Strange events surround instant coffee market

When 2015 began, Vinacafe Bien Hoa’s board of directors released news that excited company’s shareholders: it became the only supplier of coffee to be served at Vietnam Airlines’ flights.

Vietnam Airlines now holds the biggest market share in the domestic market and provides flights on many international air routes. Therefore, becoming a partner of Vietnam Airlines is what any business wants.

“This is the quickest way for anyone to approach the international market,” Nguyen Tan Ky, CEO of Vinacafe Bien Hoa said at that time, adding that the golden opportunity would pave the way for the company to go ahead. However, just three months later, Vinacafe Bien Hoa’s shareholders felt disappointed when they were informed about the unsatisfactory business result. 

The revenue increased modestly by 5.3% in the first quarter of 2015 to VND481 billion, while the profit was VND5.56 billion only, or just 7% of the same period of the year before. This is a record low profit Vinacafe Bien Hoa has reported since it listed shares on the bourse.

The business result got even worse after the second quarter. The finance report showed that net turnover in the first half of 2015 was VND1.088 trillion and the pretax profit was VND33 billion, which was just equal to 20% of the same period of 2014.

By the end of the third quarter, Vincafe Bien Hoa had earned VND88.2 billion in pretax profit. The remaining time of the year was not enough for the company to gear up to obtain the targeted turnover of VND4 trillion and profit of VND600 billion.

Vincafe Bien Hoa, with the financial support from Masan Group, once maintained a high growth rate of 30%. However, things got worse in 2015, when a shareholder of Vincafe Bien Hoa withdrew its capital. The Vietnam Coffee Corporation divested 3.41 million of Vinacafe Bien Hoa’s shares, or 13% of the company’s stake.

The story about Trung Nguyen was the opposite. The legal fight between Trung Nguyen’s owner, Coffee King Dang Le Nguyen Vu, and his wife was believed to be the reason behind the supply interruption of G7, a Trung Nguyen instant coffee product. 

The bad news about G7 was believed to push Trung Nguyen against the wall, because instant coffee brings the largest profit to the conglomerate.

However, this did not happen. G7 still sold well and made up considerable proportion to the conglomerate’s revenue.

As such, while the internal conflict was thought to cause difficulties for Trung Nguyen, it has done well. Meanwhile, the good news cannot help Vincafe Bien Hoa develop.