Sugar price is being unreasonably high

Over 86.5% of the total domestic sugar was supplied for domestic market while only over 13.4% for exportation in 2019/2020, according to the Vietnam Sugarcane and Sugar Association (VSSA).

These figures reveal that the development of the sugar industry in Vietnam so far has mainly relied on the domestic market.

However, sugar consumption in Vietnam’s domestic market is encountering many problems. There are currently 3 main sugar consumption channels in Vietnam, including sales channel for industrial consumers, wholesale channel for supermarkets, agents, commercial enterprises and direct retail channel to consumers.

Among those channels, the wholesale channel for supermarkets, agents and commercial enterprises accounts for the highest rate, at 52%. Sales channel to industrial customers follows up, accounting for 42.6% while direct retail to consumers only accounts for a low rate of 5.5%.

As the wholesale channel for supermarkets, agents and commercial enterprises dominates the sugar supply, the retail price of sugar sold to consumers has been unreasonably heightened in compared with the production cost and price offered at the gates of the sugar mills.

In February and the first half of March 2021, wholesale prices at factories for RE refined sugar ranged from 17,800 to 18,000 VND / kg and therefore, the retail price of RE sugar should be only about 21,000-22,000 VND / kg.

However, the retail price at many supermarkets for packaged RE sugar is currently at an average of 25,000- 28,000 VND / bag (1kg).

Over the years, consumers have been paying a sizable intermediate distribution cost, averaging 18-22% of the sugar price. In addition, in the retail stage, 1 kg of sugar in the supermarket might be subject to a 20% or even 30% discount.

Like many other products, on deposited at consignment agents at supermarkets with strong sales, the producers must accept their terms, which also contribute to the large difference between the retail price of sugar and the price sold at the gates of the sugar mill.

Due to such high retail price to consumers, the amount of sugar consumed is limited, while the inventory is large - a paradox that has existed in the Vietnamese sugar market for a long time.

Intermediaries gradually reduced

Thus, Vietnam’s intermediaries and retail stages seem to be enjoying too much profit compared to sugar cane growers and sugar factories for years, affecting the competitiveness of Vietnamese sugar in the domestic market, especially under the pressure of imported sugar (including officially imported sugar and smuggled sugar).

According to VSSA, it is necessary that the Ministry of Industry and Trade take over the arbitration role to ensure fairness in commercial transactions in the current domestic sugar distribution and consumption market.

In addition, businesses need to reduce the amount of sugar consumed through wholesale channel for supermarkets, agents, and commercial enterprises in order to reduce the selling price of raw materials for products using sugar.

Thereby, profits for industrial producers and consumers of sugar, as well as competitiveness for domestic sugar could be increased.

At the same time, 2 sales channels for industrial consumers and direct retail to consumers need solutions to be promoted and increased in the future. Therefore, the intermediate distribution costs and the selling price of sugar to consumers could be reduced while the competitiveness of the domestic sugar could be improved in the context that the sugar demand and consumption in Việt Nam is forecast to continue to increase in the future.

In addition, the sugar industry also needs to promote sales through traditional sales channel. In the current domestic distribution system, the country has about 9,000 markets, 1,085 supermarkets and 200 trade centers.

Particularly in the markets, the traditional sales channel, domestic sugar is sold in small quantity. The reason is that Vietnamese retailers have sometimes neglected traditional markets, but this channel provides from 80-85% of essential items for social consumption, especially for low-income groups.

Therefore, both traditional and modern sales channel should be paid attention to in order to boost consumption of sugar produced by Vietnamese factories.