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Vietnam’s cooking oil industry – a fierce competition

Vietnam’s cooking oil industry – a fierce competition

Monday 29, 11 2021
According to market research firm Nielsen, the size of the cooking oil market in Vietnam is estimated at 30,000 billion VND/year, and continues to grow each year. This has attracted a lot of investment from domestic and foreign enterprises.

Overview of the cooking oil industry in Vietnam

Although the cooking oil industry in Vietnam is a well-established one, it still offers a lot of opportunities for new players. Currently, the consumption of cooking oil of Vietnamese people is lower than the recommended standard of 13.5kg/year by WHO. However, it is expected that in the coming time, this figure will increase to 16.2 - 17.4 kg/person/year and by 2025, it will be 18.6 - 19.9 kg/person/year.

cooking oil industry in Vietnam

According to market research firm Nielsen, the size of the cooking oil market in Vietnam is estimated at 30,000 billion VND/year, and continues to grow each year. This has attracted a lot of investment from domestic and foreign enterprises.

Currently, there are about 40 cooking oil companies in Vietnam. Regarding the origin of oil, there exist domestically produced cooking oils and imported cooking oils from Singapore, Indonesia, and Malaysia. In addition, cooking oil is also classified based on ingredients such as soybean oil, sesame oil, peanut oil or palm oil. The environment and climate in Vietnam are not suitable for growing palm trees. Domestic raw materials for Vietnamese enterprises are mainly sesame, peanuts and rice bran. The majority of raw materials for palm oil must be imported from Malaysia and Indonesia.

The market is also segmented on the basis of use, consisting of four categories: cooking oil for frying and sautéing, specialized salad oil for mixing vegetables, nutritional oil to supplement essential vitamins and solid oil for baking. However, in Vietnam, the segmentation of the cooking oil market based on the functions of oil is not clear. Consumers often use the same blended cooking oil for many different purposes.

Consumer habits

Restaurants or eateries often buy large cans of 10 to 30 liters of oil while households often choose bottles of 250ml, 400ml or 1 to 2 liters.

Restaurants or eateries

The strong development of the supermarket system has created a change in the shopping habits of consumers. Vietnamese people often buy goods in large quantities at supermarkets to enjoy discounts, promotions and ensure the quality of the goods they use.

In addition, the press often mentions studies related to the harmful effects of animal fat such as causing cardiovascular disease and clogging of blood vessels, which has had a strong impact on consumers and led to the substitution of animal fat in cooking with vegetable oil.

Moreover, consumers still do not fully understand the difference among types of vegetable oils, which leads to weak purchasing power for nutritious, salad and solid oils such as canola oil, olive oil and gac oil.

Fierce competition

The Vietnamese cooking oil market is witnessing a fierce competition due to the arrival of foreign cooking oil brands. However, making money from cooking oil is not easy because of too much pressure.

This was evidenced by the fact that at the end of 2011, an FDI enterprise, the Bunge Group of the United States, which put a soybean oil factory with an investment of up to 130 million USD into operation, did not see any profit. After 4 years, in early July 2016, Bunge had to sell 45% of shares to Wilmar Group of Singapore.

FDI enterprise

An other example is Acecook Vietnam Company, which had to withdraw from the cooking oil market. The reason is that the competition in the cooking oil segment is getting fiercer as there are too many types of oil with features and designs that are not very different. It costs a lot  to gain market share while the profit margin is thin and the risk is high.

The Ministry of Industry and Trade once tried to help Vietnamese cooking oil enterprises avoid direct competition with foreign enterprises in the same industry by increasing import tax on cooking oil. However, the safeguard duty on imported oil ended in May 2017 and imported cooking oil products have entered the market easily, putting pressure on domestic companies.

On top of that, in the past few years, some foreign enterprises, such as Musim Mas Group (Singapore) - one of the world's largest vegetable oil producers, have built cooking oil factories in Vietnam with investment capital of 71.5 million USD and designed capacity 1,500 tons/day.

Through the distribution company ICOF Vietnam, Musim Mas has brought high-quality cooking oils to the Vietnamese market. The Singapore representative places great faith in the development of the brand in Vietnam, seeing that Vietnamese consumers are increasingly interested in healthy products.

Identifying the competitive pressure, domestic enterprises have sought to increase production and business capacity. Vocarimex is expanding the source of raw material supply to avoid dependence on imports, shifting to producing cooking oil from peanut oil, sesame oil, and co-operating with pangasius manufacturers to produce fish oil.

According to Mr. Nguyen, General Director of Kido Group Joint Stock Company, there are more than 450,000 distribution points in Vietnam's cooking oil industry, so foreign competitors who want to bring goods to Vietnam must rely on them. Therefore, it is difficult for them to compete with companies that have been in the market for a long time.

Source: bizfood, Nielsen Vietnam

Compiled by VietnamCredit

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