In Vietnam, the market for food ingredients is expanding quickly. However, food businesses need to be self-sufficient in raw resources for sustained growth.

The paradox of the shortage of raw materials

Vice Chairman of the Ho Chi Minh City Business Association, Mr. Pham Ngoc Hung Ho Chi Minh City claims that during the last eight months, the food industry has slowly started to revive. Due to the numerous challenges in the export market, businesses in this area have nimbly switched to the local market and successfully capitalized on it.

Statistics show that, in the first eight months of 2022, the industrial production index of Vietnam’s food processing industry increased by nearly 9% over the same period in 2021. Particularly in Ho Chi Minh City. Ho Chi Minh City in the first 8 months of 2022, the index of industrial production of the food industry increased by 11.9%.

Dr. Nguyen Dang Nghia – Former director of the Southern Center for Soil, Fertilizer and Environmental Research, said that the quality of food produced in Vietnam has been increasingly improved. Currently, food manufacturing companies in Vietnam have demanded stricter quality input materials. This is good news for Vietnamese businesses.

However, the problem for the food processing sector today is the supply of raw materials. Although Vietnam has an abundant source of food materials, processing enterprises still have to import 90%. Every year, domestic enterprises have to spend billions of dollars on importing raw materials. This makes the selling price of Vietnamese food products very difficult to compete with other countries with similar products and lose the advantage in the “home field”.

Statistics from Customs show that, by mid-September 2022, Vietnam has spent more than 13.2 billion USD to import seafood, vegetables, and food processing materials. Most products are corn, cashew nuts, seafood, vegetables, etc.

Explaining the cause of this situation, Mr. Le Nguyen Doan Duy – Business Development Director of Asia Raw Materials Group said that at present, Vietnam’s agricultural products are still quite fragmented, small, and lacking links. lasting. This causes many difficulties for production and processing enterprises. “If the company wants to build a processing plant with a capacity of 100,000 tons, the input materials must be at least 200,000-300,000 tons. However, ensuring this volume of input materials is not easy because the raw material areas cannot meet them,” said Mr. Le Nguyen Doan Duy.

Also because production is fragmented, farmers have not yet received benefits commensurate with their efforts, and the forms of large sample fields or new-type cooperatives are not comprehensive…

Building a sustainable raw material area

Supply chain disruption, and a lack of raw materials for production, so many businesses now have to operate in moderation, about 70 to 80% of factory capacity. Even many businesses are now facing the risk of capital loss and contract compensation due to high production costs.

Facing these challenges requires businesses to minimize costs, apply science and technology, and expand import markets. Investment in raw materials from the country is also the solution that businesses are aiming for. Mr. Le Nguyen Doan Duy – Business Development Director of Asia Materials Group said that the company is currently building its raw material areas, creating input materials to supply for production and processing activities. domestic and export. Typically, sugar products from tapioca starch, and whole milk powder… are input materials for confectionery industries.

“Currently, the enterprise is building its material areas, such as the raw material area for coconuts, or the cassava material area outside Nghe An. Through these material areas, enterprises will control and ensure the quality of inputs, and at the same time gradually become self-sufficient in the supply of raw materials, “Mr. Duy added.

According to Mr. Duy, Vietnam has a rich source of agricultural products, if Vietnamese businesses combine with the investment of companies processing food ingredients, they will have the opportunity to add value to agricultural products. This also requires scaling up production, with a higher level of hygiene control than international standards, and professional marketing.

Mr. Pham Ngoc Hung – Vice Chairman of Ho Chi Minh City Business Association said that with fluctuations in the supply chain of raw materials in the world, some Vietnamese enterprises have also turned to the production of food ingredients. in the country, taking advantage of available agricultural resources. “Hopefully next time a new trend in this field will thrive. Because the food ingredients industry is seen as a supporting industry and the Government is very supportive. In the face of fluctuations, the fear of breaking supply chains around the world, the energy crisis… Food companies want to have a stable supply, especially when it comes to raw materials right in Vietnam,” said Mr. Pham Ngoc Hung.

However, for businesses to have the resources to build a sustainable raw material area, the government also needs to have policies to support it deeply and closely. At the same time, building linkages, so that farmers can see the added value of providing processing enterprises to produce raw materials, thereby ensuring sustainable development for the whole country. 

Source: Cong Thuong