Foreign investors pour money into food processing, drinks industry

The food processing and drinks industry has seen growth of 7 percent in recent years, with more and more foreign investors deciding to pour money into the sector.

The food and drinks sector is now taking the largest proportion of monthly spending for the Vietnamese, around 35 percent, Pham Thanh Kien, Director of the Ho Chi Minh City Industry and Trade Department, was quoted as saying in the Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

In HCM City, food and drinks represented 17 percent of total retail revenue last year.

Export turnover for food processing and agricultural products totalled more than USD 40 billion last year.

Vietnamese products have successfully reached many technical standards and quality barriers and are present in 200 countries, including the US, Japan, the Republic of Korea and the EU.

For foreign investors, the abundance of agricultural products and foodstuff in the country is an advantage. Vietnam is considered one of the top five food baskets in the world and one of the top 15 largest countries by agriculture exports.

The young population and the rising popularity of processed food are two other factors influencing investors' decisions.

For the last five years, many international food-processing companies have and expanded their production in Vietnam.

In the coming time, the Government plans to withdraw its shares in major food processing and drink companies like Vinamilk or Habeco and create more opportunities for foreign investors.

Foreign investors have also invested in and expanded their trade centres, supermarkets and convenience stores, which have all helped to increase consumption of processed foods.

Multinational retailers like Circle K, 7-Eleven, B's mart, Family Mart, MiniStop, Big C, Aeon and Lotte now have a total of 3,000 convenience stores, 300 trade centres and supermarkets in Vietnam.

This also means more competitive pressure for the domestic food processing and drink manufacturers, said Ly Kim Chi, Chairwoman of the HCM City Food and Foodstuff Association.

Currently, 98 percent of domestic manufacturers are small and medium size with limited financial resources and poor competitiveness.

Foreign distributors and manufacturers have a strategy to dominate the Vietnamese market. Distributors have reduced expenditures to the producers, while the latter have dropped selling prices or increased promotions, she said.

Foreign distributors have also established barriers like quality and packaging standards and many others so they can refuse domestic products, she added.

To compete on the home ground, domestic enterprises must increase their production capability, quality and packaging to meet international standards, said Huynh Thanh Dien from HCM City's University of Economics.

For long-term development, domestic enterprises should join international supply chains. Authorities should also apply the same incentive policies for foreign and domestic companies, he added.

Many foreign companies receive preferential treatment on land rent, taxes and technology imports.

Authorities should also prevent unhealthy competition when foreign enterprises work together to try to eliminate local ones and engage in dumping practices, he said.

Vietnam has 5,500 food and drink manufacturing enterprises, with 2,000 of them located in HCM City.

Source: People's Army Newspaper