Itochu Group to bite into market

Japan-based Itochu Group announced it would inject around $630,000 into Vietnam-based Phu Thai Group’s food distribution chain to expand its footprint in the country.

Phu Thai Group’s general director and chairman Pham Dinh Doan said Itochu Group would contribute 15 per cent stake, or around $630,000, on establishing Phu Thai Food which has an estimated total investment of $4.2 million.

Doan said there were two reasons for which Itochu’s investment into Phu Thai was not big.

First, Phu Thai Group’s leadership wanted to hold dominant shares in joint venture deals with foreign partners. Second, the 15 per cent stake was just initial investment which would be expanded later based on actual business conditions.

Itochu and Phu Thai Group reportedly clinched a memorandum of understanding for cooperation in April, 2008.

According to Itochu’s Food Products Marketing and Distribution Division chief operating officer Shuichi Hoshi, joining hands with Vietnamese firms was the shortest way to penetrate the country’s potential distribution market which Itochu considered its strategic market.

Itochu, however, has only established a convenience store chain in Ho Chi Minh City in cooperation with Phu Thai Group and Japan-based Family Mart retailer. In 2011, the involved parties intend to expand Family Mart stores from 4 to 20.

Reality shows that investing into Vietnam’s food distribution faced a number of challenges. “Vietnamese consumers as well as producers do not pay due attention to food sanitation standards. Besides, the legal system relevant to this field is unclear and lacking sanction measures,” Doan said.

Doan also noted that Phu Thai incurred losses in all of safe food distribution ventures it did before.

Therefore, Doan said capitalising on Itochu Group’s strong brand value, experience and technology in developing international standard food distribution network alone might be insufficient to ensure success of Itochu-Phu Thai food distribution network venture in Vietnam.

“Alongside transferring Vietnam quality food distribution technologies, Itochu was proposed by Phu Thai leadership to work with relevant Vietnamese agencies to compile a set of food quality sanitation standards based on Japan experiences,” Doan said.

He said the group would also step up efforts with an aim to ameliorating general awareness about food sanitation in Vietnam with support from producers and retailers. – VIR

Tags: Itochu Group, Phu Thai