Selling bottled tea, Tan Hiep Phat, URC earn billions of profit per year

Gross profit margin of Tan Hiep Phat reached nearly 40%, with pre-tax profit nearly VND 2,000 billion.

Tan Hiep Phat, URC or Suntory PepsiCo – the three big enterprises account for nearly 80% of the $ 1.7 billion market for bottled tea, are also relatively discreet names on the market.

However, the business data of the latest financial years which are newly announced of these three enterprises has somewhat exposed the picture of this high profit industry. A product cost only a few thousand VND, but the revenue of all three enterprises are not less than a few thousand billion VND per year.

TEA+, Trà xanh Không Độ và C2 là ba thương hiệu đại diện cho Suntory, Tân Hiệp Phát và URC trên thị trường trà đóng chai - quy mô ước tính gần 1,7 tỷ USD. Ảnh: Anh Tú

TEA+, Khong Do Green Tea and C2 are three man brands of Suntory, Tan Hiep Phat and URC. Pic: Anh Tú

Founded in 1994, Tan Hiep Phat is a well-known manufacturer of beverages with a wide variety of brands, ranging from bottled tea, energy drink, squash water to soy milk and some other products.

However, most of the revenue of this enterprise comes from the three main products which are Khong Do Green Tea, Dr Thanh Herbal Tea and Number One Energy Drink. Tan Hiep Phat’s eco-system revolves around three main enterprises: Tan Hiep Phat Binh Duong, Number One Ha Nam and Number One Chu Lai. In particular, the revenue comes from the first two enterprises and Number One Chu Lai has just came into operation so it has not generated any business results.

According to the financial reports of these companies, Tan Hiep Phat Group’s total revenue in the recently years was nearly VND 7,000 billion, while Tan Hiep Phat’s parent company ranked first with more than VND 5,300 billion in revenue.

Doing business in non-alcoholic beverages, profit margin of Tan Hiep Phat is also similar to some big companies with a high figure, nearly 40%. In other words, in a bottle of water being sold on the market for 10,000 VND, the average cost of raw materials is only about 6,000 VND.

Nevertheless, Tan Hiep Phat’s business results do not always goes up.

The revenue of Tan Hiep Phat Binh Duong and Number One of Ha Nam system is also stagnating in the two years of 2015-2016 when the company was affected by the “fly lawsuit”. The turning of consumers’ back somewhat affected the revenue of Tan Hiep Phat system in 2016 when it recorded a reduction of more than 15% from 2015 and nearly 20% compared to 2014.

However, as the market share of Tan Hiep Phat increased thanks to the “false step” of URC Vietnam – the opponent clutching the previous market share, the revenue of this enterprise also increased correspondingly. By the end of 2017, Tan Hiep Phat’s revenue has surpassed the pre-crisis times of 2014.

There is a special point in the financial report of Tan Hiep Phat that annual profits are drawn by the business through the form of dividends. The cash flow statement recorded VND1,500 billion of dividends paid to owners in 2016 and 2017.

As a family company, shareholders of Tan Hiep Phat are members of Mr. Tran Qui Thanh’s family. According to the latest data, Tan Hiep Phat has a chartered capital of VND 256 billion, with three major shareholders who are Pham Thi Nu (Mr. Thanh’s wife) and two daughters with a total holding of 99.999%. Number One Ha Nam Company (VND 50 billion of chartered capital) is also similar with Mr. Thanh owning 60% and Ms. Tran Uyen Phuong owning 40%.

Almost surpassed Tan Hiep Phat when this company enters the “fly lawsuit” scandal, URC also has relatively positive results in the Vietnam market. The URC system is located in two major companies which are URC Vietnam (located in VSIP Binh Duong) and URC Hanoi (located in Thach That, Hanoi).

According to the data of Vietnam Industry Research and Consultancy VIRAC, URC Vietnam’s revenue has steadily recorded over VND 4,000 billion with gross profit margin of 22% for the past three years. Meanwhile, URC Hanoi was in charge of the northern market and reached more than VND 1,000 billion in revenue.

However, similar to Tan Hiep Phat, URC is also affected by the crisis. Recently, its products had been contaminating with lead for two major products, C2 and Red Dragon. The impact of this crisis with URC can be seen from the results of the northern market, as sales of URC Hanoi in 2016 decreased more than 35% compared to the previous year. The profit in 2016 was just over VND 180 billion compared to VND 367 billion in 2015.

But despite of the crisis, the foundation of the URC is still abundant. Unlike Tan Hiep Phat, the profits of these two companies were retained for the last three years. Undistributed profitof URC Hanoi and URC Vietnam by the end of 2016 reached nearly VND 3,000 billion.

Suntory PepsiCo, a joint venture between Pepsi and Suntory Corporation of Japan, is now one of the highest revenue earners in the beverage industry. However, unlike Tan Hiep Phat or URC, besides Suntory PepsiCo bottled tea, there are many other key products, especially Pepsi branded carbonated beverages.

Although not playing a key role but with the market share equivalent to URC, turnover of RTD Tea industry of Suntory PepsiCo is not small. Estimated in total revenue of nearly VND 14,000 billion in 2016, the turnover accounted for about 20-25%, approximately equal VND 3,000 billion.