VietNamNet Bridge - Vietnamese companies are dominating the cooking oil market despite the presence of big foreign brands. 

Vietnamese companies are dominating the domestic market

The cooking oil consumption level in Vietnam is less than 10 kilograms per head per annum, lower than the WHO recommended level of 13.5 kilograms. However, the figure is expected to rise to 16.2-17.4 kilograms by 2020 and to 18.6-19.9 kilograms by 2025.

According to Nielsen, Vietnam’s cooking oil market is valued at VND30 trillion and is growing, thus attracting investors.

Kido, established as a sweets manufacturer, sold its sweets production division and joined the cooking oil market. It quickly became a new influence in the market following a series of M&A deals. 

Most recently, Kido took over Golden Hope Nha Be, a joint venture between Vocarimex and Sime Darby Plantation from Malaysia. Prior to that, Kido acquired the controlling stake at Vocarimex and Tuong An Vegetable Oil.

However, though the market is promising, it is not easy to make money.

Opening a $130 million soybean oil plant in 2011, Bunge, a group from the US, still had not made any profit when it faced an import tariff cut to zero percent. After four years, it had to sell 45 percent of shares to Wilmar from Singapore in July 2016.

Acecook, a well-known instant noodle brand, stopped working in the cooking oil manufacturing sector. 

The market penetration cost is high as enterprises have to spend big money on marketing and advertisements to obtain market share, while the profit margin is small and the risk is high.

The Ministry of Industry and Trade (MOIT) once helped Vietnamese enterprises avoid direct confrontation with foreign companies by raising the import tariff. 

However, the safeguard duties against imports terminated in May 2017. This has paved the way for imports to flood Vietnam, putting pressure on domestic companies.

Tran Le Nguyen from Kido said there is cutthroat competition between Vietnamese and foreign brands.

Musim Mas from Singapore, one of the world’s largest vegetable oil manufacturers, set its plant in Vietnam with investment capital of $71.5 million and designed capacity of 1,500 tons per day.  Through ICOF Vietnam, the distributor, Musim Mas brings high-end products to the domestic market.

Vietnamese firms have also made heavy investments to improve capacity. Vocarimex has been developing material areas to ease reliance on input material imports. It has shifted to make peanut oil and sesame oil and joined forces with catfish businesses to produce fish oil.

For Kido, by cooperating with Felda Global Ventures (FGV), a palm oil grower and manufacturer, and Indo-Trans Logistics (ITL), it would have both a stable material supply and reasonable transportation costs.

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