Kinh Do Corp., once-Vietnam’s biggest listed confectioner, signed a contract Tuesday with Taiwan’s Saigon Ve Wong for jointly building a factory in Bac Ninh Province to make instant noodles.
Tran Le Nguyen, Kinh Do’s CEO, said the US$30-million factory would break ground soon in the northern province’s Vietnam-Singapore Industrial Park with Kinh Do owning 49 percent and Saigon Ve Wong the rest.
The latter will be in charge of production, technology and product research, while Kinh Do will assume marketing and distribution responsibilities.
The 2.5-ha factory in Bac Ninh will produce six million cartons of instant noodles a year, and double that by 2017, and also packed instant foods and sauces.
Tran Quoc Viet, deputy general director of Kinh Do, said the plant is just the first step in an ambitious plan to become one of three leading instant-noodles producers in Vietnam.
Last November Kinh Do sold 80 percent of its confectionery division to Mondelez International, the maker of Oreo cookies and Ritz crackers, for $370 million.
The latest move is conclusive proof of its focus shifting to the instant noodle market, which is now mainly shared between Acecook, Masan, and Asia Food.
According to a report released last year by the World Instant Noodles Association, Vietnam is the world's fourth-largest consumer, buying around 5.4 billion packs a year, behind China, Indonesia, and India.
However, on the basis of per capita consumption, it is third behind Korea and Indonesia.
A Vietnamese consumes an average of 56.2 packs per year, while in China it is 36.
Consumption has grown consistently at double-digit rates and demand continues to rise in both urban and rural areas.
It rose by nearly 24 percent in 2008-12 while the growth was a mere 3 percent in China and Indonesia and 5 percent in Korea and Japan, according to the report.
Instant noodles at a supermarket in downtown Ho Chi Minh City. Vietnam, the world's 4th largest instant-noodles market, is seeing Kinh Do Corp emerge as a competitor to the big three. Photo: Minh Hung
Statistics from the Ministry of Industry and Trade show Vietnam has around 50 domestic and foreign-owned instant noodle producers and manufacturers with a combined yearly output of nearly 50 billion packs.
Vina Acecook accounts for 50 percent of the market, followed by Asia Foods with more than 20 percent and Masan with 10 percent. The rest is shared by the smaller businesses.
In June last year Kinh Do and Saigon Ve Wong inked a deal to jointly produce and sell instant noodles in Vietnam. The first batch was produced at a factory in Ho Chi Minh City late last year.
“The current production of 400,000 cartons a month does not meet the demand, prompting us to build a new factory in Bac Ninh,” Chen Ching Fu, CEO of Saigon Ve Wong, said.
“In August we will also install a new line at the HCMC factory with a productivity of 800,000 cartons per month.”
Viet, deputy general director of Kinh Do, said the HCMC factory was found insufficient within the first month.
While he refused to divulge sales of the Dai Gia Dinh (Great Family) brand jointly owned by the two firms in the first five months, Viet said there would be no changes to their ambitious plan for a big share of the market.
“There is going to be no change to our long-term target of becoming one of the top three instant noodle producers in Vietnam.”