Though the TPP trade deal is not complete and it may be years before it comes into effect, a formal national brand policy should be drawn up and given effect, said panellists at the recent– Agricultural Policy 2015 – forum in Hanoi.
There also remains a good chance that the TPP agreement will not be sanctioned, they said.
The TPP currently comprises 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam), representing a combined market of nearly 800 million people and a gross domestic product (GDP) of US$28.5 trillion.
Currently a number of countries, such as the Philippines, are considering applying for membership in the TPP and if the agreement were to be formalized, in all likelihood, the experts said it would be much larger than the current 12 member states.
‘Given the potentiality of the TPP, it is imperative that Vietnam focus its efforts on developing a national rice brand to bolster the competitiveness of the nation’s rice industry,’ said Deputy Head Pham Van Du of the Department of Crop Production.
Commodity agriculture as currently practiced in Vietnam and the US he said “is generally viewed as the most efficient way of organizing production and distribution.” It allows for inexpensive production and bulk transfer of huge quantities of rice and results in enormous cost savings to international consumers.
However, there are certain aspects of the system that are not desirable as it tends to favour large over small farmers and does not allow for a lot of differentiation in product— as all product of similar characteristics are fungible (in other words interchangeable).
Simply put, he said to be competitive in commodity agriculture farms must be large and the larger they are the more competitive they will become as costs are reduced putting downward pressure on consumer sales prices.
To offset these disadvantages rice farmers in the US have developed the ‘farmer owned brand’ concept, which is similar to the ‘guarantee of origin’ or ‘guarantee of production process’ notion more common to EU nations.
In a nutshell, this solution allows farmers to grow their own brands and to control production of quantities. Most importantly, it allows them to differentiate their products but is highly dependent on finding consumers willing to pay more for rice.
“These niche markets of consumers willing to pay higher prices are essential for a successful farmer-owned brand,” Deputy Head Du said.
Du leans towards Vietnam developing a national rice brand more along the lines of the ‘commodity agriculture’ model than the ‘farmer owned brand concept’ as he believes organizing and operating the industry as if it were one large farm would boost competitiveness.
Du said it would especially benefit the nation in a post TPP world should the free trade region come to fruition.
Fundamentally the issue that needs to be resolved is how to improve the overall quality of rice production in Vietnam so that it can sell at higher process similar to that of other countries in Southeast Asia.
“Restructuring the industry on a much larger scale of production along with installing modern production equipment and technology could unlock tremendous potential both in sales and profits,” Du said.
The reality is that commodity agriculture is good, as food manufacturers around the globe differentiate rice by quality and combine rice produced in different countries based on quality considerations and price.
That literally means rice of similar quality produced in India, Thailand or Vietnam is combined and incorporated into food products produced and this proven method results in the lowest cost to the international consumer.
In true commodity agriculture, such as in the US markets the ultimate consumer is generally not supposed to know the brand name of the country that produced the rice because it is not relevant, as it is the food manufacturer’s brand name the ultimate consumer looks to.
The development of a national brand is not necessarily directed at the final consumer but rather at the food manufacturer, Du emphasized, a fact most often misunderstood by many in the rice industry.
A national brand would elevate Vietnam rice in the eyes of food manufacturers around the world and give the nation an image of producing the highest of quality product and that in turn would allow for it to command a higher sales price.
“A national brand would also open up more global markets to Vietnamese rice because many markets are currently not accessible due to concerns over quality control issues, said Deputy Head Du.
It also lays the foundation for future direct sales of Vietnam rice under its own brand name on the shelves of supermarkets around the globe more in line with the ‘farmer owned brand’ concept” that is used in the US.
“It’s a major undertaking that must be done,” Du stressed “as we have to restructure the industry and change the mind-set of the nation’s farmers, which is totally different from that of farmers in other countries.”
Director Lam Tuan Anh of the Thinh Phat Co, a member of the Vietnam food Association located in the southern province of Ben Tre, made the point that the government should erect technical barriers to prevent businesses from exporting poor-quality product.
“Quality checks should be strengthened and the license of any companies exporting a consignment of product that fails to pass such tests should be revoked,” he underscored.
Nurturing a national brand will be a long arduous task, Anh said but it must be undertaken diligently and with immediacy if the nation’s rice industry is to be competitive in the new age of globalization and integration.