Vietnam sugar producers face resistance from local corporate consumers

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Vietnam's sugar output is expected to reach nearly 1.6 million tons in the 2012-13 season

Food and beverage companies in Vietnam continued to criticize local sugar producers for price fluctuations and low quality as they lobbied for permission to import the sweetener despite large domestic stockpiles.

The companies, including Coca Cola, Nestlé and confectionery producer Bibica, said they cannot depend on local sugar suppliers since each of them needs around 40,000 tons per year.

"When we import sugar, we only need to open a letter of credit and pay 10 percent in advance for reliable delivery later," Truong Dinh Phu, CEO of Bibica, said at a recent meeting in Ho Chi Minh City. "Local sugar producers, on the other hand, require us to pay in full, or at least 50 percent for future delivery. Local plants also change prices constantly"¦"

"So how can we trust local suppliers for all our sugar demand?" he asked.

Bui Thi Huong, public relations manager of dairy giant Vinamilk, said the company can buy sugar from foreign suppliers at only VND15,000 per kilogram, compared to VND17,500 from local firms. That translates to an extra bill of VND25 billion (US$1.2 million) evey month if it has to use local sugar exclusively, she said.

Food producers have been seeking approval from the government to import sugar this year. But while they want to import a total of 338,000 tons, the Ministry of Industry and Trade has so far allowed only 70,000 tons, because it wants to protect local producers.

According to the Vietnam Sugar and Sugarcane Association, the country is expected to have nearly 1.6 million tons of sugar in the 2012-13 sugarcane crushing season, including the large stockpiles left over from the previous season.

The amount is more than enough to meet local demand of between 1.35 and 1.4 million tons, even leaving a sizable surplus of up to 200,000 tons, the association said.

Do Thanh Liem, chairman of the Vietnam Sugar and Sugarcane Association, admitted that imported sugar from Thailand is cheaper than domestic products. Thailand has a cheap source of sugarcane and also benefits from the government's protection, he said.

"Vietnamese sugar just can't compete on prices," he said.

But major sugar consumers also said locally produced sugar loses against imports in terms of quality too, an allegation that many sugar plants have rejected. Some said their sugar has been exported to markets like Singapore and Sri Lanka.

"Sugar users just need to tell us about the standard they need and we will provide the right product," said Do Thanh Liem, director of Khanh Hoa Sugar Company.

"They shouldn't make quality as an excuse and shun local products," he said.

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