Demand for top meat drives funding

Those involved in meat retail employ various strategies depending on location, trade type, and more, photo: Le Toan

Last week, AVG Capital Partners, a private equity fund from Russia, signed an MoU with Thanh Hoa People’s Committee to develop a $1.4 billion pork processing complex in Nghi Son Economic Zone.

With an area of 1,000 hectares, the complex has a designed capacity to produce five million hogs a year. It will boast 43 commercial pig farms and three hybrid pig farms, a mixed feed factory with a capacity of two million tonnes a year, as well as a slaughterhouse and processing plant with a capacity of 600,000 tonnes a year.

Phong Quach, head of business development at Ipsos Strategy3 in Vietnam, said that as a general principle, any high-tech investment in agriculture is good for Vietnam. This is because the Vietnamese agricultural sector is still trying to attract more technology that can provide higher output for both the domestic and export markets.

The Ministry of Agriculture and Rural Development has identified in its objectives for 2030 that it wants to strive for high-value added agricultural outputs rather than volume.

Quach added, “When we take a closer look at different points in the value chain and investments, there are different dynamics in the competition depending on the node we review. The latest investment from AVG Capital Partners is a feed-farm-food (3F) investment encompassing the entire production chain. However, the output capacity of the processing facility is much higher than its supply, with 600,000 tonnes of processed meat against five million hogs a year.”

This would suggest that there is still significant opportunity for Vietnamese farms to supply this facility. If AVG Capital Partners is looking to source hogs from Vietnamese farms, this would be a vote of confidence for local farming while epidemics still wreak havoc in the global husbandry industry, Vietnam included, according to Quach.

Another player, CJ VinaAgri, a member of CJ Group in Vietnam, has officially launched its clean meat retail chain Meat Master in Ho Chi Minh City. The chain supplies quality meat produced under the 3F model. The move is part of CJ Group’s efforts to increase its presence in Vietnam and tap into the promising market.

C.P. Group from Thailand is meanwhile investing in its retail channel to deliver chilled and processed meat like Fresh Mart and C.P. Pork Shop. The revenue of C.P. Vietnam’s farm and food business has increased to $640 million in the recent two quarters, with earnings from the feed segment reaching around $200 million per quarter. C.P. has the largest farms in the country with an output of 16,000-17,000 pigs a day.

Dutch animal feed giant De Heus meanwhile has joined forces with local Hung Nhon Group to develop the DHN Dak Lak Agricultural High-Technology complex.

The project is expected to form a disease-free zone and provide high productivity pig and chicken breeds to the market. The $66-million venture will feed 2,500 grandparent and great-grandparent pigs, as well as 25,000 parent and gilt pigs to the market when it is launched.

Vu Manh Hung, general director of Hung Nhon Group said, “We will invest in a clean meat store chain with a closed process from breeding and processing to distributing products directly to consumers to reduce intermediate and transport costs.”

Key players share the approach to raising quality and standards to achieve success, reacting to a strengthening demand among Vietnamese consumers – especially the middle class – for clean and safe food. The Vietnamese meat market is huge and fresh, high-quality, and high-st,andard products make up only a fraction of the total market so the sector will continue to attract investment.

Quach pointed out that the major difference among players lies in their retail strategy. In Vietnam, based on Ipsos’ experiences, there are three dominant meat retail strategies, including one that leverages modern trade, one that focuses on wet markets, and one that works independent from the marketplace.

The first two strategies have a clear focus on customer base and emphasise convenience, which is critical for Vietnamese consumers. Locations are picked through researching consumer habits to create the shortest possible meat shopping journey within the total shopping journey.

“Meanwhie, the retail format of CJ Meat Master follows the third category. Its first shop in District 1 of Ho Chi Minh City is at a spot where there are no wet markets, convenience stores, or supermarkets nearby. This means that the retail format does not intend to leverage any available food and meal shopping traffic nearby and instead take advantage of other types of traffic and strategic purposes,” Quach added.

Ahead of the game, Masan MEATLife, a subsidiary of Masan Group, launched its certified branded chilled meat line MEATDeli in 2018 using European processing technology and standards. In particular, Masan has stepped up its game by acquiring Vingroup’s VinCommerce and VinEco arms, putting MEATDeli products on the shelves of VinMart.

Both the clean meat and processed meat markets are still very small in Vietnam but the growing middle class in Vietnam sets it up for tremendous opportunities.

“Therefore, it is critical for local and foreign players to understand the needs of Vietnamese consumers and provide a quality offering that takes into account local shopping culture and craft a long term journey for their shift to clean and safe meat production,” Quach concluded.