VietNamNet Bridge – Competition in the vegetable oil market has gotten stiffer, hurting many domestic manufacturers.

Documents delivered at its 2014 shareholders’ meeting disclosed that fiercer competition badly affected Tuong An Vegetable Oil Company’s business last year.

However, the big domestic manufacturer was saved by the decision of the Ministry of Finance to hike the import tariff to six percent, which helped limit imports. Thereafter, the company’s turnover and post-tax profit grew by 6.4 percent and 3.2 percent, respectively.

Vocarimex, another manufacturer, also acknowledges that it is experiencing tough times due to input cost increases and raw material price fluctuations. The manufacturer has been relying on foreign raw material sources because there is not enough domestic supply.

Tuong An is also aiming lower. The manufacturer hopes it can sell 150,000 tons of product in 2014, equal to 91 percent of the sales in 2013, which can bring revenue of VND4.1 trillion and post-tax profit of VND50 billion, equal to 95.5 percent and 76 percent, respectively, of 2013’s figures.

Nevertheless, Tuong An and Vocarimex still “can live much better” than many other manufacturers.

In late 2013, Vina Acecook decided to stop making De Nhat brand vegetable oil. This was attributed to unstable sales due to stiffer competition, as well as the lower demand as people now turn away from fried food.

However, according to Nguyen Thi Minh Thanh, Director of Continental Vietnam, the owner of Dau Bep and Gia Viet oil brands, the biggest problem for manufacturers is their inability to control raw material supplies, as world prices continually fluctuate.

“The input material price fluctuations upset production plans and make profits unstable,” she said. “Meanwhile, manufacturers have to compete very fiercely in selling prices. If your products are just VND3,000 per 12 liter can more expensive than others, you lose customers immediately”.

The Director of the An Long Food Company, which owns Happi Kobi brand, complained that the company’s turnover in 2013 was just 80 percent of that in 2012 due to cuts in its selling prices, ones that competitive forces compelled it to make.

However, he said the biggest problem for him now is the lower competitiveness of Vietnamese products in comparison with Thai products in Cambodia and Laos. Vietnamese manufacturers cannot get the safeguard tax refund, while Thai can enjoy such tax incentives.

Thai Vinh Hien, Director of the Truong Phat Trade and Packaging Company, the owner of Ong Dia brand vegetable oil, also said his company’s turnover in 2012-2013 dropped by 30 percent in comparison with 2011.

Hien noted that in the past, when Vietnamese manufacturers did not have the the safeguard tax imposed on them, their products accounted for 80 percent of Cambodian market share. However, they have become inferior to Thai products since the day the tax was imposed.

Economists have warned that a more difficult period is ahead for Vietnamese manufacturers, when the import tariff is cut to zero percent, as Vietnam committed to doing when it signed bilateral and multilateral trade agreements.

DNSG