Food producers under pressure to keep prices low
Domestic food producers are facing increased costs while trying to keep prices down to stimulate sales, said industry insiders and experts.
Even with the Lunar New Year just around the corner, producers have been struggling to maintain sales. Rising prices, to better reflect their increased costs, will likely deal a huge blow to sales, said Thai Binh Duong, sales manager of a vegetarian food company in the southern province of Dong Thap.
"About 70% of our ingredients must be imported, mostly Canadian soya beans, yet in the first eight months of the year prices on the international market increased by 16.6% compared to the same period last year," he said.
Duong said his company has been trying to find alternative sellers in the domestic market but the task has proven to be difficult as they either failed to meet the company's demand for quantity or quality.
"We will likely keep prices stable for the time being but may be forced to raise our prices after Tet," he added.
Nguyen Quoc Hoang, CEO of Bibica Corporation, a large confectionery maker in Vietnam, said his company raised prices by 5-10% as input costs soared 20-25%, on average, since the beginning of the year.
Hoang said Tet is the most important time for his company. All ingredients, therefore, must be purchased at least six to nine months in advance. A price hike was unfortunate but inevitable.
Nguyen Hoang Dat, CEO of Vinahe, a cashew-based food producer, said his company has been trying to connect with numerous retail networks in a bid to push sales before and during Tet. While Vinahe has not decided to raise prices, he urged the government to take additional measures to support food producers at a time when input cost is rising without an end in sight.
As the US dollar continued to strengthen, producers were badly affected by a weakened Vietnamese dong and borrowing costs, especially loans in the dollar, according to economists.
Retailers have also reported an increased number of requests from producers to raise prices. Compromises have been made to keep prices stable for the time being to boost sales but the situation was likely unsustainable in the medium term.
"The idea is to find a balance that benefits consumers, producers and retailers. We don't want to raise our prices but if we must, we want to raise it by as little as possible," said a representative from a large supermarket chain in HCM City.
"Steep price hikes will likely result in consumers being forced to cut spending on foodstuff for the holidays. It will hurt both producers and retailers alike."
According to a report by the HCM City Department of Industry and Trade, demand for foodstuff for Tet will likely increase by 20-30% but only if prices are to stay stable from now until the end of the Lunar year.
A sliver of hope, according to producers, is for the government to continue with the VAT 2% reduction policy.
In last month's meeting with ministries and local authorities across the country, Deputy Prime Minister Le Minh Khai, head of the National Price Management Committee, said measures must be taken to support businesses and keep prices stable before and during Tet.
Economists have long advocated an increase in domestic production of key ingredients for foodstuff as a long-term solution to manage food prices and reduce reliance on the international market.