FOX LOGISTICS SERVICE COMPANY LIMITED
Address 273/3 Nguyen Trong Tuyen, Ward 10, Phu Nhuan District, Ho Chi Minh City, Vietnam
Counter Address 9A1 Street 48, Tan Phong Ward, District 7, Ho Chi Minh City, Vietnam
In the context of declining exports, seafood businesses are maneuvering and changing their strategies to retain export orders, sustain production, and continue their business operations.
Focus on processing, increase the value of export goods
Mr. Truong Huu Thong, Director of Thong Thuan Co., Ltd., mentioned that the global economy has been severely affected by the pandemic and ongoing wars, resulting in a significant decrease in the world economy, especially in the European, Japanese, and American markets. These three markets account for more than 90% of Thong Thuan's market share. These markets have been heavily affected by inflation, high Fed interest rates, and the tightening monetary policies of Europe and the United States. In 2023, exports are expected to decline, and Thong Thuan has already experienced a more than 20% decrease in export orders compared to 2022. However, the company has managed to maintain employment for its staff and workers and sustain cash flow.
Thong Thuan has adopted new ways of selling products, cost-saving measures, and cost-cutting strategies, seeking low-cost shrimp farming alternatives. Despite the current economic situation, other industries such as leather shoes, textiles, and wood products have experienced significant declines, but the seafood industry remains essential and has a more positive outlook. In the current conditions, businesses must be flexible, assess market realities, and find adaptive solutions to overcome difficulties. The company's production situation and workforce have remained stable, and it has managed to maintain export orders by shifting its focus to value-added products such as sushi, seasoning, and tempura.
As one of the leading seafood export companies specializing in catfish, Vinh Hoan Corporation has experienced a significant decline in catfish exports, including traditional markets, in the first five months of 2023. Ms. Truong Thi Le Khanh, Chairwoman of the Board of Directors of Vinh Hoan Corporation, stated that catfish exporters have expanded their export markets to more than 140 countries.
However, Khanh pointed out that the catfish processing industry still heavily relies on manual labor, which will be a challenge in the future. Therefore, the industry needs to invest in technology and machinery to reduce labor-intensive processes to overcome this challenge. The catfish industry needs to invest in technology to overcome increasingly stringent environmental and social requirements. Additionally, flexible mechanisms, openness, and determination from the government are also necessary factors to boost the industry's acceleration in implementing programs for the development of value-added processed products.
Sharing the company's approach, Mr. Doan Van Dong, Director of Can Tho Seafood Import-Export Company, stated that the challenging situation in 2023 may continue until the end of 2024, as predicted by many. Therefore, businesses need to find ways to survive, identify challenges, difficulties, and specific situations to overcome them. Instead of expanding their product range as before, companies should focus on existing products, improve their quality and production costs. Vietnamese shrimp products are nearly saturated in terms of VAT (value-added tax). Therefore, businesses should concentrate on existing products, improve quality, packaging, and design, instead of expanding to new markets and customers. It is important to retain existing customers, focus on enhancing machinery and modernizing workshops, take care of employees, increase wages to retain skilled workers, ensure stable labor, and strive to stabilize production and overcome this period.
In the face of difficulties due to declining orders in major markets, Vietnamese seafood businesses are innovating their products, promoting trade, and restructuring the market.
Mr. Pham Hoang Viet, CEO of Sao Ta Food Corporation (FIMEX VN), to compensate for the decline in volumes in major markets such as the US and EU, many enterprises have had to shift their exports to other markets, including Japan. The Japanese market has a relatively low inventory, so purchasing power remains good. However, due to inflation, consumer spending is also limited as consumers tighten their budgets. However, to penetrate this market, a stable supply source, good quality, and traceability must be ensured.
"It is expected that the market will be very sluggish from now until the end of the year. Purchasing power in the US market will still be low due to high inventory. Companies that want to maintain their position have to find other markets. Smaller markets in the Asian region such as Hong Kong, Taiwan, etc., have better purchasing power because they do not have high inventory, so they buy more frequently," Mr. Viet assessed.
Mr. Tran Thien Hai, Chairman of the Board of Directors of Minh Hai Seafood Corporation (SEA MINH HAI), currently, there are many new challenges for the shrimp industry in Vietnam. Vietnam's advantages in the past were having many processing plants, relatively advanced processing technology, skilled processing workforce, and a fairly good market. However, what we used to think was our strength, other surrounding countries and competitors have also achieved. Our current weakness is in the farming sector. Shrimp farming in Vietnam is still very vulnerable. Meanwhile, shrimp farming strengthens surrounding countries such as India, Bangladesh, and Ecuador. Recognizing this issue clearly, Vietnamese businesses need to reconsider.
"If in the past, the role of seafood processors was the focus in the value chain, now we should place the role of farmers as the focus in the value chain," Mr. Hai emphasized.
Sharing solutions to maintain export markets, Mr. Le Van Quang, CEO of Minh Phu Seafood Corporation, compared the production cost of shrimp among three competitive rivals: Vietnam, Ecuador, and India. The production cost of farming 50 shrimp/kg in Ecuador is only from 2.2-2.4 USD/kg, in India is from 3.4-3.8 USD/kg, and in Vietnam is from 4.8-5.0 USD/kg. Although the selling price of shrimp from India and Ecuador is low, they still make a profit because their production costs are low.
Faced with this reality, Vietnamese processing businesses have to find ways to ensure that the purchase price of raw shrimp is not too low because they are concerned that if they buy at a very low price, farmers will stop shrimp farming. Businesses need to find ways to produce value-added and convenient products to increase the selling price and achieve higher profits.
Mr. Vo Van Phuc, Chairman of the Board of Directors and CEO of Clean Vietnam Seafood Corporation, believes that the Vietnamese shrimp industry is facing two challenges. First, the economy is contracting due to the impact of inflation, leading to reduced consumption. Second, competition between countries is becoming increasingly fierce, specifically in the supply of cheaper shrimp from India, Ecuador, and Indonesia. The global crisis is still uncertain. Therefore, the consumption market will be difficult, coupled with the strategic challenge of the supply of cheap shrimp, while the supply exceeds demand, causing the price of finished shrimp to decrease, even lower than the price of raw materials.