Vietnam's Cassava Industry: Limitation, Advantages, and Solutions
Nguyen Nguyen
Founder of NguyenStarch | Modified Starch Manufacturer | Food Science & Technology
Vietnam is fortunate to have important domestic resources, including the world's largest cassava growing area, cheap and abundant labor, and a prime geographical location. Given these advantages, if Vietnamese cassava enterprises can effectively leverage these three key factors, they can become world-leading starch producers. They would then be capable of competing with top manufacturers from Thailand, the US, and Europe.
1. Limitations of Vietnam's cassava industry
The biggest limitation is the dependence on the Chinese market (accounting for more than 92% of cassava sold), this causes many consequences that prevent the Vietnamese cassava market from developing. In general, the limitations are:
2. Advantages conditions of Vietnam's cassava industry
Vietnam is the country with the most favorable conditions to become a powerhouse in producing cassava products. Below are the most advantages of Vietnam cassava industry:
3. What must Vietnam do to become the world's leading cassava producer?
To become the world's leading cassava producer, Vietnam needs to have the mindset and desire to lead the world, be able to compete with corporations from the US, Japan, and Europe. In addition, make the most of available advantages, overcome limitations, and have the strongest enterprise representing to attract domestic and foreign resources.
3.1. Thinking come first
Vietnamese businesses must have the leading mindset in the world cassava market,
There are many countries that want to be the world leader in the cassava market but they do not have favorable conditions, for example, Nigeria has the largest cassava growing area in the world but their geographical location and seaport are not favorable for this reached the top position in the world. Indonesia has many favorable conditions but they cannot lead the world because they do not have a neighbor, China, as their largest trading partner like Vietnam.
Although Thailand does not have a border with China, the total export value of cassava and cassava products in 2022 is 4.4 billion USD, while Vietnam is 1.4 billion USD. Currently, Thailand is the world's leading country in the cassava industry, and is also one of the world's starch powers.
Vietnam clearly has more favorable conditions than Thailand. If we have a strong desire and know how to take advantage of opportunities, Vietnam can completely rise to become a powerhouse in the cassava industry particularly and starch industry generally.
3.2. Take full advantage of available advantages
If we know how to take full advantage of the available advantages that mentioned in section (2), Vietnam's cassava industry can develop 3 or 5 times more than it currently does.
3.2.1. Maintain and must sell more to China
Thanks to its favorable geographical proximity to China, and China being the world's largest cassava consumer, Vietnam must find ways to maintain and sell more to China.
Vietnam has already sold a lot of cassava to China, but must sell more. Currently, China buys a lot of cassava from Vietnam because of its cheap price and favorable geographical location close to China. Although Thailand's geographical location is further away than Vietnam, the price may be higher, but China still buys a lot of Thai cassava (?).
I once talked to the owner of one of the largest tapioca starch manufacturers in Vietnam. He told me that the quality of Thai tapioca starch is very good. I have helped many businesses sell products abroad, many businesses in South Africa said that they used to buy Vietnamese tapioca starch, but the quality was not guaranteed, so they switched to buying from Thailand and were very satisfied.
If Vietnam can make cassava products quality equal to Thailand's and provide good customer service like Thai businesses, China will turn to buying products from Vietnam because Vietnam's geographical location is more favorable. Moreover, politically, Vietnam is still a good friend and close neighbor to China.
3.2.2. Must attract foreign FDI capital, businesses, and technology
In the US and Europe, dozens of startups in the food sector receive millions of dollars in investment capital from investment funds and food corporations each year. Investment funds and large corporations see the potential of startups and they invest in them. If these corporations see the potential in Vietnam's cassava industry, they will not hesitate to pour capital into it.
Thailand in the past was like Vietnam, they had no capital, no technology, later they knew how to attract capital and technological resources from advanced countries so they rose very quickly and became the leading country in cassava.
Many Thai businesses have invested in building factories in the Vietnamese market, typically Tay Ninh Tapioca JSC (invested by ThaiWah), they exploit Vietnamese raw materials, then export them to Indonesia, and the world. Each year Indonesia buys more than 30 million USD from Thailand, but only buys from Vietnam in very small quantities.
The world's leading businesses and starch corporations all have a desire to expand their markets, and at the same time they also have concerns about cheap tapioca starch from Asia competing on price with corn, potatoes, and wheat starch.
Ingredion, the world's leading American starch corporation, has long seized this opportunity, investing in production in Thailand, taking advantage of cheap raw materials and labor, producing starch products, such as modified starch, then exported back to the US, Europe, and around the world. In 2018 Ingredion planned to invest 60 million USD in Asia (mainly Thailand) to expand the market.
Vietnam needs capital and technology from the world's leading corporations such as Ingredion to invest and produce. On the contrary, the world's leading corporations are also in dire need of a place with a favorable geographical location, abundant raw material resources, and an elite cheap labor force, so that they can expand their market and compete with Asia competitors (which is competing with their starch products from corn and wheat).
Most of the world's leading food and starch corporations have strategies to invest and expand production in Asia; what they need is a sincere invitation and favorable conditions from the government , a strategically compatible partner, and a trusted ally.
There are many leading starch corporations, capital ventures, partners in the world that Vietnam should invite. Outstanding names that I believe should invite cooperation are:
3.2.3. Sustainable planning, responsive to climate change
Vietnam has the largest cassava growing area in the world, but we also need to anticipate difficulties and challenges in the current global climate change environment.
In 2023, Thailand has faced a serious decrease in raw materials for cassava production and cassava products, due to unprecedented heat. A few months later, in February 2024, Thailand's representative, ThaiWah, coordinated with the world's leading starch production organizations and businesses such as Ingredion and Roquette, to organize the "12th Starch Value Chain ASIA" in Vientiane, Laos aims to set out sustainable development directions, helping Southeast Asian countries develop sustainably with high quality cassava varieties capable of responding to climate change, thereby also contributing to ensuring raw material supply for Thailand.
Food manufacturers in general and starch in particular in the world today are committed to sustainable development. As the global population continues to grow, sustainable agricultural practices are essential to ensure long-term food security while minimizing environmental impact. This is also a very clear and important goal of the Vietnamese government, expressed through the Decision approving the Project "Sustainable development of the cassava industry until 2030, vision to 2050"
3.2.4. Organize consulting, support, and training programs for farmers to grow and care for cassava
Cassava industry businesses should not think that the relationship with farmers is the government's duty, neglecting their responsibility to farmers. In fact, the relationship between businesses and farmers is a vital one.
Thailand's leading cassava businesses have programs to visit their farmers. Every week and every month, they send quality monitoring experts to each household to visit and grasp the farmers' growing situation. If the farmers encounter any problems, they immediately help. This strategy helps ensure supply and build strong relationships with farmers.
Building relationships with farmers does not cost much, the quality monitoring staff can take this job, the efficiency is very great, which is trust from farmers, also the trust from customers.
Thus, businesses need to be responsible towards farmers, considering them as partners and the source of life for the business. Because if the relationship with the farmer is good, they will protect the business, provide the business with the best quality raw materials, and ensure the business meets the standards and quality that the business wants to achieve.
To do this, businesses need to accompany the government, regularly visit, meet, listen, advise, support, and train farmers, taking farmers as the basis in their operations.
Businesses should not abandon farmers to self-sufficient farming, forcing prices, considering farmers as profit to exploit, because then farmers will not be devoted to cassava, they will only care about profit, therefore they will use a lot of pesticides and chemicals to make plants grow quickly and make a profit, without paying attention to quality standards.
3.2.5. Close coordination between businesses and government
Reality shows that in any industry, the people who understand the market best are businesses, not the government. If the government has to research and make policies on its own without the enthusiastic and close contribution of all businesses, it will be difficult to achieve the expected results.
For Vietnam's cassava industry to develop rapidly, businesses must pay close attention to extensive research on the global market, grasp opportunities and challenges, proactively engage with government agencies, and propose recommendations.
Most cassava industry conferences in Southeast Asia are organized by leading Thai businesses in coordination with the government. This shows that Thai businesses, especially leading businesses in the industry, are very focused and enthusiastic in building development policies in the country and the region.
3.2.6. Reduce small businesses, build large corporations
Small businesses facing difficult conditions are very likely to fail. Statistics show that small starch production businesses only exist for 10-20 years. If they are lucky, they will sell themselves to a large corporation in return for shares, otherwise they would face bankruptcy and lose everything.
Vietnamese cassava enterprises should aim for the world's leading corporate model, instead of hundreds of small manufacturing factories as currently. This can completely become a reality if small businesses have close bonds and trust in each other. When combining, small businesses still ensure assets (contributed capital), real rights (right to participate in management), and profits.
Many small businesses in Europe realized this very early, they immediately liquidated assets to businesses in underdeveloped countries, took back their capital and joined and built a larger corporation. In fact, in Europe, there are less than 30 corporations but account for more than 95% of Europe's starch output.
3.2.7. Close cooperation with Laos and Cambodia to ensure supply
Climate change is a huge threat and challenge to the agricultural sector. Droughts, storms, floods, and extreme weather are becoming more and more serious, and concerns about lack of raw materials are present.
Vietnamese businesses should expand cooperative relationships, exchanges, and expand markets to neighboring countries Laos and Cambodia, to prevent the risk of raw material shortages when there are crop failures and pests.
3.3. Fix all limitations
In addition to taking advantage of and promoting available advantages, Vietnamese businesses need to clearly see the limitations to overcome them.
3.3.1. Access the most advanced technology
Technology is the core factor that determines the success or failure of a business. A small business with advanced technology will develop more sustainably than a large business but lacking high technology.
Only technology can help businesses develop and succeed. Without technology, one day businesses will certainly fail.
I know a cassava business that owns an old German production line. Although it only has a capacity of less than 200 tons/day, this business always runs at full capacity to serve its customers in Europe and USA.
On the contrary, I know of businesses that own up to 4-5 production lines with outdated technology, and are always struggling and worried because of low profits and extremely difficult machine maintenance.
Currently, the world's leading starch manufacturers have researched and developed very modern and professional production technology, and their products have super good quality (top notch). If they own their technology, combined with Vietnam's advantages, Vietnamese cassava businesses can confidently participate in the global starch market.
If 50 years ago, Korean company, Hyundai built the world's largest shipping ship thanks to the help of Western businesses, then Vietnamese businesses can do the same to build a world-leading starch factory.
3.3.2. Build cooperative relationships with the world's leading starch manufacturers
In a world where global cohesion is extremely important, businesses in the West and Europe are also very interested in Southeast Asia, they are certainly looking for a Vietnamese partner to expand their market.
Look at the lesson from Ingredion, thanks to expanding the market in Thailand early, it has helped them grow dramatically. The world's other leading starch corporations certainly know about Ingredion's strategy and are also looking to build their bases somewhere in Vietnam or Thailand.
Reality shows that over the past two decades, the world's leading corporations have come to Vietnam to build bases. Vietnamese businesses need to have a "win-win" mindset, we need technology and capital from the US and the West, conversely they also need raw materials, favorable geographical location, and our "indigenous".
Based on that, Vietnamese businesses should proactively seek out the world's leading starch corporations, ask for help, and access their capital and technology. Besides, we also need to prepare to meet their requirements, which are experience, capital, strategy, and the government's commitment to support.
3.3.3. Build customer relationships with the world's leading food manufacturers
Vietnamese businesses need to eliminate intermediary thinking and sell directly to customers.
The world's leading food producers that Vietnamese businesses need to pay attention to are those who use starch in the production of their products. They can be companies of instant noodles, confectionery, smokeless charcoal, glue, paper, etc. Vietnamese businesses need to know who they are, and proactively contact them.
With the development of information technology, many factories now sell directly to their customers, no longer needing to go through distributors. Direct selling helps cut costs for third parties, care for and listen to customers better, resulting in higher and more sustainable profits.
Based on information technology, market researchers can clearly know who the largest food company in a country is, so they can contact and offer directly to them. Vietnamese businesses need to research and understand who their customers are in each country and region, thereby directly approaching and building close relationships with customers based on commitment to quality and price.
If customers previously had to buy starch through an intermediary company, today they only need to spend time searching on Google to know who is the leading starch manufacturer and contact them directly to buy without having to go through intermediaries like before.
3.3.4. Focus on sales to non-China market
During the past decades, Vietnamese businesses have only focused on selling to their giant neighbor China. Faced with this situation, industries exports must have commented that Vietnamese businesses are "putting all their eggs in one basket". So when the situation is not favorable, if this basket falls, what will be the common fate of all Vietnamese cassava businesses, surely any business owner can clearly imagine.
Right now, in addition to maintaining and further promoting sales to China, Vietnamese businesses need to have a sense of urgency and fiercely explore a market that is much larger than China, collectively known as the non-China market.
Many Vietnamese businesses, when mentioning the markets of African countries, immediately criticize them for being small and underdeveloped, but in fact African countries also import a lot of cassava from Thailand.
The Thai people are different, they invaded Brazil and Latin American countries - where a lot of cassava is also grown. Mexico and Peru import even more cassava from Thailand than from Brazil.
3.3.5. Research and produce a variety of products from cassava
The production problem of Vietnamese cassava enterprises is still very limited in terms of products. From cassava, it is possible to produce countless different types of products such as modified starch, glucose syrup, binder, animal feed, corrugated carton glue, etc., but Vietnamese businesses still only mainly producing cassava chips and tapioca starch, a few businesses started producing modified starch but the quality is not high.
Thailand's SMS Group specializes in producing modified starch products from cassava, with up to hundreds of product types, serving nearly 30 manufacturing industries including food, beverages, healthcare, paper, plastic, health care, animal feed, textile industry, construction.
In Vietnam, modified starch production is just starting to take off and without careful research, it cannot compete with large foreign enterprises. Specifically, Vietnamese enterprises produce modified starch labeled E (mainly E1412, E1414, E1420, and E1422, with a little more E1440, E1442, Pre-gelatinized Starch, E1404, and Cationic). When customers ask to buy product such as E1414, they ask customers to provide the D.S index before quoting the price.
On the contrary, if that customer buys goods from Thailand, America, and Europe companies, they just need to say what product they are producing (eg: noodles, bread, cheese, etc), and the company's technical support staff will advise which modified starch product to use immediately.
3.3.6. Focus on quality standards
Most Vietnamese businesses have not paid attention to quality standards, because they have only sold to the Chinese market so they do not need to pay attention to international standards.
There are a few businesses that seek to export to other markets but only stop at a few average standards such as HACCP, ISO, Halal.
Very few Vietnamese businesses have all the necessary standards such as FSSC 22000, Organic, BRC, Kosher, etc. While this is the minimum condition to sell to reputable food businesses in the developed countries such as America, Japan, South Korea, and Europe.
4. Summary
To build a strong Vietnamese cassava industry, businesses need to overcome limitations, maximize available advantages, attract capital and mobilize the participation of the world's leading starch production corporations.
Author: Nguyen Bao Nguyen,