Vietnam’s Food Industry Suffers Rising Prices And Supply Chain Issues

When Vietnam was already averaging 12,300 daily COVID-19 cases in August, the southern localities of Ho Chi Minh, Binh Duong, Dong Nai and the areas in the Mekong Delta all unanimously agreed to further extend strict lockdown measures. By August 23, residents in these areas were totally banned from going out, not even for a trip to the supermarket or the pharmacy.

For Nam Xhan, who owns a mushroom farm in Long An and Tay Ninh, the lockdown had an even more serious impact. Because of movement restrictions and social distancing protocols, his farm had to stop planting and harvesting for three weeks. Mushrooms grow from spores, and rather than soil, spores rely on substances like sawdust, grain, straw or wood chips for nourishment.

“Within the social distancing period and up until now, all of the ingredients used to plant mushrooms are still heavily restricted. We already lost 80% of the ingredients supply (rubber sawdust). As a result, the price of planting mushrooms has doubled compared to pre-COVID, which is affecting consumer price, too,” Nam explains.

Beyond the supply issue on rubber sawdust, Nam says that disruption in logistics was an additional burden. “Demands for mushrooms increased, but we couldn’t supply them to buyers because of restrictions on transportation. Our operation costs stayed the same, but our revenue dropped by 40%.”

Now a month after Vietnam lifted the lockdown and farming has gone back to normal, Nam remains cautious. He cut back production of mushrooms to about 70 to 80%, afraid that a new lockdown might leave the products stuck and rotten again. He’s also focusing on planting mushrooms that are easier to plant and require cheaper ingredients to grow, like straw mushrooms.

From the farm, Nam sends his mushrooms to KAMEREO, a B2B food sourcing platform, which then supplies the fresh produce to restaurants, supermarkets and hotels within Ho Chi Minh City. Because of supply shortages and rising costs in the supply chain, KAMEREO founder Taku Tanaka admits that their product pricing has been affected by the changes made by the sectors involved in the whole food supply chain.

“Many farmers did not grow vegetables during the lockdown. It has impacted their production, as it takes about two to four months to grow and harvest vegetables,” says Tanaka. “There were manpower shortages in factories, input cost rise, and demand-supply issues.” Then, of course, the closure of restaurants, hotels and cafes.

“The lockdown affected businesses. Even e-commerce reported a negative growth rate since they didn’t have any resources to continue operation. As a B2B e-commerce player, we’ve also been negatively impacted as F&B stores, our major customers, we’re not allowed to open for months.”

KAMEREO, which procures most of its vegetables from Da Lat and Daklak, also sees price increases in fresh produce as farmers in the Central Highlands region scramble to grow vegetables that are in season right now.

On the other end of the supply chain — restaurants and ready-to-eat food services — the situation isn’t any better. Fitfood, a weekly plan subscription service in Ho Chi Minh City, resumed operations immediately after the restrictions were eased. As the business slowly recovers from its “most serious challenge” in its six years in operations, it faced another set of hurdles: low supply of fresh produce, meat, seafood, and imported ingredients like Chinese herbs, lack of whole wheat noodles since the factory in the Mekong region was closed down for months, and staff stuck in their hometowns.

“It’s been very frustrating. Our vegetable truck from Dalat couldn’t get in the city due to testing and vaccination policy, so we’re constantly looking for new suppliers every two days. Our suppliers in Binh Dien market weren't allowed to reopen for most of October, some of the vendors also died of COVID. It’s been very hard to resume full operations,” says Kim Thai, founder of Fitfood.

Fitfood’s menu, which includes healthy vegan options, relies heavily on fresh produce and meat the company sources on a daily basis. But the prices of their most basic ingredients have increased, affecting their product offerings. Broccoli has increased from 50,000 to 60,000; cauliflower from 47,000 to 55,000; tomato from 25,000 to 32,000; zucchini from 32,000 to 41,000. Others like carrots, bell peppers, pumpkins and potatoes increased around 5%, probably because they are less perishable.

Kim says she’s trying to cover price gaps and maintain her usual meal pricing, but Fitfood has to alter some dishes with ingredients that are more accessible and cheaper. “Some weeks we couldn’t follow our model, like using whole wheat pasta. We’re afraid that could affect our customers’ perception of our service. But when we change something, we always notify them, and fortunately, they understand the situation.”

To solve sourcing issues, Kim says she’s started buying from Hanoi and other regions as she waits for farming and factory operations in Dalat and the Mekong Delta to stabilize.

But she hopes these significant issues affecting pricing and supply of fresh produce in Vietnam are only short-term trends, and won’t last for too long. “Or else, we would need to adjust our product prices to mitigate the financial impact,” says Kim.

For Tanaka, who has closely observed food supply-demand changes in Vietnam since he launched KAMEREO in 2018, “everything might be back to normal after the Tet holiday”.

That is if Vietnam won’t go into another full lockdown.