Vietnam: Increasing Interests in High-Grade Vegoil
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Currently, the two leading suppliers of Vietnam’s crude Palm Oil are Indonesia and Malaysia – accounting for 60% and 40% of the total value of Vietnam’s Palm Oil imports in 2020. In the context of Palm Oil prices, crude Oil price declined, especially the CPO prices of Indonesia and Malaysia, so Vietnamese Vegetable Oil producers such as Tuong An Vegetable Oil Company (TAC) or Vocarimex (stock code: VOC) have opportunities to buy crude Palm Oil at lower prices than in the first half of 2022.
Since CPO’s best storage period is, on average, nine months, Viet Rong Securities (VDSC) expects Vietnamese Vegetable Oil producers to fulfill new Palm Oil orders at low prices. According to an assessment by Kantar Worldpanel, Vegetable Oil is currently the item with the second highest inflation rate, with a rate of 23.6% in the first quarter of 2022. Besides, Kido Group (KDC) announced to rise in the average selling price of Vegetable Oil products by about 7-8% compared to the beginning of last year. In addition, on the e-commerce platform, the selling price of Tuong An Vegetable Oil also increased by more than 40% over the same period.
CPO price has been falling since the beginning of June 2022 after Indonesia resumed exports at the end of May. The Indonesian Government issued 383 export permits to transport 460,647 tons of Palm Oil and launched a program to accelerate Palm Oil exports to one million tons. In addition, Indonesia is also reducing the maximum export duty and tax rate for crude Palm Oil to $488/ton from $575/ton to boost exports.
VDSC finds that Vegetable Oil products are the products that can absorb most of the increased input costs into selling prices. Due to lower input material costs, thanks to lower Palm Oil prices, VDSC believes that the profit margins of Vietnamese Vegetable Oil producers started recovering in the second half of 2022. In terms of Soybean Oil, according to AgFlow data, Vietnam imported 44,000 tons from Argentina in 2022, followed by Russia (30,000 tons).
A prominent consumer consumption trend in Vietnam’s Vegetable Oil industry is the increasing consumer interest in high-grade Vegetable Oils after the Covid-19 pandemic. Among the leading enterprises pursuing this strategy are Tuong An Vegetable Oil Joint Stock Company (TAC) and Cai Lan Oil & Fat Company Limited (Calofic). The price of premium Vegetable Oil products is higher than standard products, so a higher contribution from this group will help drive revenue growth of Vegetable Oil producers. For example, the price of high-grade Tuong An Vegetable Oil is about 16% higher than the standard price.
Vietnamese Vegoil Producers’ Growth
The sales growth of Vegetable Oil producers in both 2021 and the first quarter of 2022 recorded positive numbers. Except for Vocarimex, whose primary customer channels are industrial parks and schools, the revenue growth in 2021 of the parent company of the leading Vegetable Oil manufacturers in Vietnam, TAC and KDC, increased by 20% and 26%, respectively; while the results of the first quarter of 2022 increased by 7% and +24%, respectively, compared to the first quarter of 2021.
According to KDC’s plan, the company will increase the total designed capacity of Vegetable Oil production in the coming years to increase market share. Notably, Kido plans to penetrate deeper into the northern market based on the favorable geographical location of Vinh Oil plant in Nghe An province. In 2021, in terms of Vegetable Oil retail, KDC accounted for 19.3% of the total market share (excluding Vocarimex’s products), ranking second only to Calofic (47.6%). KDC aims to achieve 45% of the full market share in the long term.
Other sources: CAFEF
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