Investment in Shin Ca phe is to treasure the experience gleaned from failures: PAN exec

Tuesday, Nov 12, 2019 07:30

The PAN Group (HOSE: PAN) has just announced its acquisition of a nearly 80 per cent stake in the Shin Ca phe chain. Nguyen Duy Khanh, a member of the BOD of The PAN Group directly in charge of the investment in this start-up, shares his views on PAN's production and trading of speciality coffee.

- Why did PAN decide to enter this field?

Besides based on internal resources, PAN Group has always been ready for M&A plans. In addition to other leading companies, PAN also has a strategy to invest in potential start-ups which are suitable for carrying out the mission of promoting Vietnamese agricultural and food products. It was not until now that we became interested in coffee. The group has signed a memorandum of understanding with Dak Lak Province to build facilities for coffee growing, processing and manufacturing at a cost of around VND1 trillion.

Mr. Nguyen Duy Khanh – Director of the PAN Group

However, this amazing deal is not what we had planned in the beginning. One of our top leaders accidently knew about the inspiring story of Shin Ca phe’s CEO, Nguyen Huu Long, and realised that it could be the vital link in our integrated chain from farm to high-quality consumer goods. And the most important thing is that we and Shin Ca phe share the same mission of promoting Vietnamese agricultural products to the world.

I personally considered this is a good opportunity for both parties and insisted on a direct meeting to get to know more. However, PAN's BOD is also very demanding when it comes to making decisions, especially when everyone sees that commercial coffee is easier to make and more profitable. The difficult path that Shin Ca phe chose, though, is very consistent with what we are trying to build. It was because of this common thinking that we finally received the nod from the board.

- Shin Ca phe is known for its speciality coffee products, but its scale is modest. What does PAN expect from this business opportunity?

Speciality Coffee is a type of coffee that the Association of American Specialty scores 80 points or more on a scale of 100 with very specific points. These are types of coffee grown in different areas with special, ideal geographical and climatic conditions: It can be hot, cold, little rain, or mild climate, can be 1400m or even above 2,000m above sea level. Speciality coffee is different because of the special characteristics and composition of the soil in which the coffee is grown.

Even though coffee is a key agricultural product of Vietnam, it is exported mainly in the form of raw materials and with low quality. Farmers struggle to produce coffee beans, but get little value for them. Meanwhile, speciality coffee is considered a market with high value addition and rapid growth. In 2017 the world spent around US$60 billion on this product.

Vietnamese people consume around 170,000 tons of coffee beans each year, but the raw material is generally of poor quality and production and consumption are fragmented without any domination the market. The PAN Group has long wanted to contribute to supplying top-grade coffee beans from high-quality growing areas in Vietnam to the world's premium coffee markets through brands that are known globally.

Meanwhile, our partner Shin Ca phe has strength in producing and supplying speciality coffee, controlling the quality from the farm stage to processing in its own factories. People often know about two Shin Ca phe shops in the centre of Ho Chi Minh City, but they are just experience spaces to introduce speciality coffee products to the public.

Normally, people have a prejudice in favor of arabica coffee, which brings high value, while Vietnam’s popular robusta coffee is not a speciality. With his knowledge, the CEO of Shin Ca phe wants to change that mindset to increase value-addition for Vietnamese farmers. And Pan Group decided to give them a hand.

An experience space at Shin Ca phe chain, founded by CEO Nguyen Huu Long (inset), in HCM City. 

- The F&B market, especially coffee, is fiercely competitive globally as well as in Vietnam. What makes you believe the project will succeed?

We treasure the value of our partners' previous failures. What is important is Long stood up again after failures. Unlike M&A between leading companies, investing in start-ups never has a firm footing. The best way to limit risk in my opinion is to find partners who have to pay for their mistakes in the past. Those are valuable lessons that help them gain experience to cope with uncertainty in the future.

Specialty coffee products at Shin Ca phe.

Nguyen Huu Long has had more than one fall in his coffee journey. He went to Japan and did other jobs to get the opportunity to learn about coffee. And we believe in his experience. Another thing that makes me very confident is that he has all the qualities needed to be a highly successful person like great passion for his work and thoroughly understanding of the sector he is entering.

- After Shin Ca phe becomes a member of the PAN Group, what synergies ​​can the two parties bring each other?

With the development history of our corporate and member companies, the PAN Group has rich experience in developing cropping areas and in the process of selecting varieties and guiding cultivation. This will further expand Shin Ca phe's growing area.

We also have more than 150,000 sales points across the country and export to dozens of countries, and are ready to give wings to the dreams of the founders of Shin Ca phe. That is not to mention the ability to combine the company's product development (R&D) capabilities with a small company model. Investing in start-ups like Shin Ca phe is an opportunity for PAN to acquire long-term, sustainable growth potential.

Comments (0)