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Foreign investors covet food market

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The growth of the Vietnamese food market has made it a magnet for foreign companies.

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Vietnam is an attractive food market

 

According to the Vietnam Trade Promotion Agency, Vietnam’s annual food consumption accounts for 15 percent of GDP and the amount of food consumed in the first nine months of 2017 was 11.9 percent higher than the same period last year.

F&N, Daesang and CJ are the best-known foreign names in the Vietnamese food market with a series of takeover deals targeting Vietnamese companies. 

In 2016, CJ bought Ong Kim kimchee brand and spent VND300 billion to acquire a 4 percent Vissan stake at its IPO. In 2017, it took over Cau Tre Food JSC and renamed it CJ Cau Tre.

A representative of CJ said the group decided to develop a food production complex with investment capital of VND1.4 trillion, comprising food production and processing, research and development, and a food safety center.

After a series of M&A deals and the construction of the complex, expected to be completed by 2018, CJ projects revenue of $700 million from the food industry alone.

Daesang Corp, also from South Korea, spent $33 million to acquire a 13 million stake of Duc Viet Food, a big sausage manufacturer. Other well-known brands such as Cholimex Food and Sai Gon Food all have foreign owners.

According to MOIT’s deputy minister Do Thang Hai, Vietnam’s food industry has been developing rapidly, making up an increasingly high proportion in GDP. This is one of the industries the government has prioritized from now to 2025.

Vietnam is a member of many free trade agreements which creates favorable conditions for businesses to invest in the food industry. Investors can enjoy preferential tariffs and trade liberalization in 50 countries. 

While foreign conglomerates have been expanding their business in Vietnam, domestic businesses, though having good brands, have been losing their distribution networks. 

Since they don’t have good governance skills and long-term development strategies, they have fallen into deadlock which has forced them to sell a stake to raise funds and call for modern governance technology.

Nguyen Lam Vien, general director of Vinamit, a dried fruit producer, commented that Vietnamese businesses have lost the ‘software’ (market, marketing and strategy to conquer consumers’ hearts), and it will be worrying if they lose the ‘hardware’, or manufacturing, as well.

If this happens, Vien said, Vietnamese businesses would have to work for foreign companies and fall into the lowest links of the value chain.

Vietnam has plentiful supply sources of farm produce, but Vietnamese businesses in general can only make simple products, and cannot make products at high processing levels and with high added value.

 

Source: VietNamNet

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