VietNamNet Bridge – Truong Phu Chien, General Director of Bibica, a sweets manufacturer, has officially admitted that Bibica made a right move when signing the cooperation contract with Lotte which has exposed its attempt to swallow Bibica.

Lotte cherishes ambitious business plan in Vietnam 

Mr Truong Phu Chien, General Director of Bibica

In the interview given to Thoi bao Kinh te Vietnam, Chien said that the cooperation with the South Korean group was a big blunder.

When asked about the result of the 5-year cooperation with Lotte, Chien said that the initial expectations Bibica put on the cooperation deal have been attainable.

Joining hands with Lotte, Bibica expected a multi-field cooperation between the two partners, from the management, technology to the distribution market. However, the only thing Lotte has shown to the Vietnamese partner over the last five years is its attempt to turn Bibica into its subsidiary.

Chien said that the moves taken by Lotte since the day the cooperation agreement was signed show that they want Bibica to become the unit which makes products and develops brands for Lotte.

Bibica installed the Lotte pie production line, but it was not allowed to develop the products it wanted, while it could only make Lotte’s products. Bibica could not do anything relating to the input things, could not diversify the products and increase the capacity of the production line.

As for the project in Hung Yen province, Bibica planned to conduct the research and development (R&D) work to develop new products. However, Lotte said it wanted Bibica to conduct the research work based on the existing products of Lotte. This would restrict Bibica’s creativeness of generating new products that fit the market’s tastes.

Chien has affirmed that the Lotte-Bibica contract on cooperating to make Lotte pie would get expired by October 2013, and that Bibica would refuse to extend the cooperation, as it understands that the continued cooperation would not benefit Bibica.

It seems that Lotte now considers Bibica as one of its subsidiaries already; therefore, it has been trying to impose its intentional plans on Bibica. Especially, Lotte, which now holds 38 percent of Bibica’s stakes, attempted to change the name Bibica into Lotte-Bibica at the shareholders’ meeting in March 2012. However, the attempt failed.

Commenting about Bibica’s case, observers say Bibica has obviously tasted the bitterness from the decision to join hands with Lotte. However, luckily, Bibica is still believed to have the opportunity to terminate the unbeneficial cooperation affair.

They also said that Bibica’s case has made many other businesses, which plan to sell stakes to foreign partners, shrink back with their plans. The businesses have learnt a lesson that they may not receive the cooperation and support as expected, but may see their businesses to be taken over.

Chien said that Bibica made a wrong move when it only set up the minimum amount of stakes the foreign investors can have, but did not set up the maximum amount. In case of Bibica, Lotte may increase its percentage of stakes as it wants.

If Vietnamese businesses set up the ceiling foreign ownership ratio in the business cooperation contracts, they can prevent the foreign partners from controlling the businesses.

Experts believe that the foreign ownership ratio of less than 25 percent would be save for the Vietnamese businesses, while businesses should not allow foreign partners to hold more than 34 percent.

Doanh Nhan