Vietnam’s iconic enterprises of old struggle past 60

Living through more than 60 years of history, many famous Vietnamese brands are now struggling to retain their market share and expand business activities.


Vietnam’s iconic enterprises of old struggle past 60, vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news

Once Vietnam's foremost shoe manufacturer, Thuong Dinh Footwear now struggles to retain its few loyal customers



At the end of 2016, Thuy Ta Ice-Cream had contributed more than half of the total revenue of Thuy Ta JSC. The business saw a growth rate of 6.3 per cent in revenue and grew by 19 per cent in profitability compared to the previous year. However, against the business results of five years ago, Thuy Ta Ice-Cream has achieved no growth.

At the age of 60, Thong Nhat Match JSC—the company holding the biggest absolute market share in the production of matches in Vietnam—also report similar prospects. In 2016, the number of matchboxes sold by the company was only 109 million units, down three million compared to 2015.

Its business performance has been in decline after sales have started dropping many years ago. The total sales of matchboxes in 2016 dropped by six million compared to 2014 and nearly 30 million compared to 2013. Thus, the company’s output has decreased by 40 per cent in the span of eight years.

Another brand struggling to survive is Thuong Dinh Footwear. Despite the fact that the company once provided essential products to almost every family across the country, currently, it has been steadily disappearing from big cities, giving up room for foreign brands.

Profit margins have dropped to a record low, to under 1 per cent. Profit in recent years has been hovering around the VND1-2 billion ($44,053-88,106) threshold, even though the company had been traditionally recording a revenue of hundreds of millions of dollars.

From a popular brand, Thuong Dinh Footwear has fallen to rely on smaller markets, mainly focusing on a safe segment to serve a small number of loyal customers.

In fact, Thuy Ta Ice-Cream, Thong Nhat Match, and Thuong Dinh Footwear are some of the few brands that “once dominated” the domestic market with their almost absolute power. However, after Vietnam started opening its market to foreign competition, these brands have failed to maintain their positions and are now facing a period of decline and struggle to keep their heads above the water.

Of the three, Thuy Ta Ice-Cream is perhaps the oldest brand. Established in 1945 and famously associated with Thuy Ta Restaurant on Hoan Kiem Lake, Hanoi, this once hugely popular ice-cream company had become the core business of Thuy Ta JSC, in addition to other areas, such as restaurants or service provision.

At the early stages of its establishment, due to difficult economic conditions and the low income level of the population, Thuy Ta only focused on producing cheap ice-cream products. Its main products were frozen ice-cream with traditional flavours.  In the late 90s, Thuy Ta started setting up industrial manufacturing production lines, firstly with the construction of a production plant based on Italian technology which aimed at producing one million litres of ice-cream per year.

However, the emergence of “new-born” rivals such as Unilever’s Wall's Ice-cream and especially the growth of two other competitors that rule the market at the moment, Kido Foods and Vinamilk, have significantly changed the playing field for traditional businesses like Thuy Ta. The diversity of products and product segments posed major difficulties to the brand.

The revenue of Thuy Ta Ice-Cream over the past five years has been hovering around VND50 billion ($2.2 million) per year. Compared with the constant 80-per-cent growth rate of its “new-born” competitor in the ice-cream segment, Kido Foods, since 2013 and its 2016 sales hitting VND1 trillion ($44.05 million), Thuy Ta Ice-Cream seems to have been “stuck in a low gear.”

While other businesses are continuously thriving, the influence of this traditional brand has gradually diminished and it now only serves as a pleasure filled with nostalgia for citizens when visiting Hoan Kiem Lake.

Thuong Dinh Footwear’s story follows the same pattern. In the early 90s, this shoe brand dominated the market, providing indispensable products to every household. The image of a pair of cloth shoes with green stripes on plastic soles was familiar to many Vietnamese consumers.

However, the heyday of Thuong Dinh Footwear only lasted until the early 21st century. The signing of the ASEAN Free Trade Area (AFTA) and Vietnam’s participation in the World Trade Organization (WTO) were some of the turning points for this traditional brand.

Thailand and other neighbouring countries are hastily expanding their presence in Vietnam, along with foreign giants such as Nike or Adidas, and have completely beaten Thuong Dinh Footwear in big cities, where consumer taste always changes quickly.

At the moment, the most appreciated asset of Thuong Dinh Footwear is probably its valuable property portfolio. The company owns a lot of accessible and well-positioned lots. Of these, the main factory and warehouses are located at a prime location in Thanh Xuan district, Hanoi, with an area of ​​over 36,000 square metres.

According to Hanoi’s future planning, it is possible that by 2019 Thuong Dinh Footwear will have to move to the suburbs. These land assets can bring a major surge in the company’s profits, multiplying the few billion dollars of profit trickling in from its business activities each year.

At the age of 60, Thong Nhat Match JSC is in the same boat. Challenges threatening the company have emerged in recent years, as matchboxes—once an indispensable item in any household—were gradually replaced by more convenient and modern products, such as lighters.

In a document sent to shareholders, the Board of Directors of Thong Nhat Match JSC said that the company’s main products—a variety of box matchboxes—are heavily influenced by the purchasing power of consumers and the availability of other substitute products.

“Matches are a common consumer product with a low degree of tradability, low value, and other substitutes. The decline in consumption is an obvious consequence of the fact that matches are being replaced by all kinds of lighters,” said the board of directors.

Thong Nhat Match JSC has invested in a wide range of alternative products, such as lighters, after it saw the downward trend in the market demand for its core products. However, the initial efforts of the 60-year-old brand to enter this new product segment also faced numerous challenges.

Conventional spark type gas lighters produced under the Thong Nhat brand, which were launched to the market two years ago, each priced at VND2,000 ($0.088), only reached sales of 10 million units in 2016. The total sales of this product were merely equivalent to about 12 per cent of the company target of 85 million units as planned from the beginning of the year.

The stories of Thuy Ta Ice-cream, Thuong Dinh Footwear, and Thong Nhat Match are just one small part of the big picture portraying the struggle of traditional Vietnamese brands amidst accelerating international integration.

Poor flexibility in business operations, a lack of capital for investment, and the rigid management mechanism of state-owned enterprises have resulted in these formerly market-leading companies quickly falling behind the intense competition posed by “new-born rivals.”

VIR

Vietnam’s iconic enterprises of old struggle past 60, vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news
 
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