Being dependent on raw material import sources: A big challenge for the food processing industry

Many foreign enterprises took part in the Industry Exhibition 2017 (Vietnam Foodexpo 2017) to seek opportunities for cooperation and investment. Picture: N. Hien.

The workshop is a part of the 2017 National Investment Promotion Program held by the Trade Promotion Agency – Ministry of Industry and Trade in coordination with the Foreign Investment Agency – Ministry of Planning and Investment and other relevant organizations. The workshop is one of the important activities in the series of events of the Industry Exhibition 2017 (Vietnam Foodexpo 2017).

In recent years, the food processing industry of Vietnam has tended to growth strongly, step by step supplying many products with high competitiveness, dominating the domestic market and increasing exports. The Vietnam's annual food consumption is estimated at about 15% of GDP, and in the first nine months of 2017, it has grown by 11.9% compared to the same period in 2016. However, the increase in production of the food processing industry only increased by 9%, still not meeting the demand of the domestic market.

Speaking at the workshop, Deputy Minister of Industry and Trade Do Thang Hai said that the food processing industry in Vietnam has steadily increased as the increase of the average industrial production index reached 6.94% per year for processed food and 9.48% for beverages in the period 2012-2016. However, the Vietnam food - beverages market is evaluated that there is a lot of potential. In fact, the continuous growth in recent years shows that there are still plenty of surplus areas for enterprises to take advantage.

A recent report of the Business Monitor International predicts that the growth rates of the Vietnam food and beverages industry will remain at the compound annual growth rate of 10.9% in the period 2017- 2019 thanks to the improvement in income and the higher comsumer value trend. Notably, the Business Monitor International also forecasts that the milk industry’s growth rate is at 10%, alcoho beverages is at 11.1% and the consumer demand will concentrated on the the basic food and beverage group.

Mr. Hai said that, beside the investment to exploit the domestic market, the potential of food exploiting and processing of Vietnam to export is relative good. Now, Vietnam is always one of the largest exporters of rice, coffee, cashew… The exports of agricultural groups in 2016 reached over $US 15, increased by 7.7% compared to 2015. In which, there were many commodities groups having a high growth rate such as vegetables and fruits, pepper, cashew, coffee…

Vietnam’s agricultural products have been exported to over 100 countries in the world, meeting the high standards of these countries. For example, Starbucks are use Arabica coffee origining from Da Lat in its 21,500 locations in 56 countries in the world. Meanwhile, only 3% of coffee in the world can meet the Starbucks’s standards.

"This proves that Vietnam's food materials now can meet the quality requirements of the most prestigious food and drink companies in the world," Hai said.

However, Mr. Bui Truong Thang, Deputy Director of the Industry Department under the Ministry of Industry and Trade, said that beside the opportunities and potential, the food processing industry is facing great challenges. Specifically, the food processing industry is highly competitive and increasingly fierce. At present, although food and beverage enterprises in the country have established a certain position in the domestic market, most famous food and drink manufacturers in the world are present in Vietnam, bringing pressures on the competitiveness.

Vietnam's participation in FTAs, the reduction of import tariffs on food and beverages under the commitment will greatly affect the competitiveness of domestic products and imported products. In addition, strict requirements on technical standards, food safety, packaging and labeling are also significant barriers when enterprises in the industry want to penetrate the other markets.

In particular, Mr. Thang emphasized the lack of raw materials for domestic production and the imports of raw materials accounting for a large proportion. This leads to the inability of enterprises to have the quantity, quality and price of raw materials affecting production and business activities.

For example, raw milk jusst meets about 40% of the demand for production and consumption in the country, the rest have to import. Import turnover of milk and dairy products annually is about $US 1 billion. In raw materials for brewing, except small quantities of rice in the domestic production, the remaining beverages and hops are completely imported.

Vietnam has not developed oil-bearing trees, so every year, enterprises have to import more than 90% of raw materials to refine into cooking oil for domestic consumption and exports. Raw materials for the production of confectionery are flour, flavoring are also imported.

At the workshop, experts and representatives from domestic and foreign enterprises exchanged and discussed the great investment opportunities in raw material areas, large and potential domestic market in Vietnam, the trend of increasing processing products and the State's policy support. At the same time, experts also pointed out investment trends in the food processing industry, the application of new technologies, the increase of added value for processed food products, the development of new products in the food industry of Vietnam...