The Kinh Do Confectionary Corporation recently spent some more US$24.9 million to buy a 27 per cent stake in Vocarimex, boosting its stake in Vocarimex to 51 per cent. — Photo BizLIVE

HA NOI (Biz Hub) — In addition to importing more cooking oil products, Viet Nam's domestic cooking oil market is seeing growing competition between the new and experienced brands.

Power of experienced brands

The Viet Nam Vegetable Oils Industry Corporation (Vocarimex), a cooking oil giant with four subsidiary companies and three associated companies, owns the largest chunk of market share in the domestic cooking oil sector.

However, in view of its falling market share in the recent years, the corporation decided to sell 24 per cent of its shares to Kinh Do Corporation (KDC) and 8 per cent to VPBank Securities.

The Kinh Do Confectionary Corporation recently spent some more VND530 billion (US$24.9 million) to buy a 27 per cent stake in Vocarimex, boosting its stake in Vocarimex to 51 per cent.

Accordingly, KDC will support Vocarimex in distribution system development, brand name and technology.

Vocarimex's market share increased from 50 per cent to 95 per cent during the 1994 to 2000 period, but fell to 90 per cent in 2010 and currently stands at about 80 per cent now.

According to KDC, the country's cooking oil sector can be valued at VND22.3 trillion (US$1.04 billion) and has a growth rate of 7 to 9 per cent. Vietnamese cooking oil consumption is about seven to eight kilograms a person per year. KDC has forecast a high potential for the market and said it expects consumption to double by 2015 and triple by 2020.

Ambition of new brands

Sao Mai Group, which focuses on property trading and seafood processing, entered the cooking oil market last year with its Ranee premium fish oil.

The company is also confident about introducing a new oil product made from tra fish.

Deputy Director of the Sao Mai Group Truong Vinh Thanh told the Dau Tu (investment) newspaper that even though the cooking oil market is competitive, the group is still firm on entering the sector because there are no domestic or foreign producers making cooking oil from tra fish.

However, supplements or food for babies that use tra fish oil are already available in the market, he added.

The Quang Minh Vegetable Oil Joint Stock Company is also involved in the production of cooking oil with many different brands and has a good reputation in the domestic food market through products, such as Mr Bean cooking oil, OilLa cooking oil and Soon Soon cooking oil, which have been around since 2011.

During its seven years of operations, the VinaCommodities Joint Stock Company has introduced Otran cooking oil, Eliza cooking oil and Chica cooking oil in the market.

Tran Van Toan, president of the management board of VinaCommodities, as saying that the company's goal is to become a leading agricultural product producer in Viet Nam and the Asia-Pacific region.

Dependence on imported raw material

Domestic cooking oil producers are still dependent on raw material imported from foreign countries. For example, the country has to import a large amount of palm oil from Malaysia and sunflower oil from Europe.

Since 2012, import tax on vegetable oil was removed following trade agreements, which resulted in fierce competition among cooking oil producers.

Products from neighbouring countries, such as Malaysia, Indonesia and Thailand, which have the advantage of planting and production, have led to Viet Nam's market share reducing and its revenue contracting.

During the 2009 to 2012 period, the market share for domestic production fell from 37 per cent to 22 per cent, while that of imported products rose from 33 per cent to 51 per cent during the same period.

Therefore, the Ministry of Trade and Industry decided to tax vegetable oil cooking products 5 per cent in 2013. However, this was only a temporary self-defence measure as it only lasted 200 days. — VNS