Cau Dat Farm – The Coffee House: New scenarios


The Coffee House acquisition of the coffee division of Cau Dat Farm Company only means another meaning than investment value?

The Coffee House – TCH has announced the acquisition of the coffee department of Cau Dat Farm Company. In the context of continuing to expand the chain of systems, the act of acquiring Cau Dat Farm is a decision that makes many people wonder.

According to information from TCH, from January 2018, Cau Dat Farm’s coffee department officially merged into TCH. Cau Dat Farm is owned by Seedcom, a company funded by Mr. Dinh Anh Huan (former co-founder of The Gioi Di Dong), which grows coffee, tea and vegetables. TCH only buys the coffee growing department, which includes 33ha of land, brands and factories. Mr. Nguyen Hai Ninh, founder of TCH, said that the transaction is done entirely in cash.

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The value of the deal is not disclosed, but the amount is certainly not small. In the context of TCH continuing to expand domestically, opening the first coffee shop in China and announced to spend 100 billion VND opening 40 Ten Ren tea franchises (Taiwan) in 2018, decided to buy Cau Dat Farm more mysterious when Mr. Ninh affirmed: “The company has no intention of listing on the floor in the near future”.

Nguyen Hai Ninh, founder of The Coffee House.

Mr. Ninh shared his wish to export coffee. In fact, Cau Dat currently exports to US partners in the form of outsourcing, but exporting under his own brand, Mr. Ninh admits it still takes time and TCH has only placed the first bricks.

Bringing Cau Dat Farm coffee products to the market in the form of FMCG is also not part of TCH’s plan. In fact, TCH is also inexperienced and cannot build a distribution network in a short time to serve this purpose.

Until now, TCH’s main revenue still comes from coffee retail. The company currently has 80 stores nationwide. The coffee retail market is a trinity race of the three largest chains, Highlands Coffee, Trung Nguyen and TCH. Highlands Coffee, after being acquired by Jollibee Group (Philippines) in 2013, continues to expand and currently leads with more than 150 branches nationwide.

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In Trung Nguyen, so far the business that generates the biggest revenue is still coffee export to China; The retail segment has been quite quiet recently and shows signs of slowing down when some premises have been sold to competitors.

For its part, TCH plans to continue to expand, and is expected to reach 160 stores by the end of 2018. At the same time, the Company will open two more The Coffee House Signature stores. Last year, TCH’s revenue was about 400 billion dong.

According to Mr. Ninh, the number of 2,000 The Coffee House stores in the future is completely possible. “However, we are holding a very small market share. The coffee retail market in Vietnam still has a lot of room to develop ”, said Mr. Ninh. To increase its market share, TCH is investing heavily in online sales and door-to-door delivery. Currently, the Company uses in-house and outsourced delivery teams to make deliveries. Mr. Ninh expects sales from online channels will contribute 20% of revenue by the end of this year.

In the short term, Cau Dat Farm’s coffee source will be used in the global chain. Mr. Ninh said that each day, the Company serves more than 40,000 customers, 40% of which consume coffee, and the chain consumes about 400 tons of coffee annually. It is known that Cau Dat Farm fresh coffee output reached 200 tons per year, is expected to reach 250 tons by the end of this year.

Mr. Ninh admits that with the current consumption volume of TCH, choosing a supplier is more profitable than investing in Cau Dat Farm, because farming is very risky. In terms of business, buying Cau Dat Farm is not beneficial for TCH. “But buying Cau Dat Farm means a lot to TCH for the dream of making coffee properly and writing the Vietnamese name on the map of specialty coffee,” he said.

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There are 2 scenarios for this deal. Firstly, both TCH and Cau Dat Farm have investments from Seedom. In 2014, after selling all his shares in The Gioi Di Dong, Mr. Huan set up Seedcom Investment Fund. This fund has poured capital into dozens of startups, including The Coffee House, Haravan, Giaohangnhanh.vn, Pizza 4P …

In the past time, Seedcom has also merged a number of departments to operate more efficiently, so it does not exclude the possibility of selling the coffee production department to TCH to increase efficiency, while restructuring the portfolio and announced new investments.
The second scenario is for TCH to call capital from investors. Although gross profit in the coffee retail industry is up to 50% but operating costs are very high, it is not difficult to find additional sources of capital in the future.

Acquisition of Cau Dat Farm’s coffee growing division helped TCH become a rare coffee retail chain that owns both production stage in the market and this is a beneficial factor for the Company on the negotiation table.

Cong Sang
* Source: Investment bridge

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