A Strategic M&A

Recently, Nutifood Nutrition Food Joint Stock Company (Nutifood) officially took control of Kido Frozen Foods Joint Stock Company (Kido Foods), the owner of two well-known ice cream brands, Merino and Celano.

According to Nutifood, this acquisition allows them to expand their product supply chain, moving beyond nutritional food to enter the frozen food sector, particularly ice cream. However, in a highly competitive market like ice cream, can Nutifood maintain its growth momentum?

In reality, the deal represents a big step forward for both organizations' commercial plans. Nutifood's 51% ownership in Kido Foods enables the firm to diversify its supply chain, particularly in the frozen food market, where it does not currently have a significant presence. A Nutifood spokesman claimed that entering the ice cream market through Kido Foods not only helps to increase their product variety, but also improves competitiveness by leveraging KIDO's existing manufacturing and distribution resources.

Meanwhile, KIDO's divestment from its ice cream segment, one of its most profitable businesses, has raised eyebrows among analysts. With Merino and Celano holding a significant market share in Vietnam's ice cream market, this decision is seen as part of KIDO's strategic restructuring, indicating the company is reallocating resources towards core businesses to optimize long-term profits.

In an interview, Mr. Tran Kim Thanh, Chairman of KIDO Group, shared: "We want to focus more on the edible oil and processed products segments, where KIDO has significant potential to lead the market."

Challenges Ahead

Vietnam's ice cream market is already thriving, with key firms including Vinamilk, Thuy Ta, Trang Tien, and multinational brands such as Unilever competing. According to Euromonitor, Vietnam's ice cream market is predicted to develop at a compound annual growth rate (CAGR) of around 6.7% between 2023 and 2028. Nutifood will encounter significant obstacles when entering this sector, including shifting customer preferences, pricing competitiveness, and product innovation.

One of the most significant obstacles is altering consumer patterns. Vietnamese customers are progressively seeking higher-quality and more diverse goods, ranging from conventional ice cream to unique and novel alternatives. Nutifood must not only respect the ideals that Kido Foods has established, but also spend extensively in research and development (R&D) to stay up with consumer trends and new manufacturing technology.

Building brand loyalty in a market with so many options involves more than just product quality; it also relies on accessibility and strategies for marketing. However, Nutifood must also consider competition from premium overseas brands such as Wall's, Baskin Robbins, and Haagen-Dazs.

Nonetheless, Nutifood offers considerable prospects. First, purchasing Kido Foods offers them instant access to a large distribution network created by well-known brands such as Merino and Celano. Furthermore, Nutifood may use its brand and reliability in the nutritional food industry to place ice cream goods in the premium market, meeting customers' rising need for safe and high-quality products.

According to market experts, Nutifood has a competitive edge due to its extensive product selection and consumer confidence. However, the corporation must exercise caution in avoiding dividing its resources too thinly across sectors where it lacks experience.

Looking ahead, it is unclear if Nutifood will be able to adapt and survive in the frozen food sector. The strong rivalry in the ice cream business necessitates that the corporation not just rely on established brands, but also constantly innovate and fulfill consumer wants.

That being said, this acquisition is a significant milestone for both companies. For Nutifood, it could be a golden opportunity to diversify and expand its supply chain. As for KIDO, the divestment signals a focus on pursuing a more concentrated strategy in areas with higher profit potential. However, the ultimate success of this deal will depend on how both Nutifood and KIDO continue to exploit and develop the assets they have acquired.