This July, the Hong Kong and London-based conglomerate Swire Pacific signed an agreement to purchase Coca-Cola’s bottling and distribution businesses in Vietnam and Cambodia for US$1.015 billion.
The acquisition, which is scheduled to complete in the next six months, brought back vivid memories of Coke’s attempt to buy THP back in 2012. We were offered $2.5 billion for our company.
We turned it down.
This is not what Coke had been expecting at all. As I wrote in the book Competing with Giants, their senior management viewed us as David to their Goliath.
They were the giant multinational company and we were the much smaller but fast-expanding national operator. They wanted to use us as springboard to increase their market share across Vietnam, as well as neighbouring Cambodia and Laos.
But as anyone who understands the biblical parable knows it is not size that counts. Local knowledge, commitment and passion are what matters.
THP has all three, whereas Vietnam was just another market for Coke. This is why we are still Vietnam’s most profitable soft drinks company and they are not.
Recent financial data shows that our net income was triple the VND 838 billion (US$32 million) that Coke made in 2020. It is a similar situation where Suntory Pepsi is concerned.
Coke has been trying to crack Vietnam since 1994. They were one of the first US companies to set up operations after North America’s then President, Bill Clinton, lifted economic sanctions. But it took them almost two decades to even turn a profit.
By contrast, Swire Pacific understands Asia well. It sees “significant opportunities” in Vietnam because of the country’s size, rising wealth and demographics.
We could not agree more. Yet while Swire has regional experience its management does not necessarily understand Vietnam.
The acquisition by their subsidiary Swire Coca-Cola is their first one in South East Asia’s beverage sector. So while we welcome the competition, we do not fear it.
THP is not only more profitable than international competitors in Vietnam but also enjoys far higher profit margins. There are many reasons why.
One of the main ones relates to our distribution network. We have spent many decades building it up so that we reach all parts of the country through every sales channel.
Our marketing budget also achieves far more bang for the buck because we understand our customers and how to get through to them. In addition, there are plenty of studies showing how and why consumers prefer domestic brands.
When a country first rises up the income scale, it is often foreign brands, which do well. They confer a visible symbol of affluence on the people who can afford them.
This reverses once countries hit middle-income status and beyond. This is when consumers take pride in local brands. Their success reinforces what the country as a whole is achieving.
We are all very proud of what THP’s warriors have achieved in the decade since Coke tried to acquire us in 2012. I know that we will still feel the same way one decade from now and the many beyond that.
As our sixth core value puts it “Today is better than yesterday but not as good as tomorrow.” Let’s all raise a glass of a healthy beverage to that!!
