Singaporean palm oil giant strengthens Vietnam presence

Vietnam Economic Times | Mon, Jul 11, 2016 01:53:45 PM Share this on

Wilmar International to purchase 45% of oil crushing factory in Ba Ria Vung Tau, adding to previous investment in Can Tho.

The world’s largest palm oil processor and one of the largest soybean buyers is strengthening its share in Vietnam’s cooking oil market.

The Singaporean-based Wilmar International will buy 45 per cent of Bunge Ltd’s oilseed crushing factory, the company announced on July 5. The terms were not disclosed.

The Quang Dung Company, a soybean meal distributor in Vietnam, will retain a 10 per cent share in the factory, creating a three-party joint venture, according to Reuters.

With an annual capacity of 1 million tons, the factory crushes 3,000 tons of soybeans every day into 600 tons of soybean oil and 2,500 tons of soybean meal. The soybean oil is used for consumer products while the soybean meal is used as animal feed. The oilseed crushing operation was established in 2011 and is located at the Phu My I Industrial Zone in southern Ba Ria Vung Tau province.

Bunge is Vietnam’s largest producer of soybean oil. Its chartered capital stands at VND560 trillion ($25.1 billion) with revenue for 2014 reported at VND12.8 trillion ($574 million). “This joint venture will strengthen Bunge’s operations, marketing and logistics,” Wilmar’s CEO Mr. Soren Schroder was quoted as saying.

Wilmar is “a partner who really knows what they’re doing in oil marketing,” said Mr. John Baize, President of the international agricultural trade and policy consultancy John Baize and Associates. “It makes sense for Bunge because they get to pull out capital, which they can put back into their core businesses.”

Wilmar’s target after the deal is to “integrate operations that are both a source and sales outlet for oil in Vietnam,” according to the statement. “It will also help the company to remain a low-cost operator with the highest efficiency possible,” Mr. Schroder added.

In 2008 Wilmar bought the Hung Phu factory established in 2003 by the Cai Lan Oils & Fats Industries Company (Calofic) in the Mekong Delta’s Can Tho city. With a daily capacity of 500 tons, the factory produces rice bran meal as animal feed and rice bran oil for consumer products.

Calofic, in which Wilmar holds a 76 per cent stake, is the leader in Vietnam’s cooking oil market with a 37 per cent market share. It reported total 2015 revenue of VND11 trillion ($493 million), three times higher than its nearest competitor, the Tuong An Vegetable Oil Company. Calofic has won the trust of a wide range of customers with its famous brands, including Neptune, Simply and Meizan.

The Vietnam Vegetable Oils Industry Corporation (Vocarimex) announced on June 27 that it will sell 24 per cent out of its 51 per cent holding in Tuong An. It seems likely that Vocarimex will sell the stake to the KIDO Group Corporation, who confirmed with VET that it would increase its stake in Vocarimex to 51 per cent in the second half of this year. With KIDO aiming to cooperate with Vocarimex and with Wilmar’s strategic deal, the country’s cooking market is set to see fierce competition.

Vietnam’s cooking oil market now has 40 companies producing and selling cooking oil products, 70 per cent of which are palm oil, 23 per cent soybean oil, and 7 per cent vegetable oil, according to data from the Ministry of Industry and Trade.

It is a growing market for oilseeds due to increased demand in the livestock industry, where soybean meal is a major animal feed. The country is projected to import 5.2 million tons of meal in 2016/17, up from 2.291 million a decade ago, according to data from the US Department of Agriculture.

Source: Vietnam Economic Times