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Nipping crises in the bud

Released at: 08:50, 20/10/2019

Nipping crises in the bud

Photo: Viet Tuan

Local beverage brands need to take consumer feedback on board to avoid any fallout from product crises.

by Nghi Do

With production having begun in 1994, the Tan Hiep Phat Beverage Group (THP) is now one of Vietnam’s largest fast-moving consumer goods (FMCG) companies. Taking on obstacles and navigating a brand crisis over recent years in a particularly fierce market, the local brand has posted outstanding revenue and profit figures in the tens of millions of dollars. The family-owned group began by producing green tea products and eventually added herbal tea, sports and energy drinks, soya milk, and water, which are delivered throughout Vietnam and 20 overseas markets, including the US and the EU. 

Crisis overcome

Focusing on nature-based products since its establishment, THP recorded double-digit growth in the 2012-2015 period and held the largest market share in the country’s beverage industry. But it faced a lawsuit in 2015 when a local consumer found a fly inside an unopened bottle of its Number 1 Energy Drink and sued for VND500 million ($23,300). While the company won in court, CEO Tran Qui Thanh acknowledged at the time that the episode had dented its brand image. With a decline in demand for its bottled tea products, 2016 revenue and profit fell significantly. The company, however, has recovered spectacularly since and rebuilt its image among Vietnamese consumers. 

As Vietnam’s beverage industry is forecast to see among the highest growth in the FMCG sector, it has become attractive to foreign investors from the US, the EU, and Japan. Money was poured into building production factories and expanding their brand image in the country last year. As such, competition in the market became much fiercer, especially for soft drinks, with both local and foreign brands focusing on diversifying products and prioritizing quality and hygiene. THP caught on to the trend early, putting four factories into operation in Vietnam’s three regions.

Its latest opening, the country’s largest beverage plant in the Mekong Delta’s Hau Giang province in March, is part of plans to increase production capacity from 1 billion liters to 3 billion by 2023. The plant uses modern Aseptic filling lines from GEA Procomac, a technological leader in sensitive beverage filling. The technology allows THP to produce nature-based products such as Dr. Thanh Herbal Tea, Number One Energy Drink, Zero Degree Green Tea with Lemon, and Zero Degree Macchiato Milk Tea. CEO Thanh has spent $300 million on ten production lines from GEA over the last 13 years, as it is the most advanced technology in the market and guarantees bottling in a sterile and hygienic environment. This also helped the brand boost its growth in Vietnam and overseas, with an aim of exports representing 10 per cent by 2023 and revenue standing at $3 billion by 2027. 

Brand protection

THP joins other successful brands in facing and overcoming a crisis, local branding experts said. Competition in the industry can create incidents, especially in the era of the internet, where brands can be badly affected by just a small mistake or by false media reporting. According to marketing expert Mr. Hoang Tung, the best way to overcome a crisis is to avoid it in the first place. “However, if a crisis does occur, brands that don’t resolve the problem at the source or try to avoid public scrutiny will find themselves in an even worse situation and may be subject to false reporting,” he added. “Building strong brands can maintain trust among customers and the public in such instances.”

Brand safety is becoming a central concern in almost every industry due to the rise of digital marketing. Given the challenge this poses to every business, brands should be fully prepared to tackle crises before they even occur or, at least, from the outset. “For Carlsberg, managing crises while having diversified brand portfolios is scarcely a challenge, as we are always prepared and have a standardized crisis management manual, used both locally and globally,” said Mr. Stefano Clini, Managing Director of Carlsberg Vietnam. “Dozens of scenario planning and training sessions are required, but this is a must if you want to move forward in this new era.”

THP has spent 18 years building its brands, including Number One, Zero Degree Green Tea, and Dr. Thanh Herbal Tea, and success has been a long journey, according to Deputy CEO Ms. Tran Uyen Phuong. “Brand safety is more difficult than branding,” she told a branding conference in April in Hanoi. 

Mr. Nguyen Dang Hien, General Director of the Tan Quang Minh Manufacturing and Trading Co., which owns the Bidrico brand, told VET that branding and brand safety are vital for any enterprise and his company boosts spending on the two tasks every year. “Branding nowadays is more difficult than previously, as we have changed not only our product structure, designs, and technology but also our communication channels,” he said. “When young Vietnamese went digital, we had to follow them as target consumers. We will invest more than ever in digital marketing over the next three years.”

Digital disruption has changed the way brands communicate with consumers as well as how consumers form opinions about companies, according to Mr. Clini. From a positive perspective, online channels are opening up more opportunities for companies to reach more customers in a more effective and comprehensive approach. However, the nature of the digital environment also poses certain challenges to brand safety that requires brands carefully consider and act appropriately, he added. Whether connecting traditional businesses to digital platforms or moving towards digital transformation, the customer experience is still the focus of every brand. Digital disruption has significantly transformed customer habits, which requires brands embrace the new market reality and provide an unmatched experience. 

Given that brand safety is problematic in the modern era, brands need to be prepared to confront risks immediately, but there is no fixed formula, Mr. Clini said. 

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