Vietnam: KKR has faith in Masan Group’s feed farm fork model
KKR first invested US$159m in Masan Consumer in 2011 with a second follow-on investment of $200m in 2013, what was then the largest private equity investment in Vietnam. It later diverted those holdings.
Ashish Shastry, head of KKR Southeast Asia, said Vietnam holds great opportunity with its growing economy and favorable demographic trends.
“This investment underscores our commitment to Vietnam in particular and to ASEAN generally," he said.
November 2015 saw KKR pay nearly US$100m for a significant minority stake in Chinese aquatic feed producer, Yuehai Feed Group Co.
KKR, this time out, has purchased US$100m worth of secondary shares of the Masan Group from PENM Partners, an independent Danish private equity company, and has a taken a 7.5% stake, worth US$150m, in the group’s feed-farm-fork business, Masan Nutri-Science.
In 2016, that subsidiary moved beyond only producing feed, with it investing in a high tech pig-breeding farm in Nghe An Province while also acquiring nearly one-fourth of the state-owned Vissan, the country’s largest meat company.
Masan said Vietnam's US$18bn meat sector is not efficient and is highly fragmented - the market leader has less than 1% share. It is aiming to increase productivity across the entire animal protein value chain.
Feed sales
The leading domestic feed producer in Vietnam, Masan Nutri-Science reported sales of over 2.5m tons of feed last year, worth around US$1.1bn. It has a national network of over 4,500 dealers and 13 feed facilities.
Pig feed accounted for 64% of total volume sold during FY2016, compared to 54% during FY2015, showed its February 2017 financial results report.
Growth was also driven by the integration and turnaround of Proconco and ANCO, said the group. The company acquired a 52% and 70% equity interest in Proconco and Agro Nutrition Company JSC – Anco – respectively in 2015.
Fertile ground for foreign players
Vietnam continues to be a fertile market for international feed players.
In February, a subsidiary of the CJ Group, CJ Vina Agri, held a ground-breaking ceremony for its US$19.4m feed plant build in the Binh Dinh province of Vietnam. It will be the sixth animal feed plant in Vietnam for the CJ Group when the facility goes live in January next year.
De Heus sees huge potential for the aquaculture sector in Vietnam and is due to open an aqua feed R&D center there, in collaboration with consultancy group, Fresh Studio, in the coming months. That Dutch group opened its seventh feed plant in Vietnam in April 2016.
Cargill is also in the process of completing a feed mill build in Binh Duong - that site is due to come on stream later this year, and will have annual capacity of 260,000 (MT). The US group opened an $8.5m facility in the Nghe An province of Vietnam in May last year. Q1 2016 also saw the completion of a new production line at a Cargill facility in Dong Thap targeting the specialty aqua feed sector.
In July 2016, Bunge Limited and Wilmar International Limited teamed up in a joint venture project to develop the supply chain of soybean products in Vietnam.
