Vietnam: Pepper industry takes advantage of opportunities to the UK market

 

06 October 2022, VN:
Vietnamese pepper exporters have great business opportunities in the UK market, which has high demand for pepper imports.

According to industry experts, Vietnamese exporters can also take advantage of the supply shortage in the UK to increase exports of items such as pepper to the UK due to the impact of the COVID-19 pandemic, Brexit and international sanctions against Russia led to supply instability and caused a shortage of goods in the UK. Currently, the UK is the second largest pepper importer and consumer in Europe after Germany, and Vietnam’s pepper exports to the UK market have increased sharply in recent years.

In 2020, Vietnam exported 5,621 tons of pepper to the UK market, earning 48 million USD, out of a total of 14,000 tons of pepper and 121 million. At the end of 2021, Vietnam’s pepper exports to the UK increased sharply compared to 2020, with an increase of 49%. In the first four months of 2022, pepper continues to be one of Vietnam’s main agricultural exports to the UK, alongside coffee and cashews.

According to the Vietnam Trade Office in the UK, pepper is among Vietnamese agricultural products that have a strong position in the UK and sold well in supermarkets. This agency said that Vietnamese agricultural products such as pepper have an advantage in the UK compared to similar products from other countries who have no free trade agreement (FTA) with the UK as UKVFTA has completely abolished the regulations on tax policy for pepper imported from Vietnam. However, local businesses can only take advantage of these competitive advantages if they meet British quality standards and suit the taste of their customers.

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Inflation, supply chain woes weigh on spice maker McCormick

 

Published Sept. 15, 2022

Dive Brief:

McCormick & Co. said supply chain challenges that are taking longer to ease and inflation that is impacting consumer buying habits are weighing on its business, prompting the company to trim its financial guidance in 2022 for the second time.

In a statement, CEO Lawrence Kurzius said the “normalization of our supply chain costs is taking longer than expected, pressuring gross margin.” He said the 133-year-old manufacturer of spices, seasoning mixes, flavorings and condiments “will be aggressively driving the elimination of supply chain inefficiencies.”

McCormick is not the only CPG being impacted by macroeconomic issues. Every food and beverage company is dealing with increased costs, heightened uncertainty and changes in consumer buying habits that have impacted their bottom line and made planning increasingly difficult.

Dive Insight:

Fewer than three months ago, McCormick cut its outlook, citing high cost inflation and supply chain challenges. Now the flavorings giant is lowering it once more. The company said adjusted third-quarter earnings would be 65 cents a share, trailing analysts’ estimates, while it expects adjusted earnings for the fiscal year 2022 to be between $2.63 to $2.68 a share, a drop from its previous guidance of $3.03 to $3.08 estimated in June.

“Supply chain challenges, heightened costs, and tepid consumption are taking a more pronounced toll on McCormick than foreseen two months ago,” Erin Lash, a director of consumer sector equity research at Morningstar, said in a research note published last week.

Brendan Foley, McCormick’s president and chief operating officer, told a Barclays Global Consumer Staples conference audience last week that people are looking for ways to stretch their food dollars, including using more of what they already have in their pantries and eating more leftovers. Shoppers, he said, also are doing more planning ahead and looking for lower prices on the shelf. The shift has been especially pronounced during the last three months.

“Fundamentally, we’re seeing consumer behavior change, really pretty significantly since the first half of ’22,” he said.

In addition to supply chain woes, McCormick is facing a moderation in some trends like baking at home that, while elevated, have eased “both faster and earlier than we expected,” Kurzius said at the Barclays conference.

The executive noted that inflation has left consumers less inclined to accept price increases. McCormick, Kurzius said, is increasing its brand marketing and focusing on highlighting the value of its offerings to drive growth. To be sure, the headaches reflect the economy as a whole rather than anything specific to McCormick, which has a dominating position in the spices category.

“We do see the consumer under pressure. We do see supply chain constraints that are still impacting us. But with that, our sales growth is still quite strong,” Kurzius said. “We still have a lot of confidence in the long-term outlook.”

McCormick is among a handful of food and beverage makers to lower their outlook or report ongoing challenges in recent months. Tyson Foods said last month that consumers are buying more chicken and cheaper cuts of beef to save money. And soup and snack maker Campbell Soup said recently that margins are slipping, and supply challenges impacting its Lance, Late July and V8 brands are likely to continue into 2023.

As consumers watch their spending, a major beneficiary of the current inflationary environment continues to be private label manufacturers such as TreeHouse Foods. While McCormick is best known for Lawry’s, its namesake spices and condiments like French’s and Frank’s RedHot, it also has a strong private label business that could serve as a buffer, Lash noted.

“Even if consumers opt to trade down, McCormick is well placed, given it operates as the largest private-label seasoning and spice manufacturer,” she said. “Most importantly, we think its unwavering focus on investing in consumer-valued innovation and marketing (5% of sales, or $100 million annually) should enable it to navigate the unsettling backdrop and maintain its competitive prowess long-term.” 

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Christopher Doering

Senior Reporter

https://www.fooddive.com/news/mccormick-inflation-supply-chain-woes-spice-maker/631671/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-09-15%20Food%20Dive:%20Ingredients%20%5Bissue:44570%5D&utm_term=Food%20Dive:%20Ingredients

VIETNAM PEPPER MARKET UPDATE WEEK 36

Today, we received a brief report from one of our Vietnamese parties as below:

According to the preliminary data report of the General Department of Vietnam Customs, pepper exports in July 2022 reached 19,013 tons of pepper of all kinds, down 5,197 tons, ie down 21.47% over the previous month and down 7,217 tons, ie down 27.51% over the same period last year.

Export turnover in the month reached 80.12 million USD, down 19.95 million USD, or 19.94% compared to the previous month and down 14.77 million USD, or 15.57% decrease over the same period last year. last year.

The cumulative export volume of pepper in the first 7 months of 2022 reached a total of 142,557 tons of pepper of all kinds, down 37,631 tons, or 20.88% lower than the export volume of the first 7 months of 2021.

In terms of export value in the first 7 months of 2022, it totaled 639.84 million USD, an increase of 48.33 million USD, or 8.17% increase over the same period.

The average export price of pepper in July 2022 reached $4,214/ton, up 1.94% compared to the average export price of June 2022.

The European - American and Middle Eastern markets are flocking to Brazil to buy new crops due to lower logistics costs and softer prices. While the Chinese market still has an unresolved real estate crisis, the outbreak of a new Omicron variant has caused the Government to return to maintain the "Zéro - covid" policy, making pepper prices unable to prosper in the short term. . The soaring coffee prices also contributed to putting pepper prices at a disadvantage.

Coffee season is coming, dealers need money to trade coffee, so the pressure to sell pepper from now until the end of the year is quite large.

Check for more info o IPC week 36 report

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IPC PEPPER REPORT No. 35/22, 29 August 02 - September 2022

 

MARKET REPORT - KEY HIGHLIGHTS

- Market this week showed a mixed response with only India reported with an increase.

- After reported stable for the last two (2) weeks, Indian pepper price responded positive this week.

- Pepper price for Indonesia continued to be reported stable for the last three (3) weeks.

- Both local and international prices for Malaysia remained stable and unchanged as Malaysians celebrated the Malaysia’s Independence Day on 31st August.

- Local price for Sri Lankan pepper continued to be reported with a decreasing trend for the last three (3) weeks.

- Only Viet Nam white pepper local price reported stable this week. Whilst, the rests remained negative for the last three (3) weeks as Vietnamese celebrated the Independence Day of Vietnam on 2nd September.

FOB PRICE BLACK PEPPER - in US$/Mt

BUYERS PRICES AT NEW YORK (In USD/Mt)

FUTURES CF              THIS WEEK    PREVIOUS WEEK

Malabar black (Garbled 1)  n.a              7,100 CF September/October

Lampung black (ASTA)       n.a              4,850 CF September/December

Sri Lanka black                   n.a               7,000 CF September

Brazil black (ASTA)             n.a               n.a

Sarawak black (YL)             n.a              5,500 / MT FOB Prompt

Viet Nam black (ASTA)        n.a             4,400 CF September/October

Muntok white (DW)              n.a              n.a

Muntok white (FAQ)             n.a             7,450 CF September/October

Sulawesi Soroako white      n.a              n.a

Sarawak white (BL)             n.a              7,375 / MT FOB Prompt

Viet Nam white (DW)           n.a              6,100 CF September

IPC PUBLICATION - No. 33/22, 15 - 19 August 2022

Market this week shows a rather negative outlook with no origins reported with an increase as India and Indonesia celebrate their independence day this week.
Indian pepper price reported stable this week .
After reported with an increasing trend for the last two (2) weeks, pepper price for Indonesia reported stable this week as harvest continued in Lampung region.
Both local and international prices for Malaysia continued to be reported stable and unchanged.
After reported stable for the last two (2) weeks, local price for Sri Lankan pepper reported with a decreasing trend this week.
Both local and international price for Viet Nam responded negative this week.

FARM GATE PRICE BLACK PEPPER - in US$/Mt

FOB PRICE BLACK PEPPER - in US$/Mt

PINK PEPPER HARVEST IS IN FULL SWING IN BRAZIL

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MALAYSIA - Pepper market slows down

 

By JACK WONG

KUCHING: Domestic pepper prices have weakened considerably this year, after 2021’s powerful rally as a result of the spice’s global oversupply.

Other key factors contributing to the pull-back in prices include the Russia-Ukraine war, inflationary pressures and the strong US dollar.

Kuching Grade 1 black pepper slipped to RM13,750 per tonne on Aug 12 from RM17,330 per tonne in December 2021, down by RM3,580 per tonne or more than 20%.

Likewise, Kuching Grade 1 white pepper fell to RM23,850 per tonne from RM26,450 per tonne or by RM2,600 or about 10% during the same period, according to Malaysian Pepper Board’s (MPB) daily published prices.

In 2021, both black and white pepper prices posted impressive gains, soaring by about 90% from RM9,050 per tonne and 65% from RM16,000 per tonne respectively recorded in 2020.

Last year, both the black and white pepper prices climbed to their highest levels in three years since 2018, but were still far way off from their all-time highs of RM30,000 per tonne and RM50,000 per tonne respectively, in 2015.

International Pepper Community (IPC) executive director Firna Azura Ekaputri Marzuki said the current pepper market continues to be bearish, as the world grapples with demand erosion this year due to “deficit changing to surplus” inventory.

Other factors are depreciating currencies because of the strong dollar, inflation and low consumer appetite.

“China has returned to the pepper market but it may not be enough to cheer markets as Brazil and Indonesia are entering harvest season for 2022,” she added in her presentation on “Globalisation and World Pepper Industry 2021/2022” at Universiti Malaysia Sarawak (Unimas) late last month.

Sarawak’s established pepper exporter Nguong Aik (Kuching) Sdn Bhd director William S C Yii said as China, a major pepper consuming country, has not fully re-opened its international borders due to its Covid zero policy, it has resulted in a cut down in imports from major producing and supplying countries like Vietnam.

“Now China is very short of pepper because of a lot of restrictions (in imports). If Vietnam exporters cannot sell to China, they have to sell to other markets, like the United States and Europe and this has affected pepper prices,” Yii told StarBiz.

Vietnam, the world’s number one pepper producer and exporter, was estimated to have exported 261,000 tonnes valued at US$938mil (RM4.17bil) in 2021. This was down 8.5% in volume but up 42% in value from 2020, thanks to strong export prices.

Year-on-year, Vietnam’s average export price of pepper products jumped 53.5% to reach US$3,757 (RM16,697) per tonne in 2021.

Yii said the Russia-Ukraine war, which broke out in February 2022, has affected demand and pepper shipments to the two countries which imported a combined 7,000 tonnes a year previously.

He said the new Indonesian pepper crop, which will come into the market from next month, might be bigger in quantity than that of 2021. This may put pressure on pepper prices as Indonesia is the world’s second largest pepper producer.

The strong US dollar, he added, is another reason for the weak pepper prices as this dampened consumption of the spice.

Late last year, Yii was bullish and had predicted pepper prices to extend their rallies by another 30% in 2022. But the unexpected turn of events as mentioned has largely changed his views on the market outlook.

“The current pepper market is very inactive and extremely quiet. Though cargo containers are now available and the global shipping freight rates have come down from (their historical peaks) last year, these are still high compared to the pre-Covid-19 period,” he said.

Frina expects the global pepper market to stabilise and prices to firm up in November and December.

Concurring with her, Yii said it is normally in the third quarter and towards the end of the year when the global pepper market is more active, with prices on the uptrend.

“If China fully opens up its international borders by then, this may push up pepper prices by 10% to 20%, from current levels. But any price spike will attract sellers,” Yii said.

On Sarawak’s new pepper crop, he said the harvesting season was just over and that it had been a “failure crop”. Yii estimates this year’s small crop production to be 10% to 20% lower, compared to the past two years.

According to MPB, Malaysia produced 31,600 tonnes of pepper in 2021 (2020: 30,804 tonnes), with Sarawak contributing nearly 98% of the country’s total output. In 2021, Malaysia, which ranks fourth among the top five IPC member producers, exported 7,407 tonnes of pepper worth RM153.7mil.

Yii said pepper farmers are hit by soaring imported fertiliser prices, which have doubled from that of 2021.

Fertiliser made up about 70% of farm inputs.

Inadequate fertilising of pepper vines will affect yields.

At current weak prices, Yii said the better-to-do pepper farmers and rich dealers are holding onto their inventories and hoping to sell at higher prices.

By JACK WONG

TAGS / KEYWORDS:

Pepper , Prices , Down ,

https://www.thestar.com.my/business/business-news/2022/08/15/pepper-market-slows-down

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