Report (80).pdf

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Food and Beverage

Gross margin may improve in Q2

Revenue recovered in 1Q22
Food and beverage (F&B) consumption continued to recover in 1Q22, with varying degrees in each industry group. Based on our estimates, the total revenue of the four listed dairy companies continued to grow. Revenue growth in 1Q22 was 5.9% yoy, lower than 10.2% yoy in 4Q21. The total revenue growth of 14 listed breweries on the three exchanges continued to maintain the recovery momentum from 4Q21, with total revenue growing 15.3% yoy, compared to 10.7% yoy in 4Q21.

Gross margin ratio diverged in the context of strong increases in input material prices in 1Q22
The gross margin ratio of the dairy industry narrowed in 1Q22 due to weak sales growth, which could not offset the strong increase in input material prices. The gross margin ratio of the dairy industry decreased by 2.8 percentage points compared to the same period, and the gross margin ratio of VNM decreased sharply by 3.1 percentage points compared to the same period in 1Q22 due to a 30-40% increase in imported milk powder prices compared to the same period in 1Q22. In contrast, the gross margin ratio of the beer industry increased by 1.7 percentage points to 27% in 1Q22. The gross margin ratio of SAB improved by 0.6 percentage points compared to the same period, thanks to good price increases, although raw material prices such as aluminum and malted barley increased.

Gross margin ratio may recover in 2Q22F
We expect the recovery momentum of F&B consumption to continue in 2Q22F and return to pre-Covid levels. From our perspective, demand for the F&B industry will continue to recover, especially beer consumption. The reopening of all economic activities will drive household income to continue growing in 2Q22F, so F&B companies can more easily increase prices to offset the surge in raw material prices. Therefore, we expect the gross margin ratio to improve in 2Q22F for listed dairy and brewery companies, thanks to signs of cooling raw material prices and more impact from price increases.