On 16 May, Groupe SEB (SEB) announced the acquisition of 65% of Vietnamese company Vina Electric Fan Co Ltd (Vina). Through this deal, SEB's declared mid-to-long-term focus will be on building Vina's brand equity outside the Vietnamese market and tapping into the fast-growing and high-value Southeast Asian air treatment products market.
The announcement of the acquisition of Vina by SEB is another clear indication of the French manufacturer's intention to expand its presence in high growth markets. Euromonitor International analyses the deal and investigates its impact on Asia Pacific's competitive landscape.
The deal in context
The deal does not come as a surprise. As noted by Euromonitor International back in February 2011 (see the article “Groupe SEB Ups the Ante in China by Raising its Stake in Supor”), SEB's focus in Asia Pacific is currently mainly concentrated on China. In the region, however, the company only commands a 3% share of the overall small appliances volume sales. Over the next five years Thailand, Vietnam and India are expected to underpin growth in the Asia Pacific appliances, but SEB's presence in all three small appliances markets thus far has not been particularly strong.
Through the Vina deal, the French company will expand its presence in the fast-growing small appliances market in Vietnam, jumping in 2011 from 23rd to sixth place in retail volume terms. Following the acquisition, SEB will strengthen its foothold in a market of nearly 87 million Vietnamese consumers, where volume sales of small appliances are expected to increase at a 9% CAGR between 2010 and 2015 and cooling fans is predicted to grow at a 15% volume CAGR over the same period.
Vina is the leading cooling fans manufacturer in Vietnam, with a volume share of 24% in 2010. Over 2009-2010, the company made volume share gains in desk fans and standing fans, thanks to a broad portfolio that includes several different product types and models and covers all price segments. Aside from ceiling, desk and standing fans, Vina also offers tower, wall-mounted, humidity, industrial, orbit and box fans.
Vina has two factories in Vietnam, with a daily production capacity of around 5,000 units. After developing a solid position in its domestic market, Vina turned its attention to export markets. In 2010, Vina's Asia fans were exported to Cambodia, Bangladesh, Malaysia and South Korea. Vina also exported premium fans to the US, although exports only accounted for 5% of the company's overall revenue in 2010. Through the acquisition of Vina, SEB will try to expand in Southeast Asia, but Euromonitor International has not ruled out the possibility that Vina's Asia fans may also enter Europe during the mid-term.
Vina's Asia brand has a strong reputation for quality that gives it an edge over cheaper Chinese imports. Strong brand awareness in the domestic market has also been strengthened thanks to a successful marketing campaign emphasising Asia's 'high-quality, affordably-priced Vietnamese goods'. The company's relatively low labour costs will enable SEB to compete against Chinese products on price, while benefiting from a perceived higher quality, which will place it in direct competition with Japanese and South Korean companies.
Vietnamese small appliances market into context
What the future holds
Although strategic in the mid-to-long run, the deal does not have the power to reshape the landscape in the region, and SEB may need to seek further expansion to preserve its position. In Asia Pacific's small appliances market, SEB remained in seventh place in 2010, holding a 3% volume share. Its direct European competitor, Koninklijke Philips Electronics NV, ranked third, commanding a 6% volume share within the small appliances market, thanks to a wider regional footprint, which includes the powerhouse India.
The question is: will SEB be looking to a similar acquisition-led strategy in India? The Indian small appliance market is at present fragmented, with the two leading manufacturers, Bajaj Electricals Ltd and Sunflame Enterprises Pvt Ltd, in 2010 only posting a combined volume share of 12.7%. This represents a potential opportunity for any leading small appliance manufacturers and we may see further M&A activity in India during the course of 2011.