Processing prevents EU agro-increase

For exporters here to be able to penetrate new markets faster, better processing tech is required. Photo: Duc Thanh

Hoang Xuan Khang from International Fresh Group, an enterprise that distributes agricultural products at more than 3,500 supermarkets in many EU states, said that strict regulations on pesticide residues, food safety standards, and traceability have become barriers that make it difficult for many Vietnamese businesses to bring their products to the EU market.

Khang’s company, despite contacting and seeking cooperation opportunities with many Vietnamese suppliers, has been prevented from striking deals thus far because such suppliers cannot meet the requirements.

“The output of agricultural products from Vietnam that we distribute in the EU market accounts for less than 1 per cent, which is a pity,” Khang said.

Inflation in the EU has not only pushed up energy prices but is also affecting the cost of food. The EU’s Eurostat data agency on July 1 said in the 19 countries that use the euro currency, inflation hit a record 8.6 per cent. Food prices have accelerated by 8.9 per cent, while some items such as milk and sugar have also increased in price by 31 and 25 per cent, respectively, compared to the period before the scarcity of supply.

Tran Van Cong, Vietnam’s agricultural counsellor for Europe, said that this is an opportunity for Vietnamese businesses to expand their markets and increase their export rate, especially agricultural products. “The EU is the largest fruit and vegetable import market in the world, worth around $120 billion per year. This accounts for 40 per cent of the global trade value of fruit and vegetables,” Cong said.

Fresh products account for 70 per cent of the structure of agricultural products exported to the EU market; only 30 per cent of agricultural products are preliminarily processed, mainly in the form of fruit juices and frozen juices. “Vietnam can completely access the European market with frozen and canned vegetables and fruits,” Cong suggested.

European consumers are in high demand for plant-origin, high-quality, and nutritional farm produce. Healthy processed products have also become a new consumption trend worldwide, as demonstrated at the Thaifex 2022 fair held in Thailand in May.

While some opportunities may seem straightforward to access, it has not been easy for Vietnamese enterprises to promote the development of processing technology.

According to the Agricultural Products Processing and Market Development Department (MDD) under the Ministry of Agriculture and Rural Development (MARD), Vietnam’s annual output of vegetables and fruits has reached nearly 31 million tonnes, including fruit production of more than 11.6 million tonnes per year and vegetables and bean production of nearly 19.3 tonnes per year. However, the processing rate is only about 12-17 per cent.

The fruit and vegetable processing industry also only meets about 8-10 per cent of the annual output, while more than 76 per cent of exported vegetables and fruits are still consumed in fresh or semi-processed form.

Meanwhile, Vietnam’s agricultural processing enterprises are facing difficulties in terms of capital, with more than 80 per cent of such facilities having a capital size of well under $100,000, according to the MDD. Many businesses are unable to invest in technology because they do not have collateral. In addition, the current amount of input materials to meet the processing demand has only reached 60 per cent due to seasonal characteristics and small farming areas. Limited storage leads to more than 20 per cent post-harvest loss.

The European market still has ample room for Vietnamese agricultural exporters. Currently, Vietnam can only export around $190 million worth of products to the market, accounting for a very small proportion compared to the European market share of imports, according to additional data from the MARD.

Some experts said that in addition to waiting for supportive policies on capital or technology from state management agencies, Vietnamese businesses can also expand their markets and seek more export opportunities on major e-commerce platforms.

Huynh Thai Hoa, director of the E-Commerce Centre at OSB Company, an official authorised agent of Alibaba, said that Vietnam’s processed agricultural products and fruits are of great interest on Alibaba’s website.

“Recently, there have been several markets increasing demand for processed agricultural products, such as the US, Turkey, Bangladesh, Russia, and African countries. Vietnamese enterprises can take advantage of this opportunity,” Hoa informed.

Dang Tran Viet, CEO of Orgencorp, the distributor of Sasaki drying machines, told VIR the business has received a skyrocketing number of requests for quotations, mainly focusing on dried fruits and vegetables.

Orgencorp has searched for many solutions to support businesses such as offering seasonal machine rental. This business also cooperates directly with domestic and foreign financial leasing credit institutions to help customers access capital more easily. “Sasaki is an official product approved as a zero-rated VAT product, helping to reduce costs for businesses,” Viet said.

In an effort to support a quicker switch to processing tech, the MARD also proposed that localities should have policies to encourage enterprises to invest in high technology. The ministry is cooperating with localities to support expansion of processing capacities, and at the same time focusing on developing enterprises and cooperatives in preservation and processing of agricultural products.