Big 3 bottled tea makers in Vietnam strike it rich

The RTD market in Vietnam is dominated by just three companies: Tan Hiep Phat, Filipino Universal Robina Corporation (URC), and Suntory PepsiCo, a joint venture of American and Japanese firms.

Founded in 1994, Tan Hiep Phat had identified instant tea as its key business from the very beginning. Two popular products on the market are “Tra xanh Khong do” and “Dr.Thanh.”

The company used to hold more than 55 percent of the total market share in 2012, but this dropped to under 40 percent in just three years after a scandal in late 2015 when a fly was found in one of its tea bottles.

But the popularity of instant tea among Vietnamese consumers has kept Tan Hiep Phat going. Its gross profit last year hit VND1.84 trillion ($80 million), two times that of 2014.

Tan Hiep Phat is still the market leader with 53 percent.

URC, one of the biggest food and beverage producers in the Philippines, has faced many ups and downs on the Vietnamese market, including occupying the first place, before slipping drastically to third, where it stays now.

Soon after entering Vietnam in 2003 and building its fame with the “C2” brand, URC Vietnam secured the second spot on the domestic RTD market, right behind Tan Hiep Phat.

The fly-in-the-drink scandal involving Tan Hiep Phat in 2015 paved the way for URC Vietnam to become the first RTD firm in the country in early 2016.

But then URC Vietnam stumbled, when its tea was found to be contaminated with lead in mid-2016. Its market share shrank from 35-40 percent three years ago to just 15 percent recently. It has lost its second spot to Suntory Pepsico.

Launched in Vietnam in 2013, Suntory PepsiCo Vietnam Beverage Company (SPVB), a fully foreign owned joint venture in Vietnam between U.S. PepsiCo Inc. and Japan’s Suntory Holdings Limited, has used the network that PepsiCo had already established in Vietnam as a lever to thrive.

Suntory PepsiCo landed in Vietnam with its “O Long Tea plus” bottled tea that is said to be extracted from black oolong tea leaves. Oolong tea is very popular in Japan.

The firm has made good use the scandals involving Tan Hiep Phat and URC to expand its business.

By mid-2016, its market share climbed up to 20 percent and by the end of the third quarter this year, it had taken the second position, with URC Vietnam at 15.8 percent.

It is obvious that the Vietnamese have developed a taste for sweetened drinks.

The Health Ministry had said at a meeting last month that from just 6 litres in 2000, per capita consumption of sweetened drinks had soared to 44 in 2016. It had organized the meeting to announce new recommendations from the World Health Organization (WHO) on controlling consumption of sugary drinks.

Truong Tuyet Mai, deputy director of the National Institute of Nutrition, said that Vietnamese people are predicted to consume over 5 billion liters of sweetened drinks in 2018, nine times more than that in 2000, and the figure is estimated to reach 11 billion by 2025.

In 2016, sales of sugary drinks in Vietnam reached over four billion liters, according to a survey by British market researcher Euromonitor International, which found that instant tea and soft drinks were the best-selling beverages, accounting for more than 2 billion liters and around 1 billion liters respectively.

The survey also found that the sweetened beverage market has been rising fast in Vietnam, with an annual growth rate of 9.2 percent.

According to Germany's Statista Market Research Co, the market volume of RTD tea in Vietnam is expected to increase by around 72.5 percent between 2015 and 2020.

It also put the total value of Vietnam’s RTD market at $1.69 billion in 2015 and forecast that the figure will go up to $3.37 billion by 2020.