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Vietnam Cold Chain Market 2019 Preview


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Vietnam Cold Chain Market 2019 Preview
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Vietnam Cold Chain Market 2019 Preview

  1. 1. 1Financial Information | Business Information | Market Research INDUSTRY PREVIEW Vietnam cold chain market 2019 Prepared by FiinGroup Aug 2019
  2. 2. 2Financial Information | Business Information | Market Research Content Content Page 1 Market structure and description 3 2 Market size of cold chain industry in Vietnam 4 3 Cold storage in Vietnam 5 – 7 4 Cold transportation in Vietnam 8 5 Market potentials 9 – 10 6 Sector financial performance 11 - 12 7 Profile of a leading player 13
  3. 3. 3Financial Information | Business Information | Market Research Cold chain (storage & cold transportation) is classified as climate control logistics Market structure and Description Source: FiinGroup Logistics International transportation Forwarding Domestic transportation Cold storage Cold transportation Four main types are roads, railways, sea/rivers and air. Local companies dominate this segment, e.g. Vietnam Railways Corp, Vinalines, Vietnam Airlines. In terms of infrastructure, the quality of domestic roads & railways network are poor and inefficient, while shipping lines and airlines are considered time-consuming and costly, respectively. Global logistics companies dominate this segment, including Maersk Logistics, APL Logistics, NYK Logistics, and MOL Logistics. Domestic companies only provide sea and air services. However, they provide very limited international transportation service with top local players including Vinalines and Vietnam Airlines. Warehousing Transportation Other value-added services ICD & CFS services Customs clearance Cold chain Bonded warehouse Packing, Inspection, Fumigation, etc. Container loading & unloading Local companies are very active in this segment. Key players are Sotrans, Vinatrans, Vinalink, Tan Cang Logistics, and Vinafreight. Cold chain is one of the most promising logistics segment for growing in Vietnam thanks to soaring demands from retail, F&B sectors, creating opportunities for both local and international companies to tap in. Demand for other value-added logistics services is increasing. Figure 1: Logistics market structure in Vietnam
  4. 4. 4Financial Information | Business Information | Market Research Cold chain (storage & cold transportation) is classified as climate control logistics Market size of cold chain industry in Vietnam Source: FiinGroup Cold chain Cold storage Cold transportation 600,000+ pallets 700+ refrigerated trucks & terminal tracks US$169 mn Cold chain industry in Vietnam is estimated to size at US$169mn in 2019. Thanks to the development of processing industry in Vietnam and rapid growth of modern trade, cold chain industry in Vietnam is growing quickly. There are two main segments in cold chain industry in Vietnam including cold storage and cold transportation. • Cold storage are used mostly by meat and seafood. Milk, ice-cream and carton packaging also contribute to a high portion of the usage percentage of the existing facilities. The occupancy rate of the cold storage facilities across the industry is estimated at approx. 80%. The market is competitive with 48 cold storages and the majority are located in the South. • Cold transportation becomes a promising market thanks to the incredible expansion of modern trade in Vietnam recently. However, cold transportation market is also competitive and fragmented with many small players due to low investment cost and low technical requirement. Figure 2: Market size(*) of Vietnam cold chain market in 2019
  5. 5. 5Financial Information | Business Information | Market Research Cold storage market can be divided into owned and rented cold storage Cold storage in Vietnam Owned cold storage Rented cold storage DEFINITION PURPOSE KEY PLAYERS CHARACTERISTICS • Owned cold storage is defined as cold storages developed and used by the operators/owners’ internal demand • Rented cold storages are provided by third- party companies (both foreign and local) specializing in cold storage services • Normally operated by local seafood, dairy, FMCG, food processing companies, food distributors or grocery retailers • Located near processing plants and large cities’ CBD. • Usually run by a professional team and have higher quality standards • Serve wide range of customers • Located near major ports • Built to serve in-house demands • Built for commercial/ rental purpose • Hung Vuong, Vinh Hoan, Quoc Viet, West Food • Emergent Cold, Preferred Freezer Services, ABA Cooltrans, Hoang Lai, Phan Duy Within the scope of this preview, our focus is to analyze the situation of rented cold storage in Vietnam Cold storage in Vietnam
  6. 6. 6Financial Information | Business Information | Market Research Rented cold storage market had a total designed capacity of 600,234 pallets in 2018 Cold storage in Vietnam Source: FiinGroup (*) Data takes into account designed capacity of 48 cold storages in Vietnam. It is noted that we do not cover small-scaled cold storages with designed capacity of less than 1,000 pallets. • In recent years, the market recorded the aggressive expansion of both local and foreign players to cold storage segment. Particularly, in 2016, ABA Cooltrans provided full cold chain services with the acquisition of Prolog ETC in Hanoi (designed capacity 15,000 pallets). The market also recorded participation of new players such as SK Logistics, CLK … or expansion of existing players. 600 0 150 300 450 600 750 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Figure 3: Designed capacity(*) of rented cold storage in Vietnam, thousand pallets
  7. 7. 7Financial Information | Business Information | Market Research By geography, rented cold storage market is more developed in the South with 36 cold storages which account for 88% of total designed capacity as of December 2018 Cold storage in Vietnam Source: FiinGroup Figure 4: Cold storage designed capacity by region, 2018 SOUTH • Top rented cold storage providers include foreign-owned such as Emergent Cold, Preferred Freezer Services & Freight Mark; and local such as Hoang Lai, Phan Duy, Hung Vuong & SATRA. This could be explained by the high demand from seafood, especially for seafood export, FMCG manufacturing plants and fruit & vegetables. 36 cold storages 526,364 pallets Truong Sa Hoang Sa
  8. 8. 8Financial Information | Business Information | Market Research Cold transportation in Vietnam is growing quickly and being predicted to remain the growth momentum in the time to come Cold transportation in Vietnam Cold transportation Terminal tractors Refrigerated trucks 11% container throughput via seaport are refrigerated containers Seafood, Meat, vegetable, flowers, ice-cream, yogurt, etc. 700+ refrigerated trucks (bulk) Source: FiinGroup. • Thanks to high demand from products which requires temperature - controlled transportation, cold chain companies as well as logistic companies are investing more and more on this segment to meet the clients’ demand. • Excluding several professionally-managed refrigerated truck providers with large number of trucks such as ABA Cooltrans, Konoike, etc., most of cold transportation companies in Vietnam are operating in small scale. • Given low investment cost and technical requirement in comparison to cold storage, many players penetrated in Vietnam cold transportation. Their business model is to start with one or two terminal track or refrigerated trucks only then gradually expand their truck fleet once the customer base is expanded. • Logistic cooperative is popular in Vietnam. Individuals or household business could register as members of the cooperative and receive order from customers contact with the cooperative. • In some cases, when a company receive orders exceeding their transportation capacity, they will outsource or rent refrigerated trucks/terminal tracks from other companies or cooperatives. Figure 5: Cold transportation in Vietnam, 2018
  9. 9. 9Financial Information | Business Information | Market Research Huge potential for cold chain industry in Vietnam Market potentials 80% demand for cold chain is from Food group 20% from OthersEnd-use sectors Regions Expansion • Demand for cold chain mainly comes from food group, especially for frozen seafood, beef, pork and chicken • Imports: Demand for frozen meat imported from other countries is increasing year over year. Domestic products are more expensive, restaurants, street shops and catering companies tend to use imports, forcing the average price down • Exports: The seafood export turnover doubled from US$4.5 bn in 2008 to US$9 bn in 2018 with a CAGR of 7%. Of that, aquaculture (including 2 main species of shrimp and pangasius) took up 65-70% of seafood export value. • Modern trade: Food safety and busy lifestyle are main reasons for the development of modern trade such as CVS, supermarket, etc. in Vietnam, which resulted in a higher demand on frozen/chilled food and cold chain system for the operation of MT. • Beside traditional products like meat and seafood, dairy products such as yogurt, ice-cream, cream & its related products or pharmaceuticals are anticipated to grow strongly in coming period, which will also boost the demand for cold storage and transport facilities in Vietnam. • In the previous period, cold chain is mostly for the South thanks to the development of seafood industry in this area. Currently, the demand for chilled and frozen food is expected to surge across the country. • The rise in the demand for cold chain services will be led by the expansion of cold chain companies to other cities in the country. 2015 remarked the rise of North market with the new operation of ALS (2,000 pallets), Proship (5,000 pallets) and South Hanoi Cold Storage (6,250 pallets). After one year, the market started to explode thanks to the participation of SK Logistics (10,000 pallets) and ABA Cooltrans (15,000 pallets). More importantly, the expansion of SWIRE in Bac Ninh and establishment of Thang Long Logistics Center together added another 20,000 pallets in capacity to the North market. Mekong Logistics Company, which has plans to expand in markets of potential including Can Tho, Da Nang, Quy Nhon, Binh Phuoc, Hanoi, and Hai Phong. NORTH CENTRALSOUTH COLD TRANSPORTATIONCOLD STORAGE • Thanks to the development of modern trade system in Vietnam, the demand for cold transportation is increasing quickly. The investment cost for cold transportation is relatively lower than cold storage but the profit margin is higher. As a result, cold storage companies are expanding their business to cold transportation services.
  10. 10. 10Financial Information | Business Information | Market Research Zoom in End-use sectors: Demand for cold chain originated from five main sources (i) Seafood (ii) Grocery retail (iii) Fruit & Vegetables, (iv) Meat and (v) Others. Seafood export remains the leading user for cold storage Market potentials Key products Market size Market movement Implication for Commercial Cold chain Seafood “Tra” fish, Shrimp, Tuna US$ 10.52bn Seafood production rebounded in 2018, with rise in both export and import turnover. This sector remains as the major demand for cold chain, high quality requirements, especially for exporting purposes. Food Retail Dairy and perishable food products US$51.4bn Modern retailers are expanding robustly, thanks to the changing lifestyles of consumers The rise of modern trade would entail a hike in demand for cold storages as distribution centers F&V Frozen and canned fruits US$5.55bn Impressive growth for both export and import, mainly from China, Thailand and US markets Demand is expected to increase steadily as export to EU and US markets surges Meat Chilled and frozen meat US$12.50bn Consumption has shifted to frozen and chilled meat due to food safety awareness Demand for cold chain started to heat up as chilled meat products enter the sector Others • Carton packaging for fast-food products • Electronic components • Documents of Insurance companies • Animal vaccines • Etc.
  11. 11. 11Financial Information | Business Information | Market Research The sector yielded outstanding profitability ratios, thanks to growing demand and declining operation costs. Sector Financial Performance Figure 6: Profitability ratios of cold chain segmentation, 2017 Source: FiinGroup Note: The financial performance was calculated based on sample size of 19 companies collected by FiinGroup with 3 year financial data available Capital Structure & Liquidity Ratios 2014 2015 2016 2017 Total Liabilities / Total Assets 0.5 0.4 0.5 0.5 Total Liabilities / Owners’ Equity 0.8 0.6 1.0 0.9 Quick ratio 1.4 1.6 1.4 1.7 Current ratio 1.2 1.3 1.3 1.3 Management Ratios 2014 2015 2016 2017 Account Receivables Turnover 6.8 6.5 6.7 Number of Days of Receivables 53.6 56.3 54.7 Account Payables Turnover 8.3 9.4 9.4 Number of Days of Payables 43.8 38.7 38.7 Profitability Ratios 2014 2015 2016 2017 GPM 10.9% 11.3% 17.8% 17.6% OPM 5.3% 5.8% 10.4% 12.5% NPM 4.7% 4.8% 8.7% 11.1% ROA 7.8% 9.5% 8.3% ROE 11.2% 17.1% 17.2% Cost Structure 2014 2015 2016 2017 %COGS 89.2% 88.7% 82.2% 82.4% %SG&A 7.7% 8.1% 9.7% 9.4% %Financial expense 0.9% 1.1% 2.3% 2.4%
  12. 12. 12Financial Information | Business Information | Market Research Cold transportation and full chain companies yielded impressive profitability, while cold storage providers has been underperforming Sector Financial Performance Source: FiinGroup • Full chain companies have yielded the highest profits among the industry, at 19% NPM compared to 11% of the industry average. These companies are often large enterprises with diverse services in addition to cold chain, including bonded warehousing, customs clearance or loading services. With significant base of customers and expertise, full chain companies like Konoike Vinatrans Logistics are able to control costs thanks to economies of scale, resulting in impressive profitability ratios. GROSS PROFIT MARGIN OPERATING MARGIN NET PROFIT MARGIN Average Cold transportation Cold storage Full chain 24% 12% 27% 18% 20% 7% 19% 12% 19% 6% 17% 11% Figure 7: Profitability ratios of cold chain segmentation, 2017
  13. 13. 13Financial Information | Business Information | Market Research ABA Cooltrans is one of leading cold chain logistics providers in Vietnam Top players • Registered name: ABA Business Solutions Corporation • Head office: F3, 345/134 Tran Hung Dao, District 1, HCMC • Company type: Joint Stock Company • Year of establishment: 2008 • Principal businesses: ABA Cooltrans is the leading service & solutions provider in the field of integrated cold chain logistics, servicing customers on a PAN-Vietnam basis. ABA Cooltrans offers cold chain logistics for wide range of industry including pharmaceuticals, meats, fruits and vegetables, dairy products, seeds and agricultural products and other frozen goods. Company Profiling Products & Service Key Financials Facilities Distribution Center Cold storage Others • Work as a distribution center with tailored ante- room • Implemented at customer’s request • Services: PAXD, BBXD, Central Storage, Packaging, Weighting, Labeling • 24-hour service • Storage temperature ranging from -25 to 25 Celsius degree car upon customer requirements. • Warehouse’s temperature is maintained at a temperature of 5 to 10 Celsius degree for safety purpose during operation • Customized cross- docking service • Blast freezing service: provide blast freezing service with 7 ton per time at the temperature below - 40 Celsius degree • Other value-added services • Long haul transport • Less than truckload service • Last miles delivery: Able to complete more than 1000 orders every day at an optimized cost and productivity. • Cold chain solutions: Provide solutions, consultancy and advice for customers’ cold chain; Cooperate with customers to design and tailor the cold chain that suits customers’ need and products’ specifications while ensuring standard quality Figure 8: Net sales & total assets of ABA Cooltrans Source: FiinGroup 2.09 11.47 13.99 2.82 2.55 4.32 - 3.0 6.0 9.0 12.0 15.0 2015 2016 2017 US$mn Total Assets Net Sales Warehouse Location Capacity (pallets) No. of Rooms ABA Hanoi Cold Storage Quang Minh Industrial Park, Hanoi 15,000 17 ABA HCM Cold Storage Tan Dao Industrial Park, Ho Chi Minh City 30,000 8 Truck No. of Trucks Cold Trucks 130
  14. 14. ‹#›Financial Information | Business Information | Market Research Services Contact us Dong Le, CFA Director, Market Research & Consulting Services M: +84 (024) 3562 6962 (ext. 110) T: +84 (0) 912 057 529 E: W: Hai Khieu Manager, Market Research & Consulting Services T: +84 (024) 3562 6962 (ext. 120) M: +84 (0) 966 510 388 E: W: Head Office 5th Floor, Anh Minh Building 36 Hoang Cau Street Hanoi, Vietnam + 84 (24) 3562 6962 Ho Chi Minh City Branch 3rd Floor, Profomilk Plaza Bldg 51-53 Vo Van Tan, District 3 Ho Chi Minh City, Vietnam + 84 (28) 3933 3586