Investors develop taste for Vietnam’s food processing industry

15:29 | 05/07/2018 Investment

(VEN) - The potential of domestic and export markets, in addition to preferential policies, have made the Vietnamese food processing industry increasingly attractive to domestic and foreign investors.

investors develop taste for vietnams food processing industry

Growing investment

Investors in the food processing sector benefit from a 20 percent enterprise income tax (five percent lower than the conventional tax), while prioritized projects are exempt from the tax altogether for up to four years, followed by a 50 percent reduction for the nine following years. They are also exempted from paying import taxes on production serving technology.

Taking advantage of these opportunities, a growing number of domestic and foreign companies have expanded investment in production. The Republic of Korea (Rok)’s CJ Cheil Jedang Group (CJ), for example, implemented a series of mergers and acquisitions (M&A) to expand its market share in Vietnam. In 2016, CJ bought the Ong Kim brand, spent more than VND300 billion to buy four percent plus of Vissan shares, and acquired the Cau Tre Food Processing Joint Stock Company and renamed it CJ Cau Tre. A CJ representative said the group is expected to reach food revenues of US$700 million by 2020 by providing domestic and foreign markets with a variety of healthy products compliant with consumer tastes.

The PAN Food Joint Stock Company bought four food companies – Bibica, Lafooco, 584 Nha Trang, and Aquatex Ben Tre, and has reached revenues of about US$900 million, including US$45 million worth of exports.

This year, Kido will be expanding into beverage production and returning to instant noodle and fish sauce production, apart from maintaining development of its traditional products.

The Minh Hung Group (Vietnam), MHEnviron Group (Canada) and Avure Technologies (a member of the US’s JBT Group) have co-developed a 15-hectare, VND500-billion HPP (high pressure processing) technology food manufacturing and processing plant in Long An Province’s Ben Luc District. The plant makes pho (noodle soup served with beef or chicken meat), Hue beef noodle, and fruit juices, mainly for export to North America and Europe.

Opportunities

Stable economic growth, increasing market demand, opportunities offered by free trade agreements (FTAs), and improved quality of agricultural raw materials are all attracting investors. Vietnam also has abundant raw materials to meet the demand of large-scale food processing enterprises. The Vietnamese food processing industry has been growing steadily at about seven percent in the last five years.

According to data from the Ministry of Industry and Trade (MoIT), fresh milk consumption is forecast to reach 27-28 liters per person per year in 2020; confectionery consumption will increase by 10 percent per year; cooking oil consumption will hit 17 kilogram in 2020 and 20 kilogram in 2025; beverage consumption will hit 6.8 billion liters in 2020 and 9.1 billion liters in 2025.

According to Euromonitor, a market research and statistics company, Vietnam’s food industry was valued at VND238

trillion in 2017 and is expected to be valued at VND250 trillion in 2018.

Thanh Thanh