• Diageo takes 24% stake in Halico
  • Will still run separate subsidiary
  • Analysts say scope for closer co-operation
Diageo buys 24% stake in Hanoi Liquor Joint Stock Co

Diageo buys 24% stake in Hanoi Liquor Joint Stock Co

Diageo is set to increase its presence in Vietnam after agreeing to acquire almost 24% of leading local spirits group Hanoi Liquor Joint Stock Co for GBP33m (US$52.2m).

Diageo has agreed to buy 23.6% of Hanoi Liquor Joint Stock Co (Halico) from VinaCapital Vietnam Opportunity Fund, the Smirnoff and Johnnie Walker distiller said today (26 January). It said that Halico is the largest producer of branded spirits in Vietnam, led by flagship brand Vodka Hanoi.

Separately, the two companies have agreed to form a strategic partnership in the country. The moves will enhance Diageo's presence in South East Asia's promising drinks market, although analysts believe the initial material benefit will be small.

Diageo's president for Asia Pacific, Gilbert Ghostine, said: "[Halico's] strong distribution and recent investment into their state-of-the-art production facility speaks of their ambitions in this market. Diageo has many successful partnerships in Asia Pacific and partnerships are integral to the way we want to grow our business in this region."

However, the drinks giant said that it would continue to develop its international spirits portfolio in Vietnam through its wholly-owned subsidiary, Diageo Vietnam. As Halico’s strategic partner, Diageo will assist Halico in enhancing its capabilities across a range of functions, including innovation, branding, supply, distribution and corporate relations, Diageo said.

"Halico has seen double digit growth in the last four years, but we are very keen to accelerate our development as Vietnam continues to offer attractive growth potential," said the director of Halico, Ho Van Hai.

Analyst group Evolution Securities said of the deal: "This is a small, bolt-on deal for the group, which, for now, will have little impact on either Diageo's financials or route-to-market in Asia. However, we suspect there may be scope for closer co-operation, especially in distribution, in this fast growing alcohol market in the future."

Diageo said that it expects to complete its stake purchase in Halico in its 2011 fiscal year, which runs until the end of June.

In 2008, Diageo signed a memorandum of understanding with Halico to handle product development, manufacturing, marketing and sales and distribution of its existing and future products in Vietnam.