Vietnamese are eager to embrace Western products from luxury cars to mobile phones to soft drinks, but are learning some tough business lessons along the way.
Coca-Cola was one of the first US companies to enter Vietnam when the country began opening up after years of socialist isolation in the early 1990s. Today, the brand has successfully penetrated the country, and the distinctive logo can be seen from north to south.
But for hundreds of Coca-Cola distributors, the market economy has turned out to be a bit too real with bad debts accrued since 1997 being suddenly recalled by the company.
Le Hoai Giang, from Hanoi law firm Investpro, has been tasked by Coca-Cola with trying to recover some US$10 million of debt from around 200 distributors in the north and center of Vietnam.
Between 70 and 80 percent of the money owed comes from bottles that had been supplied by Coca-Cola, but not returned, he said.
"Most of the clients who have bad debts do not have enough awareness about the laws in general, and about commercial law. They did not respect the contracts they signed with the company," he said recently.
Distributors claim that, new to the market economy, they didn't fully understand the contracts they were signing with the soft drink giant.
"The company's sales staff only explained to us the positive side of the contract, and ignored our obligations," said Nguyen Dac Uy, a distributor in Hanoi who owes Coca-Cola US$44,000.
"We distributors had almost no experience in doing international business deals. We have to admit that we were very careless signing contracts with the company without fully understanding its terms which were not clear to us at all," Uy said.
David France, Coca-Colas general director in Vietnam, declined to be interviewed, but did respond to questions sent by fax.
France dismissed out of hand claims that the company had undertaken sharp business practices with distributors.
"Conditions are clearly laid out. We are patient and understanding in our dealing. We follow the law and reserve the right to legal means if we observe unfair practice by some partners," he said in the written answers.
The director of a distribution company that owes US$38,000 sees things differently, claiming that he was encouraged to run up debts to ensure Coca-Cola's share in the emerging market.
"I became worried when I realized I had got in debt to the company, but Coca-Cola's sales staff eased my concerns by saying that the company let me borrow big quantities of bottles to develop our sales and expand the market, and would never claim our responsibility for these bottles," said Nguyen Tat Thanh, the director of Duc Thanh Trading and Service Company in Hanoi.
Once eager to sign up with the massive multinational, distributors now believe they were short-changed by Coca-Cola.
"Old distributors like us now realize that we earn almost nothing as the profit margin given by the company is too small," Thanh complained. "We could only earn 10 cents per 24 bottles excluding our delivery and storage costs."
All the court cases against distributors to date have ruled in favor of Coca-Cola, and Investpro lawyer Nguyen Thi Mai Phuong hopes that the firms debt management will be handled differently in the future.
"The problems didn't just come from the retailers. Of course it was more the clients fault than the company's, but the company should have a better way of debt management which could limit their business risks," she said.
As hundreds of distributors scramble to pay back the money they owe, some are lamenting ever getting involved with the company.
"Coca-Cola did not care about how we managed to recover the bottles, they just wanted us to expand their market to help them compete with Pepsi," Uy said.
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