Grain & Feed Material Business in Vietnam
Sojitz Secures Grain Port, Contributing to Stable Supply of Feed Materials for Asia
*Affiliations and titles are current as of the time of the posting of this article.
Rice is unquestionably Southeast Asia’s traditional staple food. In Vietnam in particular, there are an abundance of noodles which use rice as a base ingredient, such as pho and rice vermicelli, and the country now competes with Thailand to be the world’s top rice-exporting country. Recent years, however, have seen a dramatic change in the Vietnamese diet towards wheat-based foods, with eating-out industries launching bread, pizza, pasta and ramen ventures in the country’s major cities. Indeed, Vietnam’s wheat imports tripled from 2001 to 2011, and are expected to continue growing. Meat consumption, centered on pork and chicken, is also on the rise, leading to a sharp increase in soymeal and corn imports as feed for these animals. In this feature, we introduce Sojitz’s grain and feed project, built around a new grain port venture our company entered in an effort to respond to Vietnam’s surging grain demand.
Participation in a Port Infrastructure Project through Investment in a Major Vietnamese Flour Company
In 2006, Sojitz’s grain business focused on domestic trading within Japan. At the time, we were searching for a road out of Japan to move to an offshore market, believing that there would be no future for Sojitz’s grain business without overseas business. Takuya Sudo, on assignment to Singapore, was scrambling to seek out new business opportunities in Southeast Asia. He was trying to think of some way to enter the Vietnamese market, where grain demand was showing particular growth. It was then that Sojitz received the cooperation of our long-time partner in the wheat business and the largest conglomerate in Indonesia, Salim Group. In 2007, Sojitz acquired a 20% stake in Interflour Vietnam Limited (IFV), a major Vietnamese flour company, and entered into the first dual flour and port infrastructure project in the country. This project was of great significance to Sojitz due to the way it (1) expanded development of our overseas grain business and (2) facilitated our entry into the port business.
Completion of the Largest Capacity Dedicated Grain Port in ASEAN
IFV is a project company based on investment from Interflour Holdings Limited, a joint venture between Salim Group and Co-operative Bulk Handling Limited, Australia’s largest agricultural cooperative. In 2007, IFV’s 130,000-ton wheat flour production capacity made it the #2 flour company in Vietnam. Their milling plant is the only one in southern Vietnam, and is located on the Thi Vai River—an area suitable to the construction of a deepwater port able to dock Panamax-class vehicles. IFV’s shipping docks, located right next to their milling plant, are the sole dedicated grain docks in the area.
After Sojitz invested in IFV, we began working together with them on a large-scale project to upgrade their port infrastructure. Work on port infrastructure/expansion, groundwork, and grain silo/warehouse construction began in July 2007. Called Cai-Mep Agri Port (CAP), construction on the project completed in November 2010.
“CAP’s annual cargo capacity is 3 million tons. In addition to being the largest dedicated grain port in the ASEAN region--equipped with a 100,000-ton grain storage warehouse, 30,000-ton grain silo, and pier for transferring grain to local vessels—the introduction of new cargo infrastructure dramatically increased loading and unloading speed, turning the facility into a high-functioning port.” (Sudo)
Overcoming Every Hurdle
In broad terms, our project with IFV is divided into two segments: the flour business and the grain port business. IFV handles operation of the flour business, while Sojitz—as the one with port rights—is responsible for importing the grain and conducting offshore trading.
Of course, that is not to say that the project got off the ground without a hitch. A landslide caused construction to delay by a year. There were also a number of issues with operations after the port was completed, including malfunctions in loading and unloading equipment as well as missing cargo. Although it proved challenging to respond to all of these issues, we faced each on its own terms and worked to solve these problems.
An anecdote: one time, we had a ship arrive from India carrying corn, a small portion of which was Sojitz’s cargo. Unfortunately, the ship was stopped at port for two months due to a plant quarantine issue. Costs to keep the ship docked grew. If each buyer would have continued to negotiate with their seller individually, they would have had trouble reaching an agreement, so Sojitz stepped in as representative and negotiated directly with suppliers to find a way to resell the goods to other countries and guarantee suppliers’ shipments. Word spread that Sojitz knows how to take care of its customers, and that was when we started to gain momentum as a credible company with whom customers wanted to work.
“Whenever another problem reared its head, our 20 member team, made up of staff in Tokyo, Vietnam, and Singapore, would come together to deal with it. Each obstacle we surmount makes the team that much stronger and builds solidarity among us. I am truly proud of how strong this team has become. I believe that the staff members will take the experience they cultivated during this project and put it to use in the next big venture.”(Sudo)
Doubling Flour Production Capacity to become a Top-Tier Vietnamese Flour Company
IFV’s flour volume covers 80 different varieties. In order to meet Vietnam’s tremendous flour demand, milling facilities were expanded in 2012, raising production capacity from 500 tons to 1,000 tons per day. IFV now holds the largest production capacity of any Vietnamese flour company. As the country’s wheat demand continues to grow under increasing westernization of the Vietnamese diet, IFV’s sales figures are rising in turn.
The port project also provides a wide variety of port services related to the import of grain products such as soymeal, corn, and wheat. Vietnam’s grain demand is forecast to increase by 10% per year in the soymeal and corn segments, and by 7.14% in the wheat segment. Demand for ports to import these grains is also thought to be on the rise. Through CAP, Sojitz supplies grain materials imported from the U.S. and South America to the Mekong Area countries such as Vietnam and Cambodia. Moving forward, Sojitz will expand the project alongside growing demand to achieve a stable supply of grain for the region.
Sojitz has also entered into compound feed production and sale projects in Vietnam and Cambodia. Additionally, the project has achieved reliable and effective international intermodal transport thanks to Group company Sojitz Logistics’ overland transport service linking Vietnam, Cambodia, and Thailand. This has made it possible to construct a grain value chain based around CAP. By transporting grain en masse using large-scale vessels, Sojitz provides cost-competitive feed materials to customers, and by utilizing Sojitz Logistics’ international logistics service, we are able to meet the ASEAN region’s precise logistics needs.
CGG Trading S.A. Director
(Food Resources Unit Senior General Manger at the time of interview)
This project was first implemented in an attempt to turn the Food Resources Unit’s business away from one focused on domestic trade, and it has since grown into the largest milling company in Vietnam and one of the leading grain ports worldwide. Sojitz can now be counted among the top three grain companies in the Vietnamese grain industry.
I would like to use this opportunity to thank everyone involved with this project who never gave up in the face of adversity. I pray that you continue your dramatic growth.
A word from the project members
Hanoi Liaison Office
Sojitz’s grain volume has grown as our many customers have come to understand the superiority and convenience that our port’s quick unloading times and high-tech facilities afford them. I feel profoundly impacted by how initially CAP lacked name recognition as a new venture, and yet has now become a port whose name is well known among all of our customers.
Sojitz Vietnam Company Ltd.
The Sojitz Vietnam Grain Trade Team has roughly 70 customers between Vietnam and Cambodia. Utilizing the superior functions of the CAP, we have created a business scheme where we import soymeal and corn from South American and the U.S., and either sell the product to feed companies and traders in Vietnam or export it to other countries. It is precisely because Vietnam now exhibits such remarkable growth that I believe this project is incredibly valuable.
Grain & Feed Material Department Grain Section
I’m in charge of procuring products from overseas suppliers and selling products to Vietnamese buyers. The most impressive part of this job is how each staff member steadily and sincerely handles their duties, thereby expanding sales for the project.
Grain & Feed Material Department Grain Section
(Interflour Vietnam Limited [at the time of interview])
IFV is evolving on all fronts and becoming a leading company in East Asia in terms of quality and volume. The experience gained through this project in Vietnam, a continually growing market, will inspire the development of new projects.