Rebecca Lewis, Partner and Co-CEO
After a challenging two years 2024 has been more positive for Vietnamese consumers thanks to an uptick in job opportunities as the “friend-shoring” factories finally started to come online.
The messages on the banners in the photographs below that we took in the industrial parks of South Vietnam in July give a clue to the drivers of this positive sentiment. Both Vietnamese adverts are for workers at monthly wage levels higher than before. We saw this in three industrial parks that we visited.
Source: Arisaig Partners
When we spoke to households, we were told that finding a job is now materially easier than just 6 months ago. One of the interesting conversations was with the lady in the picture below; she runs two businesses; a morning rice breakfast offering, and she also sells vegetables and eggs in the afternoon… both on the motorbike cart you see in the left picture. She lamented that while the breakfast business was doing extremely well, her vegetable business was poor. We believe that the increase in factory workers helped the former business while the fact that workers are now at work during the afternoons when she sells her vegetables mean that her latter business suffered.
Source: Arisaig Partners
As investors in Vietnam the key for us is that improved sentiment has fed through to results from grocery retailer Mobile World. In July, the company’s grocery chain “BHX” reported revenues rising 42% in the first half of the year, far outpacing its rival’s 9%. The fact that this growth is all Same Store Sales Growth is a reflection not only of improving demand but also of company efforts to fine-tune their store format.
When we looked inside household fridges it is clear why BHX’s market-leading ‘fresh grocery’ offering has been so important to its market leadership. Despite having fridges most households in Vietnam don’t stock fresh food as they perceive overnight chilled meat or vegetable as not sufficiently fresh. This means consumer visit a wet market or formal retail store like BHX at least once a day to replenish their daily needs. Fridges are instead used to make ice or store cold water (which was what was in the tub at the top shelf) for the heat.
Source: Arisaig Partners
Our analysis that BHX is the only small box modern retailer tackling the fresh supply chain effectively drove the investment case and we have been pleased to see that the format is working with sales per store increasing dramatically (+50%) over the last 3 years.
Expansion efforts in terms of store count have not been without their challenges but with sales per store now 2x higher than when we first invested it is clear learnings have been acted upon. With the imminent expansion of its existing network, we believe Mobile World will consolidate its position as the leading formal grocery retailer in Vietnam – a market ripe for formalisation around 90% of groceries are still purchased at wet markets.
