Processing is not only a difficult problem for our country's agricultural sector, but also a desire and aspiration to increase the value of agricultural products and increase the value of agricultural products. The country's current fruit and vegetable output is about 31 million tons per year, but the processing rate is only about 12% -17%. Due to lack of processing, many agricultural products of our country, which are inherently of high quality, have to be dumped, sold off, exported at low prices or discarded because they cannot be stored for a long time. Feeling that pain, there is a businessman who has been working hard for decades to find ways to deeply process agricultural products, increase their value and bring many Vietnamese agricultural products to penetrate the most demanding markets in the world, including products that account for up to 60% of the world market share.
“I am attached to agriculture like fate, wherever I go I see agricultural land and agricultural products and I am very enthusiastic and passionate. Until now, I can say that my whole life is attached to agriculture and dedicated to agriculture” - Chairman of the Board of Directors of Dong Giao Food Export Joint Stock Company (DOVECO) Dinh Cao Khue opened the story with us like that.
And perhaps, thanks to that passion, thanks to that long-term pursuit and enthusiasm, DOVECO has grown as strong as it is today. Owning more than 5,500 hectares of cultivated land and 13,000 hectares of land linked to production and consumption of products, DOVECO has become the largest enterprise in the country producing, processing and exporting fruits and vegetables according to a closed value chain with vast fields of pineapple, passion fruit, lychee, banana, mango, dragon fruit, durian, sweet corn, soybeans, spinach, onions, chives, ... stretching from the North to the vast Central Highlands. Currently, many DOVECO products have dominated the markets of Europe, the US, Japan, Korea, China, etc.
Reporter: Sir, deep processing has long been a difficult field for Vietnam's agricultural sector, so what was the reason that made you choose the "difficult path" right from the beginning of your career? And what was the reason that made you choose Europe - one of the markets considered to have the highest demands in the world - to develop your products?
Mr. Dinh Cao Khue: I went to survey the world food market quite early, 30-40 years ago to see what the market needed, and to learn about the market, I mainly went to fairs. World fairs are not for displaying and selling a few products, but are where business owners meet, discuss signed contracts, new products, and can negotiate and sign sales contracts right at the fair.
Those continuous trips made me realize that the world food and beverage market is very diverse and has a lot of potential, especially in Europe. The processed beverage market in Europe is as vibrant as the rice market in Asia. The same goes for the South American market. Beverages in Europe and South America are very important, even in difficult economic times, the beverage market in this region is still growing.
Also thanks to contact with most of the fruit beverage corporations in the world, I see that Vietnamese beverages have a very good position. For example, products processed from passion fruit, durian..., Vietnam now has the ability to dominate the market.
In addition, Europe is also a market with very high quality requirements. This is a challenge and at the same time will be the motivation for the Company to do the right thing, do it well, do it properly from the beginning. Specifically, when European partners come to evaluate the quality at DOVECO, they not only check the production and products, but also check the toilets, workplaces, accommodation of workers, etc.
In addition, Europe also has conditions on labor, environment, social responsibility, etc. Most recently, there are regulations on anti-deforestation. Accordingly, products exported to Europe must not be related to cultivation or production on deforested land.
Therefore, businesses must have a diagram of the growing area, and when inspecting, European partners can go to the growing area to “see for themselves”, even to each household to inspect… I always consider that strictness as a condition for DOVECO to develop sustainably.
Reporter: Could you please tell us about DOVECO's main export products and their competitiveness in the world market?
Mr. Dinh Cao Khue: DOVECO's main product is passion fruit. This is a strong product of DOVECO, grown mainly in the Central Highlands. Thanks to favorable natural conditions, grown at an altitude of 700-800m above sea level, passion fruit grows very well, giving high productivity. Currently, Vietnamese passion fruit accounts for 60% of the world's passion fruit market share, which can regulate the world's passion fruit price, while previously this role belonged to South American countries such as Peru and Ecuador. Vietnam has also surpassed South American countries in growing and exporting passion fruit.
In addition, DOVECO also has traditional products such as pure fresh pineapple and other fruit juices such as: fresh banana, fresh peach, passion fruit... Besides, there are canned products such as corn kernels, crushed sweet corn...; frozen products: pineapple, mango, lychee pulp, whole lychee... and other fresh fruits. Recently, DOVECO has also purchased and exported durian to China. This is a highly competitive fruit with a very high export turnover and market share.
Reporter: Sir, what is the significance of building raw material areas for the operations of DOVECO in particular and agricultural processing enterprises in general?
Mr. Dinh Cao Khue: Raw material area is the factor that businesses are most concerned about before building an agricultural processing factory because only when there are enough raw materials can the factory operate stably, regularly, long-term and effectively.
For example, in Bac Giang province, the main agricultural product harvested is lychee, however, the lychee here only has enough capacity for the production line to operate for about 2 months, and other crops do not have enough volume to be processed.
Similarly, in Son La province, there are only a few types of vegetables and fruits with raw material areas that meet the factory's operating capacity, including mango trees. However, the mango output in Son La can only meet production for about 2 months. Therefore, to maintain regular operations, businesses are forced to find new and plant new raw material areas.
DOVECO attends Foodex Japan Fair 2023
Reporter: In your opinion, what is the solution to the raw material area problem?
Mr. Dinh Cao Khue: With practical production experience, to have a stable source of raw materials to meet production needs, each processing factory like DOVECO needs a raw material area of about 25,000-30,000 hectares.
However, in Vietnam, it is difficult for any enterprise to own such a large available agricultural area. One of the effective solutions to this problem is to have a policy to create conditions for enterprises to cooperate and link agricultural production with localities through various forms.
The first is to link production with new-style cooperatives according to the value chain associated with processing and consumption. The cooperatives will produce according to the quality requirements of the associated enterprises. The second is to contact farms and forestry farms that grow coffee, pepper, rubber, and farms with inefficient crops so that enterprises can rent land to intercrop short-term vegetables and fruits with high economic efficiency such as passion fruit, banana, sweet corn, etc.
National Assembly Chairman Vuong Dinh Hue visited the Company's booth at the Son La Coffee Festival 2023
Reporter: What is your assessment of the Pilot Project on building a standard agricultural and forestry raw material area for domestic consumption and export in the 2022-2025 period?
Mr. Dinh Cao Khue: This project aims to pilot the development of 5 areas of agricultural and forestry raw materials that meet standards for domestic consumption and export, which will overcome current limitations in raw materials, contribute to sustainable linkages between agricultural cooperatives and processing and consumption enterprises, meet requirements on output, quality and reduce costs of input materials for processing and consumption.
However, even though there are raw material areas, it is not advisable to build processing factories in every province to avoid the phenomenon of competition for purchase and sale due to lack of raw materials. As of now, the construction of coffee processing factories in Son La also needs to be carefully considered from an economic perspective because Son La's coffee area is only about 20,000 hectares while in the Central Highlands, the coffee area is up to 500,000 hectares but there are processing factories that are not yet operating at full capacity.
Reporter: As a typical enterprise in production linkage activities with farmers across the regions, has DOVECO ever encountered a situation of "breaking the contract" in the linkage and what is the solution to this problem, sir?
Mr. Dinh Cao Khue: DOVECO is currently linked with farmers through cooperatives. In the Central Highlands, we are linked with 20 cooperatives, providing raw materials according to our requirements. In Son La, cooperatives are the main source of raw materials for the enterprise. There are many cooperatives that are providing large amounts of raw materials for DOVECO. Specifically, Trung Hieu cooperative (Son La) provides about 700 tons of corn within 1-2 months; especially, there is a cooperative in the Central Highlands that has provided us with 40 billion VND worth of raw materials since the beginning of the year. This is a very large number.
Regarding the difficulties and limitations in cooperating with farmers, perhaps every business has encountered them to some extent. As for the phenomenon of "breaking the contract", the Company also encountered it in the past but now it almost does not happen. The reason is that DOVECO has a mechanism to build trust with farmers through ensuring benefits. Specifically, like Trung Hieu Cooperative, in the last crop they supplied 700 tons of corn, 400 tons of soybeans and vegetables, and the Company paid promptly at a guaranteed price. When farmers have profits, everything is very favorable and the deeper the connection, the more stable it will be.
Mango processing at DOVECO Son La.
In addition, an important thing when working with farmers is that in many cases, businesses must accept the loss to keep their reputation. For example, right now in Lai Chau, the company signed a contract with households growing passion fruit at a price of 12,000 VND/kg, but now the price has dropped to only 5,000-6,000 VND/kg, we still buy at the price of 12,000 VND/kg as agreed.
Only then will people trust you and cooperate effectively and long-term. However, businesses also have long-term benefits. That is, when farmers trust, it will be a favorable condition to build and expand other raw material areas in the future.
Reporter: What is the future development direction of DOVECO, sir?
Mr. Dinh Cao Khue: DOVECO continues to develop the food and beverage sector, promoting exports to Europe, China and other markets.
In particular, the Company determines to promote investment in production and processing in the Central Highlands region. Because this is a large, fertile land with great potential for development, especially for other fruits and vegetables. If the land potential is taken advantage of, Vietnamese agriculture will have great competitiveness.
Specifically, in the Central Highlands, if we convert the areas of low-yield short-term crops to pineapple, passion fruit, banana, etc. for high productivity, I dare say that Gia Lai province alone will have a fruit and vegetable export turnover equal to the current national level of about 5 billion USD. Of course, it must be done systematically and there must be a close connection between farmers and businesses.
DOVECO's processed products are diverse in types.
Reporter: Through production and business practices, can you tell us what the "bottlenecks" of Vietnam's agricultural processing industry are today?
Mr. Dinh Cao Khue: The most difficult point to develop the agricultural processing industry today is the large enough raw material area to serve the capacity of the factories. An equally important issue is investment capital. The initial cost of an average agricultural processing unit is at least 400 billion VND, even up to 2,000 billion VND for some factories.
However, the current interest rates in the agricultural sector are still high, equal to those in the industrial sector, so it is difficult for businesses to invest. Therefore, it is recommended that the Government and the State Bank study appropriate policies to prioritize businesses investing in agricultural product processing on issues such as: loan term, repayment period and interest, and loan interest rates.
Another limitation is the problem of finding and expanding markets. There can be no development of the agricultural processing industry without a market. The best way for businesses to access the market today is to participate in international fairs.
However, after many times attending the fair, we found some shortcomings such as: It is very difficult for businesses to register to attend the fair, information about the fairs is limited. At the fairs, the exhibition booths assigned to businesses have small areas, only from 4.5 to 6.5m2, not enough for businesses to display products and interact with partners; The booth area is average, meaning that businesses, regardless of size, are assigned the same area.
Therefore, to participate in the fair effectively, businesses need to have a booth with a large enough area to display their products; businesses with large production scale need to have a larger booth area than small-scale businesses. In addition, the authorities should consider creating conditions for businesses that want to expand the area of their booth at the fair to be allowed to spend additional money to rent the expanded booth area.
Reporter: For many years, agriculture has always been identified as the pillar of the economy. What is your view on this issue?
Mr. Dinh Cao Khue: I have been in agriculture for many years and I find that statement completely correct. Without agriculture, our country would be in a very difficult situation. Specifically, Europe, because it is completely dependent on industrial development, has times when it is more difficult than ours in terms of food, especially during times of economic, political, social fluctuations or epidemics such as the recent Covid-19 pandemic.
In Vietnam, the GDP of the entire agricultural sector is at 3-5%/year, but the value of agriculture is extremely large. For example, if an agricultural enterprise exports 1 million USD, the agricultural products of the enterprise and farmers are about 95% Vietnamese, but when exporting 1 million USD of industrial products, the value of Vietnamese labor is only 5-10% of the total.
This is the difference, so the export turnover of Vietnam's agriculture, forestry and fishery products increases sharply every year, proving the great value of agriculture.
Reporter: Thank you very much!
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