Seafood processors sounding out foreign investors

In May, the Tokyo-based Mitsui & Co. agreed to invest some $153 million in Vietnamese shrimp processor the Minh Phu Seafood JSC, in exchange for a 35.1 per cent stake. The local processor called for funding to bring its ambitious expansion plans over the next few years to life, as global demand for shrimp is anticipated to grow substantially. 

Mitsui regards Minh Phu as the world’s largest shrimp integrator, vertically integrating all stages from farming to processing and sales. The Vietnamese company has two processing plants and shrimp farms on a total area of 900 ha in Vietnam’s south, and its extensive range of products, including value-added products, are exported to around 50 countries and territories, most notably the US and Japan, and account for approximately 20 per cent of the country’s total shrimp exports.

Investor impact

Minh Phu revealed details last October of its plan to issue 75 million shares with a face value of VND757 billion ($32.9 million), increasing its charter capital to VND2.15 trillion ($93.5 million). Mitsui and three investors from the US and South Korea expressed interest in the shares at that time. 

The Vietnamese shrimp processor told VET about its plans to invest almost all of the $153 million on increasing capacity at the Minh Phu Shrimp Farming and Shrimp Processing Factory. Its goal is to increase existing capacity from 76,000 tons to 200,000 tons by 2025 through the construction of three new factories. The company expects the expansion to contribute $1.39 billion in additional revenue by 2026, which would rise from $801 million in 2018 to $2.6 billion by that time. 

Mitsui also invested in the Minh Phu Hau Giang JSC (MPHG) in 2013, a processing plant and subsidiary of Minh Phu Seafood, optimizing its management and operations. By investing in the parent company, Mitsui will be able to apply initiatives developed at MPHG throughout the entire group and leverage the sales networks established by Mitsui’s global group to expand sales. It will also help Minh Phu achieve further growth through the application of digital technology, including artificial intelligence (AI) in farming ponds and processing plants, and enhance the efficiency of the shrimp supply chain from farming to marketing.

A representative from Minh Phu said the Japanese company will help it quickly achieve its aspirations to occupy 25 per cent of the global shrimp market in the future. 

Mr. Nguyen Ngoc Dung, Vice Chairman of the Vietnam Pangasius Association, has a positive view of cooperation between Vietnamese processors and foreign investors given the success of previous endeavors. Generally speaking, most foreign investors in the seafood industry are financial partners and capital is important to Vietnamese companies.

Mr. Dung has found that Vietnamese seafood enterprises that have received investment from foreign investors have a different culture and adopt a better response to uncertainties than those that haven’t. “Foreign investors have influenced the decisions of the management board, the members of which are mostly relatives,” he said. “Foreign investors have also played a role in refining the distribution chains of Vietnamese seafood enterprises. Issues remain in Vietnam’s seafood value chain and cooperation with foreign investors would create opportunities to increase value at Vietnamese producers.” 

From the perspective of companies, Mr. Dung said they may have concerns about losing leadership and control as well as the difference in corporate culture. The Vinh Hoan Corporation (VHC) is one such example. Though foreign investors hold stakes in the corporation, they have not had any significant influence on its management board.

Working together

As supply is expected to exceed demand in the global shrimp market and prices will fall as a result, Minh Phu is focused on cutting costs in all stages of the shrimp value chain by using technology such as the Internet of Things (IoT), AI, and traceability using blockchain, and on reducing shrimp retail prices to stimulate demand. It will also discuss with Mitsui whether there is a need to seek further external investment. 

Quoc Viet Seafood, another local processor, is prepared to sell a majority stake in the company in order to receive foreign capital for its farm integration plan. The family-run company is seeking financial and strategic investors through private equity deals in the first stage and a strategic investor in the second stage. It produces breaded and value-added shrimp as well as raw and cooked shrimp, with Japan its main market during its 23 years in business. Under its plans, it expects to be able to fully supply raw materials processed under its own aquaculture practices at its four-star farms. 

Last year, Viet Uc Seafood received its most recent capital injection, of $33 million, from South Korea’s STIC Investment, which becomes its major financial investor. Mr. Tran Quoc Tuan, Vice President and Chief Financial Officer, told VET that STIC has a good relationship with major supermarkets in South Korea, such as Lotte and CJ, which would help it introduce its products in the country.

Viet Uc’s strategy is to provide shrimp certified with 100 per cent traceability and absolutely no use of antibiotics, as such products remain scarce around the world and are favored by distributors and customers. Mr. Tuan and the management board will consider working with a strategic partner in the future. “This partner must have a similar culture and long-term strategic vision,” he said. “The priority is for it to apply high technology in the process of producing and distributing clean products, with traceability, sustainability, and environmental-friendliness, ultimately bringing economic efficiency to our company and shareholders.”

Mr. Dung forecast more cooperation in the future given that Vietnam is or will soon be party to free trade agreements (FTA) such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Vietnam FTA. Foreign investors in other members’ markets will seek investment in Vietnam and look for potential enterprises to invest in, merge with, or acquire. “Policies in the seafood industry are more open under FTAs,” he said. “Many local companies will see the playing field widen, and those that are proficient and experienced will be more open to working with other companies.” 

Local insiders describe the trend of seeking foreign investment as not being significant, as the agricultural sector in general and the seafood industry in particular have a high investment risk. Foreign investors must not only possess advantages in capital but also understand the market segment and own part of the distribution channel in targeted markets. “Vietnamese businesses should look for investors that focus on expanding supply chains, the breeding stage, and animal feed, as these are weaknesses in the local agricultural sector,” Mr. Dung said.