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Livestock feed market falls into the hands of foreigners   2012-04-10 - TBKTSG

While domestic feed manufacturers are struggling to access bank loans, renovate technology and business strategies, foreign enterprises have made a big leap to dominate the market.


Dang Thi Tuyet, Director of Binh An Company, said that her company spends 500-700 million dong to buy 60 tons of livestock feed for about 600 pigs. However, Tuyet said she buys the products mostly from CP Vietnam, where Hong Kong-based CP Porkphan (CPP) holds more than 70 percent of stakes.

Tuyet said that she does not buy products from Vietnamese enterprises, because the enterprises’ production capacity remains limited, while products have lower quality than foreign ones.

There are 230 feed production factories in Vietnam, including 58 joint ventures and foreign invested enterprises, which put out 7 million tons of combined feed, accounting for 60 percent of the market share.

Meanwhile, the other 172 Vietnamese factories make out 4.5 million tons of products, which means that a factory churns out 2184 tons a month, 26,209 tons a year.

According to Le Ba Lich, Chair of the Vietnam Livestock Feed Association, the output of 2184 tons a month is a very low amount if compared with the investment rate. About 30 percent of Vietnamese enterprises got bankrupted in 2011 because of the market unpredictable changes, the lack of capital and the stiff competition with foreign enterprises.

While Vietnamese enterprises have scaled down their production or got bankrupted, enterprises have taken advantage of the occasion to expand their business in the field.

Cargill Vietnam, a subsidiary of the US Cargill Group, has inaugurated the ninth feed factory in Vietnam which has the capacity of 240,000 tons per annum, raising its total feed capacity to 1 million tons a year. The company plans to increase the capacity to 1.5 million tons a year by 2015.

At present, Vietnamese enterprises account for 30 percent of the feed market share. However, Lich said that the market share has been narrowed as foreign invested enterprises have been “encroaching on Vietnamese’ enterprises territory”.

In the last 17 years in Vietnam, Cargill bought Provimi Group in Dong Nai province and Higashimaru Vietnam in Tien Giang province. Greg Page, General Director of Cargill would continue targeting domestic feed companies in the next years, if the companies can satisfy the requirements on food hygiene, labor and environment safety.

Doan Trong Ly, Director of Aprocimex, a feed company, also said that a lot of foreign invested enterprises have expressed their will to buy Aprocimex, but he has refused.

Not only Cargill, many other foreign companies are also considering expanding business in Vietnam. CP, for example, has announced that it would build six factories more in Vietnam by 2014. Chinese New Hope Company would also build six factories in Vietnam in the time to come.

The unequal competition

Vietnamese enterprises can only satisfy 40 percent of the domestic demand. Vietnam now still has to import materials to make livestock feed with the import amount increasing year after year.

In 2009, in order to make out 11.3 million tons of feed, Vietnam had to import 53.6 percent of materials, while the figure rose to 59.8 percent in 2010 and 60.5 percent in 2011. Especially, the imports of materials rich in protein, energy, food supplements and additives account for up to 80-90%.

It is expected that by 2015 Vietnam’s husbandry industry needs 18-20 million tons of feed, while the figure would rise to 25-26 million tons by 2020. It is clear that this is the fertile land for enterprises to cultivate.

Lich said that it is very difficult for Vietnamese enterprises to compete with foreign ones. While Vietnamese have to borrow money at the sky high interest rate of 18-24 percent per annum, while foreign investors can access bank loans at the interest rates of 1-4 percent only.

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