In early August 2022, the group spent more than VND3,600 billion (equivalent to $155 million) to acquire a 34% stake in Phuc Long Heritage Company, operator of the Phuc Long coffee chain, according to Masan’s recent report.
With this amount, Masan has injected VND6.45 trillion into Phuc Long. After joining Masan’s ecosystem, Phuc Long has grown strongly and showed the potential to become the leading F&B chain that dominates the market.
Becoming F&B powerhouse
After signing the strategic cooperation agreement with Masan in May 2021, Phuc Long kiosks were developed at the WinMart+ (formerly known as VinMart+) multi-convenience store network.
Normally, venue rental and labor costs usually account for 60-70% of the operating costs of an independent store. But with the kiosk model, Phuc Long can sell tea and coffee without much investment in premises, thus increasing revenue, optimizing costs, and improving profit margins.
The model helps the coffee chain increase its coverage rapidly when leveraging WinCommerce (WCM), the largest modern retail platform in Vietnam, and access to the huge customer pool of WinMart/WinMart+.
Phuc Long tea and coffee products are not only available in big cities such as Ho Chi Minh City and Hanoi, but also reach consumers in many provinces across the country.
In February 2022, Phuc Long was granted a credit of VND350 billion by Techcombank, of which, VND250 billion is used to expand its network and the rest is added to working capital for business operation. Joining the ecosystem of Masan Group, Phuc Long becomes a powerhouse in the F&B industry, developing rapidly and achieving extremely positive business results.
Phuc Long also brings many benefits to the Point of Life ecosystem when helping Masan’s retail system to reach young customers who love the Phuc Long brand and transforming the WinMart+ store chain into a destination for all ages from youngsters to housewives.
In fact, Phuc Long kiosks have increased store foot traffic by 30% and reduced the breakeven sales target by 44%.
|Office workers love Phuc Long’s signature tea and coffee. Photo: Masan
Outstanding business result
Thanks to the strong synergy with Masan’s ecosystem, Phuc Long’s operational efficiency has improved significantly. According to Masan’s business results report, in the first 6 months of 2022, Phuc Long’s revenue reached VND820 billion, up 38.5% over the same period last year. Pre-tax profit, interest, and depreciation (EBITDA) reached VND117 billion.
By the end of Q2/2022, Phuc Long has 74 flagship stores, 19 mini stores, and 971 kiosks in operation. Flagship stores recorded revenue of VND549 billion in the first 6 months of 2022 and VND 281 billion in Q2/2022, up 22% and 36.7% year-on-year, respectively.
In particular, the net profit after tax (NPAT) margin of flagship stores reached 25.0% and 23.6% respectively in the first 6 months of 2022 and Q1/2022 – impressive figures in the F&B sector.
These stores are expected to be the key drivers of Phuc Long’s top and bottom-line growth in the second half of 2022 as the company aims to open 40-50 more flagship stores.
For kiosks, Phuc Long has also piloted a new menu and received positive results, increasing the kiosk’s revenue by 75% per day even though no marketing activities have been carried out yet.
|Phuc Long store at noon is busy with customers. Photo: Masan
Having the largest number of points of sale among the F&B retail chain is another competitive advantage of Phuc Long, which helps the chain grow online-channel revenue.
Currently, 35% of Phuc Long’s revenue comes from online. Phuc Long’s young customers can order drinks through shopping apps and get quick delivery thanks to the brand’s more than 1,000 offline points of sale.
At the same time, Phuc Long continues to innovate its menu, adding seasonal drinks and serving fast food such as sandwiches, hamburgers, and croissants…, meeting the modern and dynamic lifestyle of young people.
Established in 1968 in Lam Dong, Phuc Long is one of the leading coffee and tea chains in the country. Before becoming a subsidiary of Masan Group, Phuc Long’s annual revenue grew continuously at double digits and reached VND779 billion in 2019.
However, due to high selling and management expenses, Phuc Long’s profitability was low.
The margin in 2017 and 2018 of the whole chain was just a few billion Vietnam dong. After-tax profit in 2019 also just reached VND20 billion. Joining Masan’s ecosystem has brought significant benefits to Phuc Long, reduced operational costs, and improved business efficiency.