Vietnam Animal Feed Market Review 2016 Prepared by StoxPlus Hanoi, December 2016 @ 2016 StoxPlus Corporation. All rights reserved. All information contained in this publication is copyrighted in the name of StoxPlus, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. #
Vietnam Animal Feed Market 2016 Preview Part Content Page 1 Market Structure 3 2 Historical and Development 4 3 Value chain analysis 5 4 Market size 7 5 Demand analysis 8 6 Competition landscape 10 About StoxPlus 11 2
Agriculture Vietnam Animal Feed Market Preview Market Structure Agribusiness is the business of agricultural production. It includes crop production (farming and contract farming), seed supply, agrichemicals, farm machinery, distribution, processing, marketing, and retail sales. Figure 1: Agribusiness market structure in Vietnam Seed Farming Plantation Livestock Processing Feeds Raising Cattle feeds Poultry feeds Processing Source: StoxPlus Agriservice Agrochemicals Agriproduct Retailing 3
Vietnam Animal Feed Market Preview Historical and Development Historical of Animal feed sector Proconco is the first animal feed in Vietnam, established in Bien Hoa Dong Nai Cargill Vietnam, a subsidiary of leading agriculture enterprise and ANT were founded EastHope (Chinese company) was established East Hope company Ltd Masan participated in the market, invest in 52% stock of Proconco and have 70% ownership of Anco 1991 1993 1995 2003 2010 2013 2015 CP Group, one of the largest Asian animal feed producer, established CP Vietnam Livestock Ltd Anco was established in Dong Nai province while Greenfeed opened in Long An province Vietnam exported 895 tone animal feed, with amount equivalent to 200mm USD Vietnam livestock industry appears and develops spontaneously. For the first stage of its development, farmers mainly utilize by-products from agriculture to feed their livestock. By the early 20th century, the animal feed industry appears and grows rapidly along with the development of science and technology. In 1991, Vietnamese-French joint venture Proconco, the first animal feed company in Vietnam, established and built the factory located in Bien Hoa, Dong Nia. Up to 2003, there were 136 factories participating in this sector with capacity of 3.5mm tones per year. Vietnam is listed as one of 20 biggest countries of feed producing. Vietnam started to export animal feed in 2013 and in the year of 2014, Animal feed was exported to over 10 countries including US, Japan, Malaysia. 4
Vietnam Animal Feed Market Preview Value chain analysis Value chain of Vietnam animal feed Figure 2: Value chain of Vietnam animal feed, 2015 Raw materials produced by local farmers Farmer Collector Warehouse/ Feed mill/processing agencies Export Animal feed company Distribution agency Livestock farming Raw materials imported Foreign company Trading company Source: StoxPlus 5
Vietnam Animal Feed Market Preview Value chain analysis Roles for each participant in the business chain Farmers Grow raw materials for animal feed such as rice, maize, potato, sweet potato, etc. Harvest Sell to collector or feed mill/processing agencies Trading company Import raw materials Sell to animal feed companies or other trading companies to export Collector Purchase agricultural products (raw materials for feed) from farmers. Sell to warehouse or processing agency or feed mill Deliver agricultural products to the border between China and Vietnam then sell to border collectors to export to China via cross-border trade Animal feed company Import themselves or buy raw material from domestic sources or trading companies Produce animal feed Sell to domestic market via a distribution system and to export Warehouse/ Feed mill/processing agencies Purchase agricultural products from farmers and collectors Process (milling, drying, etc.) from fresh products Sell to livestock farming for making self-made feed Sell to animal feed company for producing industrial feed Sell to collectors to export to China via cross - border trade or export to Philippines, Malaysia, China via official trade Distribution agency Purchase raw materials from warehouse/ feed mill/ processing agencies then sell to livestock farming for making self-made feed. Distribute industrial feed produced by animal feed company to livestock farming. 6
Million tone Vietnam Animal Feed Market Preview Market size and segmentation 13.26 million tones of animal feed are consumed per year Figure 3: Estimated consumption of industrial feed in Vietnam, 2011-2015 For the production of animal feed, we use official 18.00 numbers from MARD. However, the real numbers could be 10% lower, according to our industrial experts 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00-2011 2012 2013 2014 2015 Domestic consumption Export Total supply Source: StoxPlus s estimation from AgroMonitor Note: We estimate the consumption in 2011-2014 based on the consuming level of the year 2014. For the production of animal feed, we use official numbers from MARD. However, the real numbers could be 10% lower, according to industrial experts. In such case, the real production is nearly same with the consumption or market supply and demand is balanced. Vietnam is an agricultural country with 70% of electors are involved in agriculture sector including farming, livestock and fishery. Vietnamese farmers grow around 379 million of livestock for all kinds per year. The consumption of feed has grown in line with the development of livestock sector and about 20 million tones of animal feed to be consumed per year. Of which, there are 13.26 million tones of industrial feed and 6.27 million tones of self-made feed. Self-made feed is very popular in Vietnam since the price of feed s ingredients is decreasing while the price of industrial feed keeps stable. To reduce production cost, Vietnamese farmers tend to buy feed ingredients then mix these ingredients based on their experience. However it is a shortterm story. In long term, Vietnamese livestock industry is switching from household model to industrial farming with large-scale business. It s one of key drivers to push the Vietnam industrial feed up. Vietnam has exported feed since 2013. However the volume of feed exported is very small, only 0.28 million tone in 2015. Majority of feed consumption is for domestic consumption purpose. 7
Vietnam Animal Feed Market Preview Demand analysis Pig and poultry are main sources of consuming animal feed in Vietnam Figure 4: Domestic consumption of industrial feed by type of livestock,2015 Source: StoxPlus Poultry 33% Others 3% By volume Pig 64% Figure 5: Breakdown of livestock in Vietnam by type, 2015 Livestock Total number (Million heads) Poultry 341.91 Chicken 259.30 Duck 69.55 Goose 13.06 Pig 27.75 Beef 5.37 Buffalo 2.52 Others 2.02 Total 379.57 Pigs and poultries are main livestock feeding in Vietnam. It s suitable with Vietnamese preference of food. A household survey conducted in 2010 by Vietnam Animal Feed Association found that 40% of household meat expenditure was spent on pork, with preference given to fresh pork over chilled or processed meat. As the result, demand of feed from the two segments accounts for 97% total feed consumption in Vietnam. Feed for pigs is the dominant segment with 64% of total feed consumed in Vietnam. The country has total of 27.75 million pigs including 23.7 million pigs to pork and 4.05 million sows. With the size of 341.9 million heads in 2015, 4.23 million tones of feed was consumed by poultry segment. In which, the proportion of chicken, duck and goose are 76%, 20% and 4%, respectively. The cattle industry in Vietnam is small. So on, only 3% feed is for other livestock excluding pigs and poultry. Source: StoxPlus from Department of Livestock production, MARD 8
Vietnam Animal Feed Market Preview Demand analysis Demand for poultry feed and cattle will increase in line with the change in livestock s structure under the Decision No.10/2008/QD-TTg Figure 6: Structure of Vietnamese meat by volume in 2015 Figure 7: Planned structure of Vietnamese meat by volume in 2020 8% 10% 19% 28% 62% 73% Pork Poultry Beef, buffalo, goat, sheep Pork Poultry Beef, buffalo, goat, sheep Source: StoxPlus Source: StoxPlus Under the Decision No.10/2008/QD-TTg, the structure of livestock in Vietnam will be changed in 2020. The proportion of pork is decreasing while the proportion of both poultry and cattle are increasing. Pork is expected to decrease from current level 73% to 62% of total meat in 2020. While Poultry will sharply increase from 19% in 2015 to 28% in 2020. Same trend with poultry, beef, buffalo, goat and sheep will have a 2% increase in 2020 compared to 2015. It s a key driver affecting to the structure of demand for feed and should be taking into consider in estimation of the demand and supply for each kind of feeds in the period 2016-2020 9
Vietnam Animal Feed Market Preview Competition Landscape Many brand name companies in global animal feed market are already in Vietnam and dominating the market Figure 8: Market share of Vietnam animal feed market, 2013 2% 3% 28% 4% 4% Animal feed 19% 8% 5% 5% 4% 8% 10% C.P Newhope Cargill Proconco Anco ANT Greenfeed Japta CJ Vina Agri Dabaco Vina How could top 10 dominate the market? - Have a long history of animal feed business in Vietnam - Have a good brand name - High capital capacity - Advantage of economies of scale in doing business - Have a wide distribution network over the country - Good commission policy for distribution agents Others Source: StoxPlus from Vietnam Animal Feed Association Foreign-dominated market Most of the large corporations in agriculture in the world has been in Vietnam for investment in manufacturing animal feed. CP Vietnam is the biggest name in Vietnam animal feed market with 19-20% total market share. The company have penetrate to Vietnam since 1990. C.P has total of 08 feed plants in Vietnam as of 2015. Of which, 04 animal feed plants, 03 fishery feed companies and a corn drying plant. Cargill is another outstanding name, the company is expanding their business in Vietnam with several new plants in Nghe An, Binh Duong and Ho Chi Minh Rise of local companies? However, in 2015, the market witnessed some signs of change. Specifically, Masan, through its subsidiaries is Nutri-Science Masan, has acquired 52% stake and 70% stake Proconco of Anco. At the same time, a fishery company naming Hung Vuong Corporation (HVG) and steelmakers - JSC Hoa Phat Group also "attack" on the feed market. To date, on the basis of announced production volume, three leading position belongs to CP (3.8 million tones, 21% market share), Masan Nutri-Science (2.5 million tones, 14% market share), and Hung Vuong GreenFeed are holding 8.3% share (1.5 million tons). However, there s no official survey about the real market share at this time. 10
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