSTRY Masan Consumer Holding (MCH) – a subsidiary of Masan Group, specializes in manufacturing essential foods for consumers such as seasonings, packaged foods, beverages, etc. MCH is the short-term growth driver of MSN Group Masan MeatLife (MML) - a subsidiary of Masan Group, specializing in the production of branded fish, cattle, poultry and meat feed (MeatDeli and 3F Viet). MNL strives to develop the chilled meat segment in the long term.
MSN Masan high tech material (MHT) - a subsidiary of Masan Group, owns Nui Phao multimetal mine, exploits and processes minerals, especially tungsten. Vincommerce (VCM) - retail chain of Masan Group with nearly 3,000 Vinmart and Vinmart+ mini supermarkets. VCM is MSN's growth driver in the long term.
VNM
Vinamilk (VNM) - the largest milk producer in the country, provides about 1.2 million tons of milk per year, providing over 60% of consumption demand in Vietnam.
SAB
Sabeco (SAB) - the largest beer, wine and beverage company in the country (40% market share), with products with long-standing famous brands such as Beer 333, Saigon Beer. 13
FINANCIAL INDICATOR OF TYPICAL BUSINESS 2020 Performance Revenue
Forecast 2021
Net Profit
Revenue
Valuation
Net Profit
Code stock Value (b.VND)
YoY (%)
Value (b.VND)
YoY (%)
Value (b.VND)
YoY (%)
VNM
59,636
6%
11,235
6.5%
63,811
7%
MSN
77,218
107%
1,395
-78%
92,553
SAB
27,961
-26%
4,937
-8%
GTN
2,825
-5%
246
KDC
8,323
15%
BHN
7,452 319,372
TOTAL
Value (b.VND) 10,488
YoY (%)
Fair price Price at (VND/ 21/05 (VND/ P/E share) share)
P/B
Upside
-6%
128,000
89,200
25.8
7.8
43%
BUY
20%
3,056 119%
104,500
111,900
43.9
6.3
-6%
HOLD
30,635
10%
4,985
0%
182,900
150,200
26.3
5.1
22%
BUY
3575%
3,122
7%
303
32%
N/A
17,200
27.4
1.1
N/A
N/A
330
59%
11,500
38%
650
96%
N/A
51,200
27.1
1.9
N/A
N/A
-20%
660
26%
5,392
-27%
255
-61%
N/A
61,000
22.4
2.8
N/A
N/A
12%
29,530
-11%
376,387
18%
31,328
6%
18.6
3.7
Ratings definition
Buy = Expected to outperform the local market by >10% Hold = Expected to in line with the local market by +10%~ -10% Sell = Expected to underperform the local market by >10%. Not Rated = The stock is not rated in Phu Hung’s coverage universe or not listed yet.
14
VALUATION
10 9 8
VNM
7
MSN
P/B
6
SAB
5 4
3
BHN GTN
2
KDC
1 0 0 -1
10
20
30
40
50
60
P/E
15
VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY - VNM Fair price: 128,000 VND/share Company profile VNM owns the largest raw milk material area in Vietnam with total number of cows of 155,000 in 2020. VNM is currently the largest dairy producer in Vietnam with 13 dairy factories VNM focused on building a distribution channel with a large coverage
Key Catalyst VNM's domestic revenue is expected to grow by 7% in 2021 thanks to (1) Milk is an essential product to promote health during Covid-19 pandemic; (2) VNM focuses on increasing the number of Giac Mo Sua Viet stores, combined with E-commerce, (3) Launching new products to the market, and (4) Expecting a Covid-19 vaccine to be deployed in 2H2020 helps increase people's consumption spending. Export revenue contributed 15% of VNM growth thanks to the expansion of export markets (Philippines and China). Growth of new business segment (beef cattle) in the long term: VLC invests in a beef farm with a scale of 20,000 cows/year. Investment in beef production and processing is considered an important step, ensuring VNM's growth when the dairy market slows down. Growth buffalo and beef meat could be 6-7%/ year.
2017A
2018A
2019A
2020A
2021F
Net revenue (bn VND)
51,041
52,562
56,318
59,636
63,811
Profit after tax (bn VND)
10,278
10,206
10,554
11,236
10,488
6,355
5,295
5,478
5,311
4,972
9%
-17%
3%
-3%
-6%
14,736
15,087
15,392
16,102
16,501
P/E
32.82
22.66
21.27
18.86
25.75
P/B
14.16
7.95
7.57
6.69
7.76
50%
45%
45%
45%
45%
Financial ratio
EPS (VND)
EPS Growth (%) Book value (VND/per share)
Cash dividend (%)
Price movement compare with Index 60% 50% 40% 30% 20% 10% 0% -10% -20% 21/05
21/08
21/11
VNM
21/02
21/05
VN-Index
Historical valuation P/E 30.0 20.0 10.0 0.0 21/05
21/08
21/11
21/02
21/05
P/E
16
MASAN GROUP CORPORATION - MSN Fair price: 104,500 VND/share Company profile MSN is one of the leading business groups in Vietnam, owning several investment portfolios and business lines of the Vietnam economy. The principal activities of MSN are developing business lines that the Group has invested in.
Key Catalyst Masan Consumer Holding (MCH): MSN indirectly owns 72.7% shares of MCH a leading company in the field of consumer goods. Revenue growth comes from new innovations and premium product lines. Masan MeatLife (MML): MSN indirectly owns Masan MEAT Life JSC (87.9%). Growth driven by deeper market penetration of chilled meat, expansion of processed meat portfolio, and recovery of feed segment Masan Resource (MHT): Group also indirectly owns 86% of MHT - the world's second largest supplier of tungsten. Revenue growth was driven by efforts to combine primary resources with H.C.Stack (HCS)'s deep-rooted tungsten platform and recycling capacity to weather fluctuations caused by commodity price cycles. Vincommerce (VCM): MSN merged with VCM and owns 80% of the shares. EBITDA reached a positive level thanks to effective business model restructuring.
2017A
Financial ratio Net revenue (bn VND) Net Profit After Tax Minority (bn VND) EPS (VND) EPS Growth (%)
Post-
Book value (VND/per share) P/E P/B Cash dividend (%)
2018A
2019A
2020A
2021F
37,621
38,188
37,354
77,218
92,553
2,791
3,103
4,916
5,558
1,234
2,727 11% 13,040
4,561 67% 27,355
4,754 4% 36,597
1,056 -78% 13,634
2,382 126% 16,687
18.54 3.88 0%
19.29 3.22 0%
16.69 2.17 10%
79.1 6.12 0%
43.86 6.26 N/A
Price movement compare with Index 100% 80% 60% 40% 20% 0% -20% -40% 21/05
21/08
21/11
MSN
21/02
21/05
VN-Index
Historical valuation P/E 100.0 50.0 0.0 21/05
21/08
21/11
21/02
21/05
P/E
17
SAIGON BEER-ALCOHOL-BEVERAGE JOINT STOCK COMPANY - SAB Fair price: 182,900 VND/share Company profile Saigon Beer - Alcohol - Beverage Joint Stock Corporation (SABECO) has 26 factories with a total production capacity of over 2 billion liters/year. Sabeco holds the largest market share in Vietnam's beer industry at more than 40%. Beer products of SABECO are exported to 38 countries around the world.
Key Catalyst SAB owns the largest production scale of beer in Vietnam. SAB strives to keep the edges in the context of the gloomy prospect of beer market: The strategies odd SAB include (1) SAB focus on building a highquality beer product line; (2) the Company focuses on growing demand from off-premise channel (including all retail outlets) and developing its E-commerce channel; (3) Diversifying product portfolio for exporting, and (4) Implementing the digital transformation project "SABECO 4.0"
2017A
2018A
2019A
2020A
34,193
35,949
37,899
27,961
30,635
Profit after tax (bn VND)
4,949
4,403
5,370
4,937
4,985
EPS (VND)
6,915
6,143
8,657
7,366
7,369
12%
-11%
41%
-15%
4%
21,165
23,693
34,393
33,082
36,116
P/E
23.02
25.73
19.92
21.6
26.63
P/B
7.52
6.69
5.35
4.96
5.11
Cash dividend (%)
35%
35%
35%
35%
35%
Financial ratio Net revenue (bn VND)
EPS Growth (%)
Book value (VND/per share)
2021F
Price movement compare with Index 60% 50% 40% 30% 20% 10% 0% -10% -20% 21/05
21/08
21/11
SAB
21/02
21/05
VN-Index
Historical valuation P/E 40.0 30.0
20.0 10.0 0.0 21/05
21/08
21/11
21/02
21/05
P/E
18
Analyst certification The report was prepared by Ton Nu Nhat Minh – Analyst – Phu Hung Fund Management Joint Stock Company. Each research analyst(s), strategist(s) or research associate(s) responsible for the preparation and content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to each issuer or security that the research analyst, strategist or research associate covers in this research report, all of the views expressed by that research analyst, strategist or research associate in this research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s), strategist(s) or research associate(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst, strategist or research associate in this research report.
Disclaimer Phu Hung Fund Management Joint Stock Company/Phu Hung Securities Corporation do not hold ourselves responsible for completeness or accuracy of the report. It is not an offer to sell or solicitation of an offer to buy any securities. Phu Hung Securities/ Phu Hung Fund Management and its affiliates, officers, employees may or may not have a position in or with respect to the securities mentioned herein. Phu Hung Securities/Phu Hung Fund Management (or one of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any company mentioned in this report. All opinions and estimates included in this report constitute are based on the assessments of Phu Hung Fund Management as of this date and are subject to change without notice.