The story about the water snake and porcupine
The shareholders of the sweets manufacturer Bibica now feel worried stiff when the brand “Bibica” may disappear for ever, which would be replaced by a South Korean brand – Lotte.
They have reasons to worry about that, as the Chair of the Board of Directors – Jung Woo Lee, at the recent shareholders’ meeting announced the delay of the renaming of the company into Lotte-Bibical Joint Stock Company, but took every opportunity to talk about “Lotte.”
Feeling that something was wrong, small shareholders of Bibica showed their strong opposition at the meeting, which then made the foreign partner fail to obtain one more seat in the board of directors. Seok Hook Yang, the finance director of Bibica, only got 53.32 percent of votes, while he needed 65 percent votes to become a member of the board of directors.
To date, Lotte has not obtained the power to dominate Bibica, but with its actual power (Lottle is holding 38 percent of the stakes, while the chair of the board of directors is from Lotte), analysts think that Bibica would fall into the hands of Lotte, sooner or later.
In 2007, Lotte penetrated the Vietnamese market through a strategic cooperation agreement, under which Bibica transferred 30 percent of its stakes (4.6 million shares) to Lotte, while Lotte helped Bibica import Lotte’s products for domestic distribution, help Bibica export its products to South Korea, and help Bibica expand its business in the sweets field.
However, Bibica failed to export Lottepie products, because Lotte only accepted the price much lower than the price offered by Bibica (6.9 dollars per box vs 8.4 dollars). Meanwhile, in 2001, when the production line got troubles, Bibica had to pay 7.4 dollars per box to import the products.
Lotte promised to help Bibica expand its business. However, in fact, it only tried to build up and develop a trademark – Lottepie. This means that Bibica has been increasing the sales of products bearing “Lotte” brand, and that Bibica has to spend money to brand for Lotte.
Truong Phu Chien, Deputy Chair and General Director of Bibica, has admitted that the foreign partner has benefited more from the strategic cooperation agreement signed in 2007.
At first, the cooperation agreement was announced as aiming to serve the mutual benefit. However, in the deal, the Vietnamese side has not got benefit. Meanwhile, analysts have warned that the second biggest sweets manufacturer would fall into the hands of the South Korean investor.
The story of Bibica, analysts say, may recall people of the story about the water snake which loses his nest because he allowed the porcupine to live with it.
More seriously, analysts have warned that a lot of leading Vietnamese enterprises in different business fields have been in the danger of being swallowed, while it would be very difficult for them to withstand the attacks from the foreign partners.
In mid March 2012, Thai Nawaplastic Industry (Saraburi) unexpectedly announced that it had become a big shareholder with 16.73 percent of stakes in Binh Minh Plastics (BMP) and 22.67 percent of stakes in Tien Phong Plastics (NTP), the two biggest plastic pipe manufacturers in Vietnam.
Prior to that, Thai Plastic and Chemical (TPC), the parent group of Saraburi, which is now accounting for 50 percent of plastic pipe in Thailand, quietly bought big volumes of BMP and NTP, to become the second biggest shareholder in the two enterprises, just to the State Capital Investment Corporation (SCIC).
This is really a step in TPC’s plan to penetrate the Vietnamese market, while the conglomerate has also revealed the plan to raise its ownership ratio to 49 percent in both NTP and BMP.
Manh Ha
Business & Investment Opportunities
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