How Are Market Dynamics in the Supply Chain, How Are the Supply Chain and Network Formed?

• Market Dynamics

Farmers: Small size farmers represent 70-80% of the total market share, whereas only 20-30% is represented by big farmers. However, as more and more big farms buying small farmers and M&A is going on between small farmers, the percentage of big farmers is increasing recently.

Processing: Vietnam is a major exporter of shrimp itself, but it also imports unprocessed frozen shrimp from Ecuador and India. Vietnam is one of the top 5 importing countries of Ecuadorian and Indian shrimp, with USD 308 million and 193 USD million, respectively.

• Increased investment in shrimp processing facilities: As Vietnam becomes one of the world-leading suppliers, there has been a strong flow to increase investment in shrimp processing facilities. During the pandemic era, 6 processing facilities opened, with a combined capacity of 100,000 tonnes.

Competitive Landscape (Subjective): Compared to Indian and Ecuadorian shrimp, Vietnamese shrimp show higher prices as more delicate farming technology is applied and feed quality is higher. 

• Supply Chain Composition

Feed Mills & Hatcheries -> Farm -> Factory -> Export Company (Most big exporters own their processing facilities)

Feed mills & Hatcheries: The feed industry in Vietnam is dominated by foreign companies

• Feed price overall is high compared to other major producing countries.

• Large commercial hatcheries sell high-quality seeds.

• In terms of hatcheries, Viet Uc Seafood represents 25% of the total market, and the other 2,500 small hatcheries claim 50% of the market.

Farmers: Vannamei is farmed in North Central and Southern Vietnam, and Black tiger shrimp can only be farmed in Southern Vietnam.

• Farmers sell their products directly to the processing facilities with few to no brokers/agents in between.

Processing facilities: 100 Shrimp processing companies in Vietnam and half of them are located in the Mekong Delta region.

Exporters: As for the big farms/exporters, they are able to supply year-long and also, since they have their own packing facilities, farm, and hatcheries – More flexible

• Except for the big exporters, Exporters often buy from other farmers to meet demands with a short-term contract.

Farmers source shrimps from the sea or a farm and for exports, the main varieties are Black Tiger and White Leg. There is no specific seasonality for shrimps as these are available year-long. Most of the time, farmers sell their products directly to the processing facilities with few to no brokers/agents in between. However, farmers/suppliers do not usually export directly. As for the big farms/exporters, they are able to supply year-long and also, since they have their own packing facilities, they are more flexible in terms of order specifications and timeline. Exporters with their own farms often need to buy from other farmers or cooperate with farmers from specific areas with a short-term contract to utilize the same farming system and resources.

• Supply Network

Co-ops exist among suppliers but they are very fragmented. Farmers form a co-op to be able to supply to several exporters and to have more power when negotiating prices. An example of a farmer co-op is the Shrimp and Prawn Association that is led by the Vietnamese Seafood Group.

• Major Suppliers

• Top 9 suppliers account for 82% of total exports.

• Small size farmers represent 70-80% of the total market share, whereas only 20-30% is represented by big farmers, but recently, the proportion of big farmers has been increasing as big farmers started to buy small farmers.