Japan ups stake in local retail market
More and more Japanese firms are venturing into Vietnam’s consumer goods market through mergers and acquisitions.
For a long time, Vietnam has been a popular choice for Japanese manufacturers due to its welcoming policies to-wards foreign investors and low labour costs. However, in recent years, investors from Japan are shifting their focus to consumer goods, retail, and hospitality services.
Manufacturing and production projects, which used to account for 30 per cent of Japanese investment in Viet-nam, have fallen to only 20 per cent of all registered projects from the country, based on data from the Ministry of Planning and Investment.
Meanwhile, the number of retailers and service providers is increasing. It is notable that the majority of Japanese firms, including the convenience store chains Family Mart and Ministop, budget store Daiso, and shopping malls Aeon and Takashimaya, tend to launch their own stores in Vietnam or sign up franchise agreements.
Besides setting up their own shops, Japanese investors are also open to mergers and acquisitions (M&A) with Vietnamese partners if the opportunities arise. According to data compiled by Stoxplus, a business information provider, between 2014 and 2017 the Japanese conducted 11 Vietnam-based M&A deals in consumer goods and retail – and the number is rising.
Just two weeks ago, ACA Investments, an affiliate of Sumitomo Corporation, bought 20 per cent of BiboMart, a baby-and-mother re-tail chain. Hiroyuki Ono, partner at ACA Investments, said that he hopes to see BiboMart go beyond retail to be-come a lifestyle service provider for families.
“Through this investment in BiboMart, we hope to seize the current opportunities for Japanese corporations to expand into the Vietnamese re-tail market,” the partner said during the signing ceremony.
In 2015, retail giant Aeon bought 49 per cent of Citi-mart, which has 26 stores in Ho Chi Minh City and owns a 30 per cent stake in Fivimart – which has 20 stores located in Hanoi. Citimart has been re-branded as Aeon Citimart and aims to reach 500 stores by 2025 with the help of the Japanese retailer.
Nguyen Thi Quynh Lan, managing director of Business Information Services at Stox-plus, told VIR that Japanese retailer and consumer goods firms are attracted by Vietnam’s increasing disposable income. “Vietnam is a growing market with over 94 mil-lion consumers, with a fast urbanisation rate and increasing disposable income. Vietnamese consumers show a strong preference for foreign- owned brands, especially for Japanese consumer goods with high quality,” Lan said.
Between 2012 and 2016, Vietnam’s retail market boasted an impressive annual growth rate of 13.1 per cent to reach $128 million in 2016. This is in stark contrast to Japan, where consumer goods and retail stores are struggling due to a dwindling and aging population.
International grocery researcher IGD forecasts that Vietnam will lead the growth of convenience stores in Asia from now until 2021. The expected compound annual growth rate stands at 37.4 per cent, making the country an attractive destination for any retailer.
Takimoto Koji, a representative from Japan External Trade Organisation (Jetro) in Ho Chi Minh City, also acknowledged a strategic shift of Japanese firms in Vietnam away from manufacturing to retail and consumer goods.
“In recent years, Japan’s investment has focused on consumer goods, services, and real estate, reflecting the growth of Vietnamese purchasing power and the attractiveness of a 94-million person consumer market,” Koji told VIR.
The Jetro representative added that Japanese investors are also buoyed by Vietnam’s improved business environment. He expects more M&A deals in consumer goods and retail, as this is the fastest way for Japanese retailers and service providers to break into the Vietnamese market. ■