17 October 2022 - Vietnam’s animal nutrition sector is forecast to continue growing while becoming a more integrated, mature, and competitive market. Domestic and international players are seeing a positive evolution in the Vietnamese market. 2021 even saw a wave of merger and acquisition (M&A) activity in the Vietnamese feed sector.
However, in recent months, the inflationary environment and lack of raw materials impacting global feed markets have been particularly acute in Vietnam.
In a recent Vietnam News Agency article, it was said that domestic producers only meet just over 40% of animal feed demand in Vietnam right now.
Vo Quang Nhan, Communication & Service Marketing Manager at Woosung Vietnam Co., Ltd. (a Vietnamese feed producer belonging to South Korea’s Woosung Corporation), told Feedinfo that currently, there are few qualified raw material suppliers in Vietnam, and they have low output. This explains why domestic raw material suppliers only meet part of the needs of feed mills.
Vo Quang Nhan highlighted the fact that Argentina and Brazil are still the two leading corn suppliers to the Vietnamese market, and from this year, the import tax on corn products from these two countries is reduced to 2%, hence prompting more imports. As for feed additives, Vietnam is largely dependent on European and Chinese suppliers.
Of course, policymakers argue that increasing the domestic supply of raw materials is among the highest priorities for the development of Vietnam’s livestock feed industry.
In Vo Quang Nhan’s opinion, creating a domestic supply of raw materials is the right long-term direction. However, he sees it as almost necessary to invest from the beginning in a methodical way to create a suitable supply of raw materials in terms of volume, quality, and cost.
“Although Vietnam is a country with abundant natural resources, it has not received attention and investment,” he commented. “Right now, Vietnam needs to create policies to help promote the application of science and technology in agricultural production. The development of planning for raw material areas according to the soil, climate, and strengths of each locality also needs to be a focus.”
Besides raw material supply, the Vietnamese feed sector continues to offset the impact of African swine fever (ASF) which remains a big challenge for the domestic pig industry.
“Although vaccines and the application of biosecurity measures have always been strongly communicated by the government and agencies, in reality, farmers face this disease almost every day,” Vo Quang Nhan said. “ASF can be considered the Covid-19 of pigs. Stronger solutions are needed to protect pigs like we have done to protect people from the Covid-19 pandemic.”
Despite these setbacks, Vo Quang Nhan is generally confident about the future of the sector and Woosung Vietnam.
First of all, there are historical reasons why Vietnam’s feed sector trajectory has been one of consistent growth and modernisation.
In Vietnam, the proportion of industrial animal feed currently accounts for about 70% of the total feed demand of the entire livestock industry, the rest (about 30%) is due to farmers taking advantage of available feed materials or buying raw materials for self-mixing, Vo Quang Nhan said.
“According to the Department of Livestock Production, in 2011, there were 233 animal feed production establishments nationwide with a total designed capacity of 16.1 million tonnes. By 2021, there were 269 establishments (90 FDI enterprises, 179 domestic establishments), mostly concentrated in the Red River Delta, Southeast and Mekong River Delta,” he added. “The total designed capacity of the 269 facilities is 43.3 million tonnes, of which FDI enterprises account for about 51%, and domestic enterprises account for about 49%.”
Based on these estimates, the number of feed production establishments in the 2011-2019 period only increased by 13.1%. However, the designed capacity increased by 151.6%.
“In 2011, the average design capacity of a facility was 69,100 tonnes/year, by 2019 it was 154,000 tonnes/year. Thus, small-scale production establishments have gradually been replaced by medium and large-scale production establishments,” Vo Quang Nhan commented.
Still looking at Department of Livestock Production data, production of animal feed in Vietnam in the 2011-2019 period grew continuously, at an average rate of 8.1%, from 11.5 million tonnes in 2011 to 19 million tonnes in 2019, even reaching 21.9 million tonnes in 2021. FDI enterprises accounted for about 60% of the 2021 output; about 40% was domestic.
Woosung Vietnam itself was established in 2003 with 100% investment capital from South Korea. Its factories produce approximately 50,000 tonnes/year of aqua feed, 40,000 tonnes/year of livestock feed, and 5,000 tonnes/year of poultry feed. Vo Quang Nhan estimated the total capital investment in Woosung Vietnam’s feed production lines at more than $50 million.
The total number of employees at Woosung Vietnam as of 31 March this year was 141 people, of which 25 people are in management. Woosung Vietnam is currently selling its feed via a network of more than 250 dealers and distributors spread across Vietnam, mainly in the southeast, the west and the central highlands.
Over the years Woosung Vietnam has been investing, not only to grow its production capacities, but also in process improvement, production line upgrades, marketing, and in its sales networks to bring its products to farmers as fast as possible.
Vo Quang Nhan also commented: “At Woosung Vietnam, we have made good progress in research and development for specific products for pigs. This product line helps reduce the cost burden for farmers by promoting optimal productivity and thereby shortening farming time,” adding that some of these pig products contain special essences which help with the animals’ resistance to ASF. This is in the hope of helping Vietnamese farmers get better performance results in the context of the ongoing ASF outbreak.
Naturally, growth in the Vietnamese feed industry will be challenging, because of the huge level of competition and Woosung is a smaller player relatively speaking compared to other firms. Vo Quang Nhan named C.P Vietnam Joint Stock Company, Cargill Vietnam Co., Ltd., De Heus Co., Ltd., Emivest Feedmill Vietnam Company, Japfa Comfeed Vietnam, New Hope Co., Ltd., Greenfeed Vietnam Company, and CJ Vina Agri Company as his company’s main competitors in the country.
To stay relevant in this context of competition and high prices, Woosung Vietnam will continue with its strategic development while bolstering ties with domestic raw material suppliers to add extra credibility to its position as a stable feed supplier and to help the supply chain become more sustainable.