Vietnam processed food industry boasts of an average growth of 10% annually, however this industry still lacks competitiveness as a large proportion of its raw materials are imported.
As such, there is a huge potential for the development of domestic raw material processing enterprises. Asia Ingredients Group (AIG) is mentioned as one of the pioneering Vietnamese enterprises in processing and the food ingredient industry, and has achieved outstanding business performance with sales revenue of US$560 million in 2022. AIG subsidiaries now supply raw materials to major players like Vinamilk, Masan Consumer, Unilever, Nestle and Trung Nguyen.
More players like AIG is needed in Vietnam as the country offers an abundant supply of agricultural products suitable for the development of the raw material processing industry. Unfortunately, this has not been fully exploited as Vietnam processing enterprises still need to import more than 90% of their raw materials, making their products less competitive.
Latest General Department of Vietnam Customs statistics showed that by the end of 2022, Vietnam spent more than US$13.2 billion to import seafood, vegetables and food processing materials. An AIG spokesperson has attributed this to the lack of standard processing facilities, as well as the country’s rather small and fragmented agricultural production areas which posed a challenge to processing enterprises.
Despite the challenges, AIG has successfully brought coconut ingredients from the major coconut-growing areas of Ben Tre and Tra Vinh in the south. It has also invested in a cassava starch processing plant, turning this food crop into a material of high economic value such as tapioca starch and glucose syrup. Its cassava material area is concentrated in 4 districts of Anh Son, Con Cuong, Tuong Duong, and Ky Son in the central province of Nghe An.
The Ministry of Industry and Trade highlighted that Vietnam currently has over 8,500 industrial-scale agricultural product processing enterprises with a total capacity of about 120 million tonnes of raw materials per year. More needs to be done to boost this industry capacity.
The inflationary pressure on material input prices has led to growing need for domestic processing. One such industry is the powdered milk industry where 60% of the raw materials are being imported. In the past 9 month, input material prices rose by 70%.
