Foreign involvement in food production takes big strides

August 16, 2023 | 09:00
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Vietnam is continuing to be an attractive destination for foreign enterprises in processing and supplying food ingredients, with more cooperation prospects emerging.
Foreign involvement in food production takes big strides
Foreign involvement in food production takes big strides, Source: VTC16

About 700 businesses from 20 countries and territories will come to Vietnam in mid-August to seek the supply sources from Vietnamese agricultural and food producers, according to the Food and Foodstuff Association (FFA) of Ho Chi Minh City.

According to FFA vice president Nguyen Dang Hien, the interest of foreign businesses will mainly focus on beverages, ingredients and food additives, and seafood, besides other fields such as nutritional food, drugs, and functional foods.

“Vietnam’s processed products and food ingredients are highly appreciated by the world market for both quantity and quality, in which there are very fastidious markets with technical barriers in terms of quality, food safety and hygiene such as the United States, Europe, Japan, and South Korea. The halal food market also highly appreciates the potential of Vietnamese products,” Hien said.

Possessing an abundant source of agricultural raw materials, Vietnam has many advantages to developing the food processing industry. According to statistics from the Ministry of Industry and Trade, Vietnam’s food production and processing sector accounts for almost one-fifth of the value of its processing and manufacturing industries.

Fruit and vegetable exports reached about $3.3 billion, of which processed items are likely to be worth more than $1 billion, accounting for about 30 per cent in 2022. Vietnam is home to around 850 aquatic processing factories of which nearly 700 were granted EU export codes, up to quadruple compared to Thailand, India, and Indonesia.

Gunther Beger, managing director of the United Nations’ Industrial Development Organisation, said Vietnam has made a remarkable development in food and foodstuff production, especially in processing. “I think Vietnam is on the right track,” commented Beger. “We have all seen a spectacular change from an importing country to becoming the world’s leading producer and exporter of food and foodstuffs, with a wide range of export-leading agricultural products such as rice and coffee.”

The food industry is also one of the key industries prioritised for development by the Vietnamese government towards 2025, with the goal of bringing the export turnover of agriculture, forestry, and fishery value to $65-70 billion by 2030.

In particular, free trade agreements have increased market access for Vietnam’s processed food and beverage products to international markets and vice versa. This is also a driving force for foreign businesses to seek business cooperation opportunities in the Vietnamese market in the food industry.

There have been many merger and acquisition (M&A) deals in the food industry and this trend is expected to continue in the coming years.

The PAN Group registered a part of shares in member company Sao Ta Foods JSC to C.P Vietnam in 2021. Before that, South Korea conglomerate CJ Corp acquired 65 per cent in Minh Dat Food Co., Ltd. in 2017 and 47.3 per cent in Cau Tre Export Processing JSC the previous year. South Korea’s food-making conglomerate Daesang Corporation bought nearly a full stake in Duc Viet Food JSC in 2017, while Earth Chemical from Japan completed the acquisition of A My Gia JSC at the same time.

According to the European Business Association, the number and value of M&A transactions in Vietnam’s food production and processing industry has been on a steady growth track in recent years. M&A transactions are considered by many investors to be the most effective way to penetrate the market and expand their business here.

“The proportion of foreign direct investment in the food processing industry has a high difference between industries and fields, mainly focusing on projects with quick capital recovery such as the processing of agricultural and aquatic products, and beverages,” said Vu Ba Phu, director of the Trade Promotion Agency under the Ministry of Industry and Trade.

The entry of foreign investors and businesses into the food processing sector also helps domestic enterprises to have abundant capital, modern technology, and management experience to improve their production capacity.

Le Nguyen Doan Duy, director of Business Development at Asia Ingredients Group (AIG), said that the business’s expansion has been fuelled by an investment of approximately $2 million from Mekong Capital since 2014 and later PEMN Partners.

“Even when we have grown up and have a high degree of autonomy, we continue to receive investment offers from many large funds,” Duy shared. “Several funds want to invest in AIG because of its good performance, and there are not many companies involved in the food processing industry in Vietnam,” he added.

AIG owns six member companies with more than 20 years of experience in providing high-quality ingredients for the food production and processing industry.

AIG member Asia Chemical Corporation (ACC), accompanied the US Dairy Export Council in the conference “Elevating Beverage Innovation with U.S. Dairy Ingredients” took place in Ho Chi Minh City on August 3 to introduce new products made from U.S. whey and milk ingredients to consumers.

An ACC representative said that the company aims to introduce to the market quality products of international standards, ensuring convenience, as a way to improve the customer experience and promote the production capacity of the Vietnamese food processing industry.

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By Hoang Oanh

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