Credit crunch triggers increased
consolidation in Vietnam
Big companies can even
exploit the credit crunch
to consolidate their own
About 40% of all feed manufacturers in
Vietnam were experiencing operational
difficulties in the early months of last year.
position at a difficult
time, while their more
exposed competitors
retrench or disappear.
Vietnam’s feed market in 2009 has presented several examples of investment to
start a new plant or expand the manufacturing capacity of an existing site. But it has
also demonstrated the adverse effects of
a credit crunch. With borrowing suddenly
more difficult and more expensive, some of
the newer mills have found that their business plans were rather too optimistic.
As one Vietnamese industry insider
remarked to Feed International at the end
of last year, the problem of financing has
been felt more by operations in the small to
medium category for size than by the bigger
players. Enterprises large and small could
capitalise the land, shell and equipment for
a new mill, but newcomers and those with
only low volumes struggled to borrow the
money needed for operating capital.
Fatal weakness
For some of them it was a fatal weakness, bearing in mind that the money for
purchases of raw materials and for underwriting the credit terms on sales over the
course of a year could often prove to be five
times what they had paid to build their mill.
Just as Vietnam in 2009 saw the commissioning or opening of several additional feed
plants, it also witnessed the closure of other
mills whose owners and investors failed to
find the necessary finance.
Commentators within Vietnam agree
that the events of 2009 will fuel the longer
term trend to consolidate in the national
feed sector. A common view is that big
companies can even exploit the credit
crunch to consolidate their own position at
a difficult time, while their more exposed
competitors retrench or disappear.
A report in 2009 from Singapore-based market analysts Stanton, Emms &
Sia suggested that about 40% of all feed
manufacturers in Vietnam were experiencing operational difficulties in the early
months of last year. Half of these were
either insolvent or had been obliged to
close their operation, at least temporarily.
The root of the problem for many had been
the forward buying of ingredients before
feed grain prices tumbled in the later part
of 2008. They had also, said the analysts,
been hit by a drop in the export demand
for Vietnamese fish and seafood.
At the start of the decade the Ministry
of Agriculture and Rural Development
(MARD) was reporting the industrial feed
sector nationally to consist of 110 mills with
a total production capacity of 3. 5 million
metric tons per year. Also according to
MARD, these plants between them pro-
duced almost 2 million metric tons of feeds
in 2000 and 2. 7 million metric tons in 2002.
Foreign backers predominated
Foreign backers have predominated
in feed deals nationally during 2009. The
