Simons Trading Research

Author: simonsg   |   Latest post: Wed, 26 Feb 2020, 3:51 PM


Food Empire - Sipping Vietnam’s Coffee Culture; Still BUY

Author:   |    Publish date:

  • Maintain BUY, 18% upside to our target price plus 2% yield.
  • Visiting Food Empire’s second largest market, Vietnam, early this week, we witnessed the high visibility of its Café Pho products vis-à-vis its competitors in Ho Chi Minh City. With an extensive network of sales representatives and a strong marketing team, we believe Café Pho should be able to grow its market share, while revenue and margins could be further improved with the increased penetration of new products.

Success of the Vietnam Market

  • Vietnam is FOOD EMPIRE (SGX:F03)’s second-largest market, contributing 20% to topline. While the group has been in Vietnam since 1993, the business only took off after it introduced Café Pho, a premium 3-in-1 ice coffee mix in 2013. The business turned profitable in 2015.
  • Today, with one single product, Food Empire is among the Top 5 players in Vietnam’s instant coffee mix industry based on volume share. It is also a Top 3 player based on value share.

Extensive Network of Sales Representatives Helps Drive Sales

  • Café Pho is largely sold in sundry shops and markets, as general trade constitutes 80% of the retail market in Vietnam. While the group uses third-party distributors to reach retailers, it employs 540 sales representatives across the country to bridge sales between distributors and retailers. These representatives visit the retailers on a weekly basis to ensure the retailers’ timely restocking. They also help direct the retailers’ shelf placements to ensure maximum visibility of Café Pho products.

High Visibility of Café Pho Increases Its Mind Share

  • During our visit, we noticed that Café Pho is widely available in the general trade. The product could be easily found in sundry shops or market stalls right next to each other (see Figure7 in attached PDF report). In addition, Café Pho is one of the few instant beverage products that focuses on selling in sachets aside from selling in bags and boxes (see Figures 3-4 in attached PDF report).
  • As Café Pho is a premium product with a higher price point, selling in sachets allows consumers with lower disposable income to buy at smaller quantity and lower cash outflows. Food Empire’s sales representatives also encourage retailers to hang strings of Café Pho sachets from a rod across the shop’s ceiling, which again raises the product’s visibility (see Figures 5-6 in attached PDF report).

Rolling Out More Products

  • Following the success of Café Pho, the group has also launched a few new products and product variants – Café Me (hot coffee mix), Café Ket (mass market 3-in-1), Café Pho Nha Lam (even higher price point 3-in-1), and Café Pho Den Da (2-in-1) to increase sales. It is also venturing into the energy drink segment in 2020.
  • While revenue contributions from these products are small, we believe they could capitalise on Food Empire’s existing distribution and sales representatives network and help to improve operating leverage and margins.

Source: RHB Invest Research - 17 Jan 2020

Share this
Labels: Food Empire

Related Stocks

Chart Stock Name Last Change Volume 
Food Empire 0.715 -0.01 (1.38%) 1,050 

  Be the first to like this.


119  165  161  658 

Top 10 Active Counters
 Rex Intl 0.199+0.004 
 Genting Sing 0.83-0.01 
 SingTel 3.07-0.01 
 BreadTalk 0.76+0.115 
 Golden Agri-Res 0.2050.00 
 Amplefield Ltd 0.046+0.002 
 AusGroup^ 0.0440.00 
 YZJ Shipbldg SGD 0.975+0.005 
 Mapletree Com Tr 2.20-0.03 
 Net Pacific Fin 0.025+0.001 
Partners & Brokers