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Making mineral water means turning water into money
While the businesses in most of the sectors of the national economy are undergoing full hardships, mineral water manufacturers remain unruffled.
Mineral water manufacturers still have been witnessing steady growth and making stable profits, despite the current economic downturn. However, it seems that the manufacturers have not caught the attention from the public. Only when the Vinh Hao Mineral Water Company was bought by Masan Group at a high price, have the investors begun eyeing the lucrative business field.
It’s still too early to say that there is an investment wave in the mineral water sector, though at least two big deals have been wrapped up recently.
The biggest deal was the one in which Masan bought Vinh Hao. By the end of March 2013, Masan has completed the purchase of 63 percent of Vinh Hao’s shares at VND85,000 per share. With the price, Masan accepted to pay 50 times higher than the post-tax profit of the company in 2012.
Masan is believed to seek to purchase more drink enterprises to implement its plan to develop a chain valued from the farm to the dining table. It is obvious that Masan has recognized the great potentials of Vinh Hao when it accepted to pay such as a high price.
The mineral water manufacturing is now called the industry that “turns water into money.” The high profitability could be the reason why in late 2012, La Vie, a brand of Nestle Waters, poured another $12 million into a new production line in Long An province, raising its total investment capital in the sector by two folds.
La Vie now holds 30 percent of the bottled water market share, and it is also the biggest mineral water manufacturer.
The attractiveness of the business field can also be seen in a Nielsen’s survey, which showed that the bottled water market in 2012 obtained the high growth rate of 23 percent. Especially, the market still shows the great potentials for development with the expected revenue of $300 million by 2014.
The high and stable demand is an important reason that prompts investors to pour money into the sector. After buying Vinh Hao, Masan hopes the turnover of Vinh Hao products would increase by 5-8 times in the next several years.
Mineral water manufacturers all reportedly have high profitability. At Vinh Hao, for example, the gross profit is always higher than 35 percent, and the ROE, or return on equity, is approximately 20 percent. The figures of Danh Thanh Mineral Water in Khanh Hoa province have been 30 percent and 20 percent, respectively, over the last 3 years.
A senior executive of an investment fund said he highly appreciates the opportunities of making investments in mineral water enterprises also because he can see the possibility of expanding the lists of product items, which would allow to expand the market and increase the turnover.
He has noted that manufacturers now only focus on making pure mineral water products, while they have just begun marketing mineral water with different flavors, which means that they still have unexploited market to develop.
Danh Thanh Company, for example, has 5 pure mineral water products and 10 mineral water with different flavors, but they mostly have fruit flavors, which means that it still can develop many more kinds of products to lure customers.
There are some 20 mineral water brands existing on the market, including the well-known ones like La Vie, Vinh Hao, Evian, Thach Bich, Danh Thanh and Vital.
vietnamnet
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