Family-owned business Tan Hiep Phat recorded an impressive net profit of VND 3,300 billion in 2019, nearly equivalent to its rivals Suntory PepsiCo Vietnam and Coca-Cola combined

With 100 dong in revenue, Tan Hiep Phat profits up to 36 dong while Pepsi profits only 15 dong, Vinamilk profits 23 dong.

With the landscape of soft drinks becoming increasingly competitive, most players introduced new product developments as they looked to stress the uniqueness of their products. Having been competing fiercely with each other domestically, the 3 FDI giants listed are Suntory Pepsico Vietnam, Coca-Cola, URC and 2 domestic players Tan Hiep Phat Beverage Group, Masan Group.

Suntory Pepsico Vietnam’s success is thanks to its wide portfolio of popular brands in the soft drinks market, such as Aquafina in bottled water, Tea+ in RTD tea, Twister in juice, Sting in energy drinks, and Pepsi, 7-Up and Mirinda in carbonates. Pepsi has outperformed revenues in recent years, reaching more than 18,300 billion in 2019 – an increase of 2,300 billion compared to 2018, followed by Coca-Cola (VND 9,300 billion) and Tan Hiep Phat (VND 9,200 billion).

In the course of time 2014-2017, despite the new factory Number One Ha Nam coming into operation, the revenue of Tan Hiep Phat slowed down at around VND 7,000 billion per year due to the scandal which accused its product of containing a fly. However, this business regained its growth momentum from 2018 when the Number One Chu Lai factory added nearly VND 1,400 billion in revenue.

Another giant from the Philippines, in 4th place, also pursued fiercely with more than VND 7,000 billion in sales. There are no official statistics but the 5th place is likely to belong to Masan Consumer. Masan Consumer’s beverage segment revenue in 2019 reached nearly VND 5,600 billion, of which VND 3,500 billion came from bottled beverages (mineral water, energy drinks…) and the rest came from instant coffee, cereals.

Other large beverage businesses generally have a much smaller scale such as La Vie (Nestle) with VND 3,000 billion in revenue, Kirin Interfood reaching 1,600 billion, Red Bull reaching 1,000 billion…

On the one hand, Suntory Pepsi outperformed revenues, which are as high as those of Coca-Cola and Tan Hiep Phat. On the other hand, Tan Hiep Phat’s profit margin far exceeded that of Pepsi and Coca-Cola combined.

The pre-tax profit of Tan Hiep Phat was reported at VND 3,00 billion, while the total profit of the two big FDI companies was VND 3,700 billion. In terms of EAT, the gap is less than VND 200 billion. 

The Tan Hiep Phat complex’s profit has increased steadily over the years, but in 2019 it has jumped 65% from 2,000 billion to 3,300 billion due to 2 factors: (1) cost of goods sold, possibly the drastically decreased price of raw materials, and (2) contributions from the new Number One Chu Lai factory.

When starting operations in 2018, Number One Chu Lai still lost VND 41 billion, but next year it reached nearly 1,400 billion in revenue and 489 billion in profit. Besides, the profit of Tan Hiep Phat company also soared from VND 1,200 billion to nearly VND 1,950 billion.

“Comfort is better than pride” tradition and the trillion ambition with real estate 

Specifically, with 2,800 billion dong of after-tax profit multiplied by a P/E of about 20 times, Tan Hiep Phat’s business valuation is about VND 56,000 billion, equivalent to USD 2.4 billion. Mr. Tran Qui Thanh and his family, who own 100% of the Tan Hiep Phat system, are the brightest names on the list of billionaires.

Besides, there are also trillions of profit that have been withdrawn to invest in other sectors. In the last 6 years, after-tax profits of Tan Hiep Phat, Number One Ha Nam and Number One Chu Lai reached VND 8,700 billion. Almost all profits were immediately redistributed to the family shareholders.

The huge profits regularly withdrawn may be the main reason for Mr. Tran Qui Thanh and other related parties to keep savings deposits of up to nearly VND 6,000 billion.

More than a year ago, Mr. Thanh’s family surprisingly established many real estate companies with a total registered capital of nearly VND 19,000 billion. Besides, this business family is also said to have bought land in prime locations. Mr. Thanh also used to share about the capital source and land fund which are the two biggest advantages of Tan Hiep Phat. According to Mr. Thanh, experience and knowledge in the real estate sector is gradually accumulated, awaiting the right opportunity to come.

In 2020, Ms. Tran Uyen Phuong, Mr. Thanh’s daughter, also spent about 350 VND billion to buy 22% shares of Yeah1 Group. This deal partnership is expected to take advantage of Yeah1’s advertising system to boost sales for Tan Hiep Phat in the future.

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