Right time for Abbott’s acquisition of distributor to better serve market
Abbott Nutrition, the global healthcare company, last Thursday announced it had acquired its distribution partner of nutrition products in Vietnam, 3A Nutrition, in a move to increase their presence in the market. The Saigon Times Daily had an interview with Ramachandran Rajamanickam, Vice President for Asia Pacific of Abbott Nutrition International, and Douglas Kuo, Director of 3A, about the deal between them and the forthcoming steps of the group in the local market. Excerpts follow.
|Mr. Ramachandran Rajamanickam|
The Saigon Times Daily: I’ve learned that Abbott Nutrition has just acquired 3A, its distributor in Vietnam’s market. Could you please say more about the deal, such as the stake Abbott holds in 3A as well as the value of the deal?
Mr. Ramachandran Rajamanickam: The first one is that the acquisition is a mutually agreed transaction, meaning 3A and Abbott have come to a common understanding that this is the right thing to do for the employees and business.
The second is, all of 3A now becomes a part of Abbott’s family, so it is completely 100% stake, not partly. We are unable to disclose the details of the transaction, but what I can tell you is that Abbott is infusing a total of US$20 million as working capital.
What is the purpose of the acquisition and its role in Abbott Nutrition’s strategy in Vietnam’s market?
- Among emerging markets, Vietnam is the important priority for us. So what we want to do is to continue bringing our innovative and science-based products to the Vietnamese market because we have seen significant interests from healthcare professionals and consumers for nutrition products that bring health benefits for both pediatrics as well as adults.
We have also seen in the Vietnamese economy the growing middle class, the fast-growing (dairy) sector here in Vietnam. Given that, we are very optimistic about the future of Vietnam.
The reason we have acquired 3A is for the value added they bring. They have done an outstanding job in helping recognizing some of our brands, their efforts in terms of distributing our products in all the provinces of Vietnam. So, in working with 3A, we intend to intensify our geographic presence in all the provinces to continue to bring our science-based products to Vietnamese people.
Abbott Nutrition decided to choose 3A as authorized distributor 18 years ago. Why doesn’t the acquisition happen earlier?
- 18 years ago, we had just started it. It was the very early part of the business. As the business has grown, 3A has grown along with it. We felt it was the right time to forward it as we continue to bring our new products to the market and we want to increase our presence in all the provinces across the country. It makes sense to bring our long-term partner in how we work as one company instead of continuing to work as separate companies.
What is Abbott Nutrition’s plan of investment to expand 3A’s distribution network after the acquisition?
- First of all, 3A has done outstanding job in terms of the whole distribution network and the entrepreneurial skill. So we hope to be able to take that strong foundation it has already has and help build on it further. We would like to provide our employees, eg sales forces more opportunities for training and development. We are committed to bringing more science-based nutrional products to Vietnam.
Previously, Abbott Nutrition paid for 3A to distribute its products. The acquisition may help cut down the distribution cost. So will the company cut price of its products sold in Vietnam after the acquisition?
- Abbott looks at a number of factors when considering how to pricing varies by economic factors, demographics, costs associated with shipments, tariffs etc, so the acquisition of 3A has no direct impact on prices. Our goal is to ensure access to our nutrition products. Abbott’s prices reflect a fair value in the market for our premium, science-based products. Our products are backed by significant investment in nutrient and ingredient research, formulation work and state of the art quality and manufacturing systems.
Could you say about the position of Vietnam’s market in Abbott Nutrition’s business, such as the market’s contribution to the corporation’s revenue?
Could you share about the current scale of 3A distribution network in Vietnam?
Mr Douglas Kuo: After 18 years, we have strong presence in all provinces of Vietnam, with a 2,100-strong sales force.
With the mutually agreed deal, we would bring more products to consumers, and it is right time for our employees to get access to more professional training.
Foreign companies in Vietnam often have their own distribution strategies and know-hows to tap the market? So what is the 3A’s distribution strategy in Vietnam’s market after the deal?
- I think each company has its own strategy and different ways to approach the consumers. What we say about us is, we want to make it as easy as possible for the consumers to access products. It means that, wherever they are, we try to get close to them as much as possible, and to make it convenient for them right now.
We are always exploring ways to bring products close to Vietnamese consumers. One of those ways is to align with the market. We know that there are big emerging middle class in Vietnam, they are everywhere in 64 provinces. For the sales team, we focus on how to get the products to the market faster, better to serve the consumers.
- Abbott is a global broad-based healthcare company with 2011 sales of 38.9 billion worldwide. In the nutrition sector, Vietnam is a key market and identified as one of the seven top markets because of its growth, along with BRIC (Brazil, Russia, India and China), Mexico and Turkey. The seven markets are identified for significant growth and we continue to invest in them. I am unable to share specific numbers but Vietnam is a key emerging market for Abbott Nutrition and we intend to invest to grow our business for the long term. In addition, the way we operate in Vietnam is characteristic of how we operate in emerging markets- bringing science and innovation to these markets we serve.
As a leading player in the dairy industry, do you have any projection on the Vietnamese dairy market’s growth potential in the coming years?
- We remain very positive about the dairy industry of Vietnam. Over the last few years it grew approximately 9% y-o-y, and the average consumption of milk increases 8% y-o-y, so it is among the fast-growing sectors of the Vietnamese economy.
We see it has significant opportunities to continue to grow for two reasons. One is the growing of middle class. Number two is we also see appreciation of Vietnamese people and healthcare professionals for nutrition products. Given those dynamics and the history of growth we see, we expect to see strong continual growth of the sector.
Reported by Thu Nguyet