Vietnam thirsts for Japanese tea
Suntory finds success in merging homegrown methods with local tastes
KAZUKI NAGOYA Nikkei staff writer
TOKYO -- Suntory Beverage & Food has raced past local rivals to claim the top spot in Vietnam's tea beverage market via bottled oolong manufactured using the same quality standards and brewing methods as those in Japan.
A mom and pop shop in Ho Chi Minh City, Vietnam's largest city, has a four-tiered rack displaying an array of Suntory's TEA+ oolong tea. The product was developed in 2013 to meet local market preferences but uses brewing techniques nurtured in Japan.
Suntory anticipated that the Vietnamese people would become increasingly health-conscious as the country's economy grows rapidly. So the company turned to its Black Oolong Tea, which is popular in Japan because it has been certified by the health ministry as FOSHU, a food for specified health uses.
TEA+ is the local iteration of Black Oolong Tea but with sugar added. The healthy property of the beverage lies with a functional component known as oolong tea polymerized polyphenols, or OTPPs, that help prevent fats from being absorbed into the human body. The 455-milliliter bottle has a price tag of 45 yen to 75 yen (39 cents to 66 cents), which is about 20% higher than local rivals' products.
Despite the cost, however, the sheen of Japanese quality has boosted its popularity.
Before Suntory came along, two green tea brands from local makers accounted for the largest shares in Vietnam's tea beverage market, and few makers sold oolong.
Suntory ran with the idea of sticking with Japanese tea leaf quality standards and proceeded to snap up market share from rivals, including the Coca-Cola Company. It now has 30% of the market and is gradually expanding.
This winning formula focused not only on the ingredients, but also the methods.
At a Suntory plant in Bien Hoa, Dong Nai Province, about 30km northeast of Ho Chi Minh City, a large tilted container is pouring a stream of oolong tea into a strainer. After the leaves are removed, the beverage will be packaged in plastic bottles. This follows the exact same manufacturing method used for Suntory's Iyemon green tea sold in Japan.
While some local rivals dissolve tea powder in hot water to make their products, Suntory's plant extracts components by boiling tea leaves in water. The same extractor equipped in Japan is used in the process.
A manufacturing director at the plant said the company "puts weight on the flavor of the tea even though the process requires a lot of time and effort."
Suntory's strength lays in the small grocery stores and other retailers that constitute 70% of sales outlets in the Vietnamese market. The company can stay away from extreme price-cutting competition, because large-scale retailers are still in the developmental stage. Suntory is focused on fostering the brand names of its products with an eye on the long term.
In 2013, Suntory entered the Vietnamese market via a joint venture with PepsiCo, the U.S.-based food and beverage group. Suntory now controls the management of PepsiCo's local unit through a majority stake.
Teaming with PepsiCo, which has established plants and a sales network in Vietnam, gives Suntory a competitive edge, but the company also has another element that supports growth: the Japanese flow. A massive product lineup is yet another strength.
In addition to PepsiCo's beverage products, Suntory also sells C.C. Lemon, a carbonated soft drink.
At present, sales of Suntory brand products in Vietnam account for 10% in the joint venture with PepsiCo in the country according to Suntory Beverage & Food Asia CEO Kazuhiro Saito, who leads sales strategy in Asia. He said the company wants to "double the rate as soon as possible."
According to British research company Euromonitor International, about 4.6 billion liters of soft drinks are sold annually in Vietnam. That is about 20% of the figure for Japan.
While the annual average growth rate in the five years through 2015 remains almost flat in Japan, the Vietnamese market has recorded growth of slightly less than 20%, buoyed by a sharp population increase.
This makes beverage makers thirsty.
Suntory's Asian sales for the year ended December 2016 totaled 164.3 billion yen, or a little more than 10% of total sales. Vietnam accounted for 40% of that.
While the company's operations throughout Asia, including Indonesia and Thailand, are just taking off, Vietnam can be considered its bridgehead.