Ready to drink report (Vietnam market)

Rtd Tea - Vietnam

Euromonitor International : Country Sector Briefing

May 2010

RTD Tea Vietnam

Euromonitor International Page i

List of Contents and Tables

Headlines ................................................................................................................................................................. 1

Trends ...................................................................................................................................................................... 1

Competitive Landscape .......................................................................................................................................... 1

Prospects .................................................................................................................................................................. 2

Category Data ......................................................................................................................................................... 3 Table 1 Off-trade Sales of RTD Tea by Subsector: Volume 2004-2009 ........................................ 3 Table 2 Off-trade Sales of RTD Tea by Subsector: Value 2004-2009............................................ 3 Table 3 Off-trade Sales of RTD Tea by Subsector: % Volume Growth 2004-2009....................... 3 Table 4 Off-trade Sales of RTD Tea by Subsector: % Value Growth 2004-2009 .......................... 3 Table 5 Leading Flavours for RTD Tea: % Volume Breakdown 2006-2009 ................................. 4 Table 6 Company Shares of RTD Tea by Off-trade Volume 2005-2009 ....................................... 4 Table 7 Brand Shares of RTD Tea by Off-trade Volume 2006-2009 ............................................. 4 Table 8 Company Shares of RTD Tea by Off-trade Value 2005-2009........................................... 5 Table 9 Brand Shares of RTD Tea by Off-trade Value 2006-2009 ................................................ 5 Table 10 Forecast Off-trade Sales of RTD Tea by Subsector: Volume 2009-2014.......................... 5 Table 11 Forecast Off-trade Sales of RTD Tea by Subsector: Value 2009-2014 ............................. 5 Table 12 Forecast Off-trade Sales of RTD Tea by Subsector: % Volume Growth 2009-

2014................................................................................................................................... 6 Table 13 Forecast Off-trade Sales of RTD Tea by Subsector: % Value Growth 2009-

2014................................................................................................................................... 6

RTD Tea Vietnam

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RTD TEA IN VIETNAM

HEADLINES RTD tea enjoys rapid growth of 41% in 2009 in total volume terms RTD tea became the preferred soft drink of consumers thanks to its healthy positioning

Asian RTD tea drives the growth rate of the overall sector

Prices remain stable throughout 2009 despite the high inflation rate

Fiercely competitive market with many existing and new brands

During the forecast period, RTD tea is expected to grow further with a strong total volume CAGR of 19%

TRENDS The year 2009 is considered to be the year of RTD tea due to the mass appearance of these products on the

market. Catching the trend of local consumers trying to control their calorie intake and cut down on carbonates, many manufacturers introduced their products to the market claiming to be low in sugar and contain vitamins and added minerals which can prevent heart disease, obesity and dental problems. Green tea is also said to prevent aging and bring life to the skin.

In 2009, there was a battle for the bigger share of sector sales between the two giants Tan Hiep Phat Group and Universal Robina Corp (URC). Zero Degree Green Tea notably was the company than radically pushed and promoted RTD green tea in the Vietnamese market, promoting heavily its health benefits, and immediately saw strong acceptance by local consumers. Soon afterwards, URC brought C2 to the market to compete with Zero Degree Green Tea. Despite being the latecomer, C2 soon won local consumers favour for its better taste and handy bottle size. Tan Hiep Phat and URC continually introduced new products with different flavours creating a fiercely competitive market.

RTD tea continued to enjoy a rapid increase in the year 2009. However, the overall growth rate being 41% is only about half that of 2008. Even though RTD tea is claimed to have many positive effects on the health of consumers, like preventing heart disease and aging, many consumers still have doubt as to whether the amount of sugar contained in RTD tea is genuinely much less than that of carbonates. Therefore, many Vietnamese people decided to switch to drinking fruit/vegetable juice or bottled water from time to time.

The manufacturers tried their best to stabilize the price of RTD tea in 2009, but due to the high rate of inflation and the increase in the foreign exchange rate of VND over USD, the imported ingredients for producing RTD tea became more expensive. In 2009, the price of RTD tea increased by about 8% (from VND6,500 to VND7,000 per bottle) which is an acceptable amount for local consumers considering the good effects it has on the health.

About 73% of RTD tea in Vietnam is consumed via off-trade. There has been increasing consciousness over health problems among local consumers and RTD tea seems to contain less sugar and more added minerals which are good for the health. Therefore, many people switch to drinking RTD tea instead of carbonates. The other 27% is consumed via on-trade in coffee shops or restaurants.

Most RTD tea available in Vietnam is green tea with sugar or without sugar. Local consumers are still more familiar with products with sugar than without. At the end of the year 2008, Tan Hiep Phat Group introduced Dr. Thanh to the market. The product quickly became favoured by local consumers for its strange taste and unique effect of reducing body heat. Tan Hiep Phat Group launched a very successful marketing campaign ensuring Dr. Thanh reached every province in Vietnam in just two months.

RTD tea is mostly consumed by groups of consumers, aged 10-40-years-old. Children usually have a bottle of RTD tea in their bag for drinking at break time at school. Adults drink RTD tea after work when getting together with friends or at lunch time after four hours of work in the morning to gain energy.

COMPETITIVE LANDSCAPE

RTD Tea Vietnam


Despite leading sales in 2009 for successfully introducing Dr. Thanh to the market, Tan Hiep Phat Group lost VND hundreds of billions in the space of a week; from 8 June to 15 June, for using out-of-date ingredients. All supermarket chains stopped displaying products from Tan Hiep Phat Group and the company had to undergo a thorough hygiene inspection. The company explained that all the boxes of out-of-date ingredients were not used in the production and it had simply not got rid of the boxes. Even though the inspection result came through to confirm the explanation of Tan Hiep Phat Group, many consumers were still nervous about using the products from this company again. Only about one month later, did the products become widely consumed again. After regaining the trust of consumers, Number 1 RTD tea started to increase in sales again and soon afterwards completely recovered from the incident.

Being the only new product to be introduced in 2009 with different target and goals and Tan Hiep Phat Groups successful adverting campaigns, Dr. Thanh, after two months, secured a strong distribution network that reached almost every city and province in Vietnam. Tan Hiep Phat is an example of applying the correct strategies to make local consumers familiar with the product.

Currently, domestic brands are dominating RTD tea in Vietnam. Despite being an international brand, Lipton RTD tea is not as well-known among local consumers as the products were introduced the after everybody was familiar with RTD tea brands from other manufacturers. Moreover, there was little advertising support organized to introduce the product to consumers. Vietnamese consumers still favoured local products over imported ones as local products have the same taste and are produced under modern technology and under strict hygiene conditions. Therefore, they do not see any reason to pay extra for imported products.

The year 2009 witnessed the successful marketing campaign for Dr. Thanh. Dr. Thanh actually is not a new product to local consumers as herbal tea has been consumed for a long time as a traditional drink. What makes Dr. Thanh so successful are the PR strategies of Tan Hiep Phat with a clear understanding of the market and the behaviour of local consumers. The company invested a great amount of money in ensuring the brand image appeared everywhere from buses, POS, billboards, merchandising and commercials. Within only two months, Dr Thanh has achieved 200% of its targeted profit.

Normally, RTD tea comes in 500ml bottles. C2 and Dr. Thanh have made innovations in packaging in terms of producing 350ml and sizes bigger than 500ml. Dr. Thanh is a bit more expensive than other brands of RTD tea. Small sized bottle costs VND8,000 and big sized one costs VND10,000 while C2 is VND5,000 and Number 1 Green Tea is VND7,000. However, Dr. Thanh still performs very well in RTD tea in Vietnam.

PROSPECTS With increasing awareness of health problems and consumers attempts to cut down their sugar and calorie

intake, RTD tea is winning the trust of local consumers for containing vitamins and added minerals which are good for the health and claim to prevent aging and heart disease. The manufacturers also have well established distribution networks, bringing RTD tea to consumers across the country.

Demand for RTD tea in Vietnam is great and current production still cannot meet the demands of local consumers. Therefore, it is predicted that during the forecast period, more products will enter the market creating a more intense operating environment. A total volume CAGR of 19% is much less than that recorded over the review period (58%). This is mainly because the review period was considered to be a prime time for RTD tea in Vietnam. RTD tea was first introduced to the market during this period and with local consumers being willing to try new things and switch brands, sales for RTD tea during the first year of introduction enjoyed a dramatic increase.

Currently, there is only one brand of herbal tea in the market, Dr. Thanh. It is predicted that other manufacturers will look into producing similar products to compete with Dr. Thanh. Manufacturers will also compete with each other in the field of marketing campaigns and aim for differentiation.

Green tea is predicted to see a better performance among the RTD tea categories in Vietnam during the forecast period because there are currently many players competing with each other for a bigger share of the pie.

With the popularity of the products and more value added innovations expected from players, it is expected that RTD tea unit price will keep increasing over the forecast period.

RTD Tea Vietnam


CATEGORY DATA

Table 1 Off-trade Sales of RTD Tea by Subsector: Volume 2004-2009

'000 litres 2004 2005 2006 2007 2008 2009

Still RTD Tea 22,309.7 26,590.9 59,377.8 102,871.1 183,999.9 253,392.7 - Asian Still RTD Tea 20,971.5 25,165.8 57,881.4 101,292.5 182,326.5 251,610.6 - Still RTD Tea 1,338.1 1,425.1 1,496.4 1,578.7 1,673.4 1,782.1 Excluding Asian Carbonated RTD Tea - - - - - - RTD Tea 22,309.7 26,590.9 59,377.8 102,871.1 183,999.9 253,392.7 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,

Euromonitor International estimates

Table 2 Off-trade Sales of RTD Tea by Subsector: Value 2004-2009

VND mn 2004 2005 2006 2007 2008 2009

Still RTD Tea 317,293.8 383,341.6 821,425.0 1,429,21 2,575,05 3,558,10 8.9 7.1 1.1 - Asian Still RTD Tea 295,853.8 360,941.6 797,681.0 1,403,91 2,548,11 3,529,13 8.5 2.1 5.3 - Still RTD Tea 21,440.0 22,400.0 23,744.0 25,300.4 26,944.9 28,965.8 Excluding Asian Carbonated RTD Tea - - - - - - RTD Tea 317,293.8 383,341.6 821,425.0 1,429,21 2,575,05 3,558,10 8.9 7.1 1.1 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,


Table 3 Off-trade Sales of RTD Tea by Subsector: % Volume Growth 2004-2009

% volume growth 2008/09 2004-09 CAGR 2004/09 TOTAL

Still RTD Tea 37.7 62.6 1,035.8 - Asian Still RTD Tea 38.0 64.4 1,099.8 - Still RTD Tea Excluding Asian 6.5 5.9 33.2 Carbonated RTD Tea - - - RTD Tea 37.7 62.6 1,035.8 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,


Table 4 Off-trade Sales of RTD Tea by Subsector: % Value Growth 2004-2009

% current value growth 2008/09 2004-09 CAGR 2004/09 TOTAL

Still RTD Tea 38.2 62.2 1,021.4 - Asian Still RTD Tea 38.5 64.2 1,092.9 - Still RTD Tea Excluding Asian 7.5 6.2 35.1 Carbonated RTD Tea - - - RTD Tea 38.2 62.2 1,021.4 Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,


RTD Tea Vietnam


Table 5 Leading Flavours for RTD Tea: % Volume Breakdown 2006-2009

% retail volume 2006 2007 2008 2009

Black - sweetened 1.1 0.8 0.5 0.4 Chrysanthemum 2.8 1.0 0.2 0.1 Green - honey 3.2 3.0 2.8 2.5 Green - jasmine 27.1 29.0 29.5 29.2 Green - lemon 52.3 58.0 58.5 58.8 Other flavours 13.5 8.2 8.5 9.0 Total 100.0 100.0 100.0 100.0 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International

estimates

Table 6 Company Shares of RTD Tea by Off-trade Volume 2005-2009

% off-trade volume Company 2005 2006 2007 2008 2009

Tan Hiep Phat Group - 25.3 38.9 52.2 56.0 URC Vietnam Co Ltd - 25.3 19.4 16.3 15.8 Tan Quang Minh Co Ltd 9.4 6.7 7.3 7.6 7.3 Interfood Shareholding Co 13.2 9.3 7.8 6.5 7.1 Saigon Beverages JSC 14.6 7.4 4.9 3.3 3.0 (Tribeco) Pokka Corp 17.6 7.3 3.8 1.9 1.2 CKL Vietnam Corp 4.7 1.8 0.8 0.5 0.5 Pepsi-Lipton 1.0 0.6 0.5 0.4 0.3 International Nestl Vietnam Ltd 1.1 0.4 0.2 0.0 - Lim Siang Huat Pte Ltd 1.1 0.2 - - - Tribeco Co Ltd - - - - - Others 37.4 15.8 16.5 11.3 8.9 Total 100.0 100.0 100.0 100.0 100.0 Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 7 Brand Shares of RTD Tea by Off-trade Volume 2006-2009

% off-trade volume Brand Company 2006 2007 2008 2009

Zero Degree Green Tea Tan Hiep Phat Group 25.3 38.9 43.5 44.2 C2 Cool & Clean URC Vietnam Co Ltd 25.3 19.4 16.3 15.8 A*Nuta Green Tea Tan Quang Minh Co Ltd 6.7 7.3 7.6 7.3 Lemon Wonderfarm Interfood Shareholding Co 9.3 7.8 6.5 7.1 Tribeco Saigon Beverages JSC 7.4 4.9 3.3 3.0 (Tribeco) Pokka Pokka Corp 4.0 2.1 1.1 0.8 Sagiko CKL Vietnam Corp 1.8 0.8 0.5 0.5 Lipton Pepsi-Lipton International 0.6 0.5 0.4 0.3 Nestea Nestl Vietnam Ltd 0.4 0.2 0.0 - Royal Miller Lim Siang Huat Pte Ltd 0.2 - - - Tribeco Tribeco Co Ltd - - - - Others 19.2 18.2 20.8 21.1 Total 100.0 100.0 100.0 100.0 Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

RTD Tea Vietnam


Table 8 Company Shares of RTD Tea by Off-trade Value 2005-2009

% off-trade value rsp Company 2005 2006 2007 2008 2009

Tan Hiep Phat Group - 25.6 39.5 54.0 59.0 URC Vietnam Co Ltd - 21.5 16.2 13.5 12.6 Interfood Shareholding Co 11.6 8.6 6.9 5.7 6.2 Tan Quang Minh Co Ltd 6.1 4.6 5.0 5.2 5.1 Saigon Beverages JSC 13.3 6.9 4.5 3.2 3.0 (Tribeco) Pokka Corp 17.9 7.6 4.2 2.1 1.3 CKL Vietnam Corp 4.1 1.7 0.7 0.4 0.4 Pepsi-Lipton 1.0 0.7 0.5 0.4 0.3 International Nestl Vietnam Ltd 1.0 0.4 0.2 0.0 - Lim Siang Huat Pte Ltd 1.1 0.2 - - - Tribeco Co Ltd - - - - - Others 43.9 22.4 22.2 15.3 12.1 Total 100.0 100.0 100.0 100.0 100.0 Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 9 Brand Shares of RTD Tea by Off-trade Value 2006-2009

% off-trade value rsp Brand Company 2006 2007 2008 2009

Zero Degree Green Tea Tan Hiep Phat Group 25.6 39.5 44.7 46.4 C2 Cool & Clean URC Vietnam Co Ltd 21.5 16.2 13.5 12.6 Wonderfarm Interfood Shareholding Co 8.6 6.9 5.7 6.2 A*Nuta Green Tea Tan Quang Minh Co Ltd 4.6 5.0 5.2 5.1 Lemon Tribeco Saigon Beverages JSC 6.9 4.5 3.2 3.0 (Tribeco) Pokka Pokka Corp 4.2 2.3 1.2 0.8 Sagiko CKL Vietnam Corp 1.7 0.7 0.4 0.4 Lipton Pepsi-Lipton International 0.7 0.5 0.4 0.3 Nestea Nestl Vietnam Ltd 0.4 0.2 0.0 - Royal Miller Lim Siang Huat Pte Ltd 0.2 - - - Tribeco Tribeco Co Ltd - - - - Others 25.7 24.1 25.6 25.2 Total 100.0 100.0 100.0 100.0 Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 10 Forecast Off-trade Sales of RTD Tea by Subsector: Volume 2009-2014

'000 litres 2009 2010 2011 2012 2013 2014

Still RTD Tea 253,392.7 328,982.8 410,860.1 472,289.8 519,403.7 560,868.5 - Asian Still RTD Tea 251,610.6 327,093.7 408,867.1 470,197.2 517,216.9 558,594.3 - Still RTD Tea 1,782.1 1,889.1 1,993.0 2,092.6 2,186.8 2,274.3 Excluding Asian Carbonated RTD Tea - - - - - - RTD Tea 253,392.7 328,982.8 410,860.1 472,289.8 519,403.7 560,868.5 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International

estimates

Table 11 Forecast Off-trade Sales of RTD Tea by Subsector: Value 2009-2014

RTD Tea Vietnam


VND mn 2009 2010 2011 2012 2013 2014

Still RTD Tea 3,558,10 4,653,43 5,903,20 6,873,73 7,628,34 8,276,21 1.1 6.5 5.1 7.9 0.1 3.4 - Asian Still RTD Tea 3,529,13 4,623,16 5,871,42 6,840,20 7,592,62 8,238,00 5.3 7.2 2.4 7.1 9.9 3.4 - Still RTD Tea 28,965.8 30,269.3 31,782.7 33,530.8 35,710.3 38,210.0 Excluding Asian Carbonated RTD Tea - - - - - - RTD Tea 3,558,10 4,653,43 5,903,20 6,873,73 7,628,34 8,276,21 1.1 6.5 5.1 7.9 0.1 3.4 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International

estimates

Table 12 Forecast Off-trade Sales of RTD Tea by Subsector: % Volume Growth 2009-2014

% volume growth 2009-14 CAGR 2009/14 TOTAL

Still RTD Tea 17.2 121.3 - Asian Still RTD Tea 17.3 122.0 - Still RTD Tea Excluding Asian 5.0 27.6 Carbonated RTD Tea - - RTD Tea 17.2 121.3 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International

estimates

Table 13 Forecast Off-trade Sales of RTD Tea by Subsector: % Value Growth 2009-2014

% constant value growth 2009-14 CAGR 2009/14 TOTAL

Still RTD Tea 18.4 132.6 - Asian Still RTD Tea 18.5 133.4 - Still RTD Tea Excluding Asian 5.7 31.9 Carbonated RTD Tea - - RTD Tea 18.4 132.6 Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International

estimates

Ready to drink report (Vietnam market)

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