Despite the difficult economy, Kinh Do JSC still sets high growth target and plans to boost revenue by expanding business categories with cautious and stable steps. Mr. Tran Le Nguyen, CEO of Kinh Do JSC, had shared some insight with DTTC on these issues.
Q: What is your opinion on business operations in general and Kinh Do’s in particular in 2012?
Mr. Tran Le Nguyen: 2012 was a year where Vietnamese businesses faced with many challenges and difficulties of the economy. GDP growth rate slowdown, high inflation, diminished confidence and purchasing power of the consumer have caused major obstacles for implementing growth strategies for Vietnamese businesses in general, and Kinh Do in particular.
Therefore, growth rate of most businesses had been insignificant, with many businesses not experiencing any growth at all; many supermarket chains even suffered from negative growth. As for Kinh Do, for the first time in 20 years, the company’s revenue only grew 1%. However, through hard efforts in management and cost rationazing, profit margin still reached the planned target of VND 500 billion despite low sales growth.
This success is due to Kinh Do’s successful efforts in implementing Stage 3,“Profitability through Efficiency”, of the Group sustainable development strategy through activities such as product restructuring, focusing on products with high profitability, reinforcing internal resources, investing in a strong and stable distribution system, effectively improving supply chains, changing the public activities operation method, and improving corporation’s operational efficiency.
Q: Are you optimistic about the business situation in 2013?
- The significant improvements of the market and macro-economy from the last months of 2012 to date may create more favorable conditions for the business. However, Vietnam is still facing many difficulties and suffering the impact from variables such as inflation pressure, if it is not promptly managed and adjusted. Hence, in 2013, Kinh Do will focus on the distribution system for strong growth potential once the economy recovers.
This year, Kinh Do will implement Stage 4, “Profitable Growth”, with a revenue target of VND 5,200 billion, a 21.3% increase from 2012 and a pre-tax profit target of VND 600 billion, a 22.5% climb from 2012.
Specifically, Kinh Do will increase investment based on the “Food&Flavor” strategy, focusing on developing key products and continuing to invest in branding, optimizing the management system and supply chains, while proceeding with some merger and acquisition transactions.
Q: Kinh Do has started partnering with Glico, what is your plan for future development of that partnership?
Up to this point, Kinh Do and Glico have had a successful partnership with certain accomplishments. Kinh Do has built a strong and stable distribution system, which is a requirement for Glico’s luxury product category to survive in Vietnam’s market alongside mass products.
To date, revenue from Glico’s stick snack product category has reached approximately USD 3 million. The distributed product is imported from Thailand but, by agreement, will be produced in Vietnam if sales reach USD 10 million within the next 3 to 5 years.
We have presented a cautious strategic development plan. In accordance with which, this year’s target revenue from Glico’s stick snacks will reach VND 57 billion. With this product category, Kinh Do is not profit-driven in the first year and will only start to take it into account from the second year onward.
As this is a partnership with our strategic shareholder, we will not draw the line at distributing the stick snack product category, but upon its success, will consider developing other categories such as ice cream and dairy products.
Q: How will Kinh Do implement its plan to produce instant noodles, sauces, and cooking oil this year?
If nothing changes, around June, Kinh Do’s instant noodles will be available in the Vietnamese market and dipping sauce is expected to launch in the fourth quarter, our cooking oil project is also being conducted as we speak. Actually, Kinh Do announced the launch of instant noodles and cooking oil to be at the end of 2012, but due to adverse market movements, the executive board considered a 2013 launch to be more beneficial.
With product categories such as instant noodles, cooking oil, and dipping sauce, Kinh Do has invited experts in the field to participate in preference, price, and quality counseling to adapt the product to the consumer’s needs. Currently, the market for instant noodles in the South is about USD 2 billion per year, thus, Kinh Do has plenty of room to develop and we are extremely confident about the success of this project.
Q: Why isn’t Kinh Do focusing on confectioneries instead of expanding to these fields?
Currently, confectionery companies have secured a certain market share so it’s difficult to gain additional market share. If [we] want to grow, the business must expand its business. This year, Kinh Do will focus on our core, which is the food product category.
Our revenue goal for 2013 of VND 5,200 billion is only inclusive of confectioneries, so if products expanded to instant noodles, dipping sauce, and cooking oil, the company’s revenue may reach VND 6,000 billion.
Thank you, sir.
Sai Gon Dau Tu Tai Chinh