FGV confident of double-digit return from forays into Vietnam

Felda Global Ventures Holdings Bhd (FGV) is confident of a double-digit return from its investments in palm oil-based consumer products in Vietnam.

Its head of palm downstream cluster, Datuk Zakaria Arshad said FGV is making forays into one of the biggest consumers of palm oil with high population growth and vegetable oil consumption.

“By collaborating with big players in the industry that has an established customer base, we can gain a strong foothold in Vietnam,” he told Bernama in an interview.

FGV recently announced a collaboration with Vietnam’s leader in the confectionery industry, Kinh Do Corporation and regional solutions provider for integrated logistics Indo Trans Logistics Corporation (ITL).

The partnership focuses on the production, sales, marketing and distribution of specialty oils and oil palm-based consumer packaged goods for the Vietnamese market.

Zakaria said the partnership would be finalised in six months' time, culminating in the formation of a joint venture company where both Kinh Do and FGV taking a 40 per cent stake each, while ITL and other associate companies, the remaining stake.

Kinh Do commands 80 per cent market share of cooking oil in Vietnam through its 51 per cent stake in Vietnam Vegetable Oils Industry Corporation (Vocarimex), a major cooking oil manufacturer.

To suit Vietnamese consumer taste, Zakaria said plans were afoot to set up blending and processing facilities to blend palm oil with peanut oil in the country, with crude palm oil as raw material brought in from Malaysia.

Vietnam, the third most populated ASEAN country with a population of 90 million, is the 13th biggest importer of palm oil, according to economic statistics.

Zakaria said FGV is banking on Vietnam's high population and vegetable oil consumption.

"A higher margin can be expected in Vietnam. Unlike Malaysia, where cooking oil is subsidised, the price of cooking oil in Vietnam is much higher as it is based on market forces," he said.

Based on the official projection, he said, Vietnam's vegetable oil consumption is expected to expand to 16 kg per person annually by 2020 from 8.7 kg per person annually.

He said major importers from Malaysia and Indonesia were banking on this projection as palm oil accounted for 70 per cent of the vegetable oil market in Vietnam.

In spite of the availability of other vegetable oils in the Vietnamese market, palm oil is preferred due to consumer awareness of its health benefits and price competitiveness, he added.