Deal focus: Quadria goes shopping in Vietnam

Vietnam’s Con Cung, a retail chain with around 600 stores, has raised USD 90m in private equity funding to open 2,000 more by 2025, while expanding its e-commerce business. The investor is not a consumer-focused or even generalist GP – it’s healthcare specialist Quadria Capital.

Quadria’s view on Con Cung is that, as Vietnam’s largest mother-and-baby distributor, it is much more than a retail play. The idea is that Con Cung is on a path to become an information and services portal for all things related to family health and wellness.

The company’s app already has 1m mums and expecting mums as subscribers. The plan is to connect them with the professionals at the maternity unit of Ho Chi Minh City’s FV Hospital, which Quadria invested in 2017.

Ewan Davis, a managing director at Quadria who led both the Con Cung and FV deals, wants to replicate a partnership model that has worked elsewhere in Asia, notably China. First, establishing a ubiquitous, one-stop category leader on the brick-and-mortar front grows the brand recognition and user base. Then the service network helps deliver more public wellness-oriented goals.

“What we like about retail models is the sheer volume of lives that you’re able to interact with and touch. Millions of customers flow through Con Cung, so there is an opportunity to provide access to greater healthcare-related products, services, and knowledge,” Davis said.

“The skill set to run a business like this is a blend of retail and healthcare. You need to understand what is driving consumer preferences for products and services in terms of health and wellbeing.”

Quadria is not inexperienced in consumer-facing products, albeit slightly further upstream. Last year, the firm invested in diaper manufacturer Nobel Hygiene and drug supplier Encube Ethicals, both Indian companies. Portfolio companies in this vein are expected to facilitate synergies by improving Con Cung’s access to high quality, affordable products.

There will be little margin for error given the level of competition. Regional e-commerce players such as Lazada are active in the mother-and-baby category, and there are several similar chains locally. Perhaps most notably, they include ACA Investments-backed Bibo Mart, which has a smaller footprint of about 150 stores but some 15,000 stock-keeping units versus Con Cung’s 2,000.

Rapid rollout

Con Cung’s strategy appears to be to establish dominance through an overwhelmingly rapid and thorough store expansion; it is already adding locations at a rate of more than one per day. This is being supervised in part by Robert Willet, who has joined the Con Cung board alongside Davis.

Willet is a former CEO of Best Buy International and global managing partner of Accenture’s retail practice. He is also recognised as one of the key figures in the success of electronics retailer Mobile World, arguably private equity’s most successful retail story in Vietnam to date.

“There’s a very scientific way in which sites for new stores are selected according to criteria in terms of location, proximity to transport, footfall, proximity to competitors, the demographics of the neighbourhood,” Davis said.

“The whole process is coordinated by technology, and that really is an enabler for scale in a systematic, controlled fashion. Getting all the real-time data and feedback from our store openings tells us whether we’re on the right track and whether we need to adjust our plans.”

Quadria is also tracking several structural tailwinds, including shifts toward premiumisation and more organised retail, as well as improved awareness around paediatrics and uplift in online shopping. Con Cung’s target market is said to be worth USD 700m currently and on track to hit USD 1.5bn by 2025.

The thesis is also underpinned by the notion that there has been a generally greater interest in preventative healthcare and wellness since the onset of the pandemic. But the question remains: Does this necessarily translate into increased retail activity in the mother-and-baby space specifically?

“Our like-for-like sales are growing strongly ahead of the market. It’s hard to distinguish what is COVID-driven and what is not, but undoubtedly, a portion of overall growth in consumer spend is being driven by greater awareness,” Davis said.

“If there was some amount of discretionary spend as to whether people would or wouldn’t buy extra vitamins or supplements to reinforce a baby’s immune system, for example, I suspect they are choosing to spend that money.”

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• Topics
• Southeast Asia
• Healthcare
• Consumer
• Expansion
• Vietnam
• Quadria Capital