The year 2016 marked our third consecutive year of transition. Now, looking back on the past few years, I am proud to report that we have made significant progress in creating a new direction for our business.
Firstly, we successfully completed the Transformative Change which was about redefining, internally, how our company operates and strengthening our platform for growth. Building on our years of experience engaging in the food business, we have been able to develop an extraordinary range and depth of core competencies: a deep understanding of what it means to orientate a business around the customer, a relentless passion about developing talent from within, and an effective management who can lead through complex operating environment with great team work.
Secondly, we embarked on an evolutionary change which was about building business with unserved or underserved customers under the simple, overarching “Food & Flavor” theme. This was achieved through a channel-focused strategy in which organic and inorganic initiatives were deployed. More specifically, after over a decade of nurturing our ice cream and yogurt business, we have been able to develop a complete end-to-end cold chain system that does not only help us dominate the ice cream market but also allow us to extend into the frozen food sector where Vietnamese customers are now coming to realize the benefits of consuming readily available frozen food. At the same time, we also strengthened our position in the packaged food category through the acquisitions of Tuong An (TAC) and Vocarimex (VOC) - both top-tier edible oil companies in Vietnam.
The successful evolution of ours were founded on a disciplined approach of seeking opportunities for valueenhancing growth and cost optimization through capital investments. Our strong financial position combined, product innovation and strong execution platform remain the core strengths of KDC as well as the primary source of my confidence in our future.
As I mentioned back in 2015, our strategic orientation of moving towards a food conglomerate inspired our strategic choice - shifting from Value Conversation to Value Creation. This starts with putting consumers at the heart of our operational focus and revolves around realigning our channel to deliver the right products to the right customers in the right place at the right time. Being able to do this will allow us to maximize value to our shareholders. We measure our commitment to shareholder value through total shareholder return. This requires sales growth, margin improvement, and increased asset efficiency. We are making significant progress. By the end of fiscal 2016, we managed to deliver over VND 2,239 billion in group sales, which is 24.3% ahead of our initial target. We were also able to deliver a 1.7% improvement in gross margin of our frozen food business. While these results are promising, we know we can do more. Our business units will be guided by disciplined strategies and operating plans that focus on the most important choices for creating value, ensuring that the optimum balance is struck between short-term return and long-term growth. We are committed to doing what it takes to deliver our shareholders consistent, reliable and sustainable returns over the long-run.
The last few years have seen us successfully navigate through evolutionary changes, presenting us with significant strategic optionality. We have expertise and capital, both human and financial, which can be leveraged beyond Vietnam, in different categories of consumer products and through different channels. The development of these opportunities is truly fundamental to our long-term growth. With the combination of our existing business and new acquisitions, we have now secured the right scale within two distinct distribution channels - frozen/ chilled and packaged.
In the frozen food business, while sustaining our leading position in the ice cream market, we have opportunities to build scale across adjacent categories. In the packaged food business, we are well-positioned to lead the edible oil market through a well-balanced product portfolio and strong platform, driven by focused investments in innovation and execution. It is clear that combining the two businesses under one group creates the potential for us to be one of the largest consumer goods companies in Vietnam and allows us to realize our ambition to dominate the Vietnamese kitchens, from refrigerators to cupboards. More broadly, our goal is to fill our channels with a larger range of products and provide the consumers with healthier, more nutritious, and more convenient choices.
In pursuing our goals, the most important resource we have is our people. They are the ones who work to anticipate and meet the needs of customers. They bring tremendous experience and expertise to every part of our business. They are committed to win and they share the drive to create an impact on consumers, which not only contributes to our success but makes our company what it is. Through the acquisition of TAC and VOC, our family has grown larger in size and wider in experience; making us much stronger and all the more passionate. While it has been a demanding year and will continue to be so as we integrate the different cultures and business practices under one group, our future growth continues to rely on our scale and agility, driven by our talented team of professionals to design processes and relationships to grow the business. Therefore, we have put forward what we term “Designing for Success” which lays the foundation of integrating the many different pathways across the Group and aligning both people and processes in preparation for sustainable growth. It is all this, taken together, that fuels my confidence in our company’s future.
On behalf of the Board, I want to once again thank you for another year of support and commitment. I want to especially thank our stakeholders, including the consumer of our products, our business partners, our team and our investors for their unwavering support of our Group. This support has emboldened us with confidence to continue to execute the Food & Flavor strategy. We wish you all a healthy and prosperous new year and look forward to working with you all.
Tran Kim Thanh