Marketing Random

Ngoc Nghia Plastic withdraws investment from the food market?


Ngoc Nghia Plastic (NNG) has recently decided to transfer all 8.1 million shares (40.5% of charter capital) in Hong Phu Food Joint Stock Company to an individual, so the parent company NNG has withdrawn. All stakes here.

Ngoc Nghia Plastic (NNG) has decided to transfer all 8.1 million shares (40.5% of charter capital) in Hong Phu Food Joint Stock Company to an individual with a total value of 810 million VND. This price corresponds to only 100 VND / share of Hong Phu Foodstuff. Ngoc Nghia Plastic and its member companies hold 98% shares in Hong Phu Foodstuff, in which the parent company Ngoc Nghia Plastic holds 40.5%.

Hong Phu’s products on the market today are sauces branded Kabin and Thai Long, but this segment is facing fierce competition from Massan. Although, when establishing Hong Phu’s factory with an investment value of up to 20.6 million USD, it was the largest factory in Vietnam, but the products made still could not capture Massan’s “huge” market share. According to 2016 data, Masan holds 63% market share in fish sauce and 70% market share in soy sauce.

So NNG’s divestment is easy to understand to avoid this business becoming a burden for businesses.

Ngoc Nghia is famous for producing PET bottles, which are auxiliary products supplied to wholesale customers. As food is aimed at the end-consumer, a different approach will be required. Therefore, although Ngoc Nghia has also spent a lot of costs on advertising, it seems that the message of high quality sterile fish sauce has not yet reached the majority of consumers. According to a quick survey by the researcher, housewives often use Phu Quoc, Hong Hanh, Chinsu, De Nhat … and almost a few people hear and remember the word “sterile” of Kabin fish sauce.

Ngoc Nghia Plastic withdraws investment from the food market?

While Hong Phu’s communication and promotion were ineffective, the Company ran into trouble with a distribution problem in Quang Binh in 2012. At that time, an official Hong Phu distribution representative deceived the Dong Hoi small market business involves paying commission when buying and displaying Kabin products. Although it is not actually caused by Hong Phu and the Company has acted as a representative to overcome the consequences, compensate for damage, but choosing the wrong distributor and not being able to control this system will definitely cause them to lose. point in the eyes of the small business.

Thus, the two most important points in bringing products to consumers are the distribution and advertising system, and the subsidiary in the food segment of Ngoc Nghia seems to have not been successful.

The market is limited, so Masan’s market share increase means a series of other fish sauce businesses to narrow production, or even close. Even large enterprises like Unilever, despite bringing Knorr Phu Quoc fish sauce first, but also quickly overwhelmed by Masan’s products. Therefore, it is not too surprising that “rookie” like Hong Phu has suffered constant losses since its establishment. Choosing an industry that is not strong and must also have to face with many big men is a “brave” decision of Ngoc Nghia.

From 2010 to the first half of 2017, the food segment of Ngoc Nghia Plastic brought in a total revenue of more than 2,100 billion VND but had a loss of nearly 1,200 billion VND. This makes the effort from the plastic industry as “wild car sand truck” and Ngoc Nghia Plastic only profit a few tens of billions per year. In 2016 alone, the company’s profit was only nearly 7 billion dong, by 2017, it was only 10 billion dong.

Nguyen Long
* Source: Business Forum

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