Source: Vietnambiz.vn
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Vietnamese enterprises are “short of breath” in competition with FDI enterprises
The recently released report on the livestock industry of Rong Viet Securities Joint Stock Company (VDSC) shows that the animal feed market still has a lot of potentials to develop with a relatively high growth rate.
Specifically, the production of animal feed nationwide only reached 8.5 million tons in 2008 and now has increased to 20.5 million tons by 2020, the average growth rate is about 7.6% / year.
In terms of production capacity, the total installed capacity has increased from 12 million tons in 2008 to 40 million tons in 2020 and helped Vietnam rank 10th in the world in terms of industrial production of animal feed.
In the coming time, along with population growth and income of Businesswire people, it is forecasted that the scale of the industry will grow 5.06% / year, reaching 12.27 billion USD by 2025.
However, as reported by VDSC, input autonomy is still very low. Because it is estimated that each year Vietnam needs 27 million tons of agricultural products to produce animal feed, but the domestic agricultural sector only supplies 4 million tons of bran and 4 million tons of cassava.
Other raw materials such as corn, soybeans and wheat are mostly imported, mainly from Argentina and Brazil.
The VDSC report said that in the 2010-2020 period, the total output of imported wheat, corn and soybeans increased by 16% per year, to 16.9 million tons by 2020.
“The fact that 65-70% of input materials have to be imported, especially basic materials such as corn, soybeans and wheat, makes domestic firms unable to control input costs, resulting in profit margins. Gross profit is often not stable “, stated VDSC.
In addition, the inactivity of raw materials also makes production activities of businesses vulnerable to unintended incidents.
For example, the COVID-19 epidemic has disrupted global logistics, many feed companies have to reduce production capacity due to insufficient input materials, and limited exports. Disease.
Meanwhile, the output is dominated by foreign enterprises. According to the Ministry of Agriculture and Rural Development, there are 265 livestock feed factories nationwide, with 68% belonging to domestic enterprises and 32% belonging to foreign enterprises.
However, most of the market share of animal feed is tilted towards foreign firms with about 60-65%.
VDSC believes that the inactivity of input materials has made Vietnamese enterprises “short of breath” in competing with FDI enterprises when FDI enterprises are larger in scale, often purchasing raw materials at scale. so, the ability to negotiate better, helping them to control input costs well.
Therefore, production costs and selling prices of FDI firms are normally more competitive, causing the market balance to be skewed towards foreign-owned firms.
Direction for Vietnamese businesses?
According to VDSC, some large domestic enterprises have entered the animal feed industry, but it is not easy to regain market share from FDI enterprises.
Because foreign businesses have a huge advantage when operating in the Vietnamese market 10-20 years ago, along with the great advantages in capital size, advanced technology and professional operation, repertoires.
Therefore, the best direction for domestic enterprises at the present time comes from developing a 3F model or linking with large enterprises in the livestock industry to form a closed livestock system “, report comments.
According to VDSC, the 3F closed livestock system will help ensure a guaranteed output when used on the own farm.
Currently, the market price of Vietnamese enterprises is still not as competitive as that of FDI enterprises, so the risk of not selling goods is still there for businesses that merely produce animal feed.
In fact, the gross margins of the animal feed segment of the companies implementing the 3F model all have 15% higher gross margins than businesses that only produce animal feed.
“Enterprises can autonomously supply feed, help reduce costs and improve the profit margin of the farm”, emphasized VDSC.
