Reasons behind the $400 million investment in The CrownX of Masan
Most recently, a consortium led by Alibaba Group (Alibaba) and Baring Private Equity Asia (BPEA) has poured $400 million into The CrownX (TCX), which consolidates Masan Group’s interests in Masan Consumer Holdings (MCH, owning 85.71 per cent) and VinCommerce (VCM, owning 92.8 per cent).
In the deal, The CrownX has a pre-money valuation of $6.9 billion, equalling $93.5 (VND2.15 million) per share. Masan will own 80.2 per cent of The CrownX while the consortium will own 5.5 per cent.
The $400 million and 5.5 per cent stake is just the tip of the iceberg. The investment is expected to create synergy of potential beyond expectation. Accordingly, the foreign investors have extensive experience in the retail industry with cutting-edge technology while Masan is owning Vietnam’s leading consumer goods and retail businesses.
Alibaba is one of the world's largest retailers and e-commerce companies. The group has initiated its global expansion plan 10 years ago with a focus on the regional retail market. Alibaba has made $200 million investment in India, $2 billion investment in Lazada e-commerce site in Southeast Asia, $1.1 billion in Indonesia’s Tokopedia, and other investments in various retail companies in both local and foreign markets.
Meanwhile, BPEA has a 24-year history with assets under management of $23 billion. BPEA is one of the largest private alternative investment firms in Asia managing a private equity investment programme. BPEA is a responsible investor that seeks to create value for all stakeholders through a sustainable approach to investing. The firm is experienced in stimulating digital transformation in the Asia-Pacific region.
With regards to Masan, the group has acquired the VinMart convenience store and supermarket chain, which will be renamed to WinMart this year. The restructuring efforts have gradually paid off as it posted positive profit margins in the recent consecutive months.
This is the right time to develop its online presence for its market-leading offline channels. Masan leaders have stated that grocery will be the key industry to accelerate the offline to online (O2O) transition.
Over the past two years, Masan has actively restructured and expanded its industries to improve efficiency. The group has proactively called for capital with a view to develop a tech-enabled consumer ecosystem for Vietnamese consumers.
Masan’s agreement with a new group of strong investors in the field of retail and digital transformation are expected to maximise the strengths of all stakeholders. Masan's mission is to provide better products and services to the 100 million people of Vietnam so that they can pay less for their daily basic needs. The deal is a stepping stone to fulfil this vision.
It is clear that the tie-up with Alibaba will help VCM with 2,500 points-of-sale across the country to extend its reach to 22 million online shoppers on Lazada, which is one of the largest e-commerce platforms in Southeast Asia, including Vietnam. Beside growing sales, both companies can get deeper understanding of customers through the partnership.
Another advantage is that more of Masan’s grocery products will be sold on the online marketplace, bringing a variety of choices and saving expenses for consumers as online shopping for grocery is less expensive than traditional ways.
Purchasing grocery goods online is expected to provide a new shopping experience for consumers. Grocery accounts for 50 per cent of Vietnam’s retail market and 25 per cent of consumer wallet share and essential daily use, but online penetration is still nascent. E-commerce platforms mainly sell non-essential products with high value and low shopping frequency like electronics products, cosmetics, and fashion items.
In fact, customers are increasingly purchasing grocery products on e-commerce platforms, driven by the COVID-19 pandemic. According to estimates by Bain & Co., Google and Temasek, the proportion of food and grocery products in gross merchandise value has risen from 4 per cent in 2015 to 11 per cent in 2020 and IS predicted to reach 15 per cent by 2025.
With the support from giants, Masan will go faster in its goal of building online channels to connect directly with each household. The direct connection boasts two advantages. First, it will help households save money by reducing the intermediary stages in shopping for grocery. Second, it will help the company access households’ grocery spending data and get an insight into the consumer shopping habit, thereby easily developing new services to meet their needs such as financial and entertainment services. Alibaba has adopted the retail and financial model with great success in its home market.
There is still a lot of room for the retail industry to transform to more modern operations. Masan has many favourable conditions to embrace this trend. The synergy between VCM's existing point of sale, the production capability of the consumer goods industry, and Lazada's leading e-commerce platform is also expected to accelerate the digital transformation of Vietnam's retail industry.
Source: Vietnam Investment Review
Masan successfully draws down first tranche of its $650 million syndicated loan
March 30, 2023