Alibaba, Baring Asia back Masan's Vietnam grocery push

The investors will take a 5.5% interest in The CrownX – formed last year through the consolidation of Masan Consumer Holdings and VinCommerce – at a pre-money equity valuation of $6.9 billion. Masan will remain the largest shareholder with 80.2%. An additional $300-400 million is expected to be committed by other investors before the end of the year.

Last month, Korea’s SK Group paid $410 million for a 16.3% stake in VinCommerce, valuing the company at $2.5 billion. The investment was predicated on the development of modern retail operations in Vietnam and the company’s potential as a pioneer of online-to-offline (O2O) services.

This is also a feature of the latest deal as The CrownX prepares to work with Lazada, Alibaba’s Southeast Asia e-commerce platform, on its digital presence. VinCommerce will become the preferred grocery retailer for Lazada in Vietnam, and its offline stores will serve a dual function as pick-up points for online orders. In addition, VinCommerce and Lazada will share knowhow and explore logistics synergies with a view to bringing down costs.

Grocery accounts for 50% of Vietnam’s retail market and 25% of consumer wallet share, yet online penetration is still nascent, according to a statement. Masan’s goal is for online gross merchandise value to account for at least 5% of The CrownX’s total sales value “in the upcoming years.”

VinCommerce comprised 123 VinMart supermarkets, 2,231 VinMart+ minimarts, and an agriculture business with 14 farms as of the end of 2020. There is also a VinID super app with 8.7 million customers. Masan acquired the business to complement the branded food and beverage assets of Masan Consumer.

VinCommerce was losing over $100 million a year, according to Masan’s 2020 annual report, but the deal was essentially a bet on modern retail. The company projects that Vietnam will be the fastest-growing modern trade grocery retail market in Asia over the next decade as the “modern” share of overall retail sales rises from 8% to 50%.

“Modern retailers will eventually dictate the consumer market. High modern trade penetration narrows the gross margin gap between FMCG [fast-moving consumer goods] players and modern retailers significantly,” Nguyen Dang Quang, Masan’s chairman, said in the report. “The shift of profits and consumer power to modern retailers will accelerate over the next decade as Vietnam modernizes.”

Over the next five years, the company wants to create an ecosystem capable of serving 30-50 million consumers. It will comprise 10,000 self-owned stores and 20,000 smaller franchise partners, an efficient supply chain, a portfolio of private label brands, and an O2O grocery model. The CrownX is expected to deliver $7-10 billion in revenue by 2025. Early initiatives included closing 700 VinMart+ outlets and redesigning the supply chain.

Janice Leow, a managing director at Baring, said that The CrownX could become Vietnam’s largest consumer ecosystem. She added: “As a long-term investor in the country, we think Vietnam has a long runway for growth supported by strong macroeconomic tailwinds and attractive demographics. The CrownX also has tremendous digital potential, particularly in e-commerce and data analytics.”

Masan refers to this ecosystem as a “point of life” platform built on grocery and financial services. One target for 2021 is to offer financial services – brick-and-mortar banking and digital payments – through at least 50% of The CrownX’s stores. One of Masan’s other subsidiaries, Techcombank, is the likely financial services partner. It also owns an integrated branded meat business that sells its products via 1,300 VinCommerce locations.

Warburg Pincus has a stake in Techcombank, which went public in 2018, and KKR is an investor in the meat business, now known as Masan MeatLife.

Masan Consumer generated VND23.9 trillion ($1 billion) in revenue last year, while VinCommerce contributed VND30.9 trillion. The businesses contributed VND9.9 trillion and VND5.2 trillion, respectively, in gross profit. Masan’s overall revenue and gross profit were VND78.9 trillion and VND17.9 trillion, both substantial year-on-year increases following the addition of VinCommerce. However, net profit dropped 78% to VND1.4 trillion due to rising sales costs.

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• Topics
• Southeast Asia
• Consumer
• Expansion
• Technology
• Vietnam
• Alibaba Group
• Baring Private Equity Asia
• Growth capital