REPORT ON INVESTIGATIONS INTO MANGO SUPPLY CHAINS IN THE MEKONG DELTA VIETNAM 2005-2007 By Robert Nissen 1 , Tran Thi Ngoc Diep 2 , Nguyen Duy Duc 2 , Nguyen Minh Chau 3 , Nguyen Trinh Nhat Hang 2 , Tran Nguyen Lien Minh 2 , Tran Thi Kim Oanh 2 , M. Rankin 4 , I. Russel 4 and Peter Hofman 1 1 Queensland Department of Primary Industries and Fisheries (DPI&F) , Maroochy Research Station, PO Box 5083 SCMC, Queensland, Australia, 4560. 2 Southern Sub-Institute of Agricultural Engineering and Post-Harvest Technology (SIAEP), 54 Tran Khanh Du Street, District 1, Ho Chi Minh City, Vietnam. 3 Southern Fruit Research Institute (SOFRI), Long Dinh-Chau Thanh, P0 Box 203 My Tho Tien Giang, Vietnam. 4 University of Queensland, Gatton College, School of Natural and Rural Systems Management, Gatton Campus, Lawes Queensland, 4343, Australia. 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AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 3 TABLE OF CONTENTS Background 5 Introduction 5 Methodology 5 Survey of mango consumers in Ho Chi Minh City 7 Introduction 7 Results 7 Demographics of Ho Chi Minh City 7 Survey of Mango Retailers in Ho Chi Minh City (HCMC) 23 Introduction 23 Results 23 Retailers of Ho Chi Minh City. 23 Retailer experience and length of time in the trade. 23 Retailers purchasing patterns and locations 24 Transport of product to retailer’s place of business 24 Retailers’ delivery of product to consumers 25 Transaction types and methods of payment 25 Retailer sales, quantity of mango sold in Ho Chi Minh City 25 The retailer wholesale purchasing price of mango in Ho Chi Minh City 27 The retail sale price for mango in Ho Chi Minh City 30 Factors contributing to fruit loss at the retail level 33 Preservation techniques and post-harvest technologies applied by retailers 36 Difficulties and costs associate with running a retail business in Ho Chi Minh City, Vietnam 37 Labour requirements for retail shops at markets and fruit shops 37 Taxes and fees paid by retailers to operate their business 38 Information flows, exchanges and business fess paid by retailers to associations 38 Survey of Mango Wholesalers and Collectors 39 Ho Chi Minh City Fruit and Vegetable Central Markets 39 Wholesalers experience and length of time in the trade in South Vietnam 39 Transportation practices 40 Wholesaler purchasing practices 42 Wholesaler mango purchasing prices 43 Quantity of mango sold by wholesalers 45 Wholesaler mango selling prices and profit 46 Wholesaler business operational expenses 48 Labour costs 49 Tax and electricity and water fees 49 Wholesalers post-harvest handling techniques and practices 50 Fruit grading practices and quality assurance 54 Artificial ripening of fruit 54 Maturity level of fruit 55 Wholesalers supply chain communication practices 55 Collectors 57 Collectors’ purchasing practices 57 Collectors’ suppliers 57 Transportation 57 Collectors handling and quality assurance practices 58 Fruit grading by collectors 58 Packaging 59 Storage 61 AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 4 Collectors’ sale price for mango 61 Survey of Mango Farmers in the Mekong Delta, Vietnam 63 Pre-Harvest 63 Varieties 63 Production Area 63 Farm sizes 64 Production Periods 65 Orchards and production systems 65 Orchard tree age 66 Canopy Management 66 Yield 67 Yield manipulation 69 Fertilizers and Irrigation 70 Pre-harvest pest and disease control methods 70 Infield diseases that directly affect on fruit 70 Infield pests that directly affect fruit quality 73 Post-harvest 78 Harvesting 78 Maturity indicators 81 Fruit grading AND packing 82 Shelf life 86 Transport 88 Sale of fruit 90 Farm gate prices received for mango fruit 91 Farm fees and taxes 92 Communication and information exchange 95 Farm profit from mango production 98 Environmental sustainability issues in the Mekong Delta 100 Soil Management 101 Irrigation and Water Management Practices 101 Agricultural Chemical Usage 102 Mango Processor:- Costal Fisheries Development Copporation (CONFIDEC) Mango Processing Factory 106 Observations and recommendations for the mango processor 107 Ho Chi Minh City, May 2006 107 Mango ripening 107 Air movement 107 Suggestions 107 Other suggestions 108 Conclusions 109 Consumers 109 Retailers 109 Wholesalers/Collectors 110 Farmers 111 Cooperatives and groups 111 Supply chains 111 References 114 AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 5 BACKGROUND In the Mekong Delta, Vietnam, about 33 286 hectares of mango are grown, producing about 193 383 metric tonnes of fruit per year. Currently, over 80% of the mango production is from small individual village farms. Many farmers harvest immature fruit to reduce damage from fruit fly and poor handling systems along the supply chain. Many poor farmers do not have direct access to supermarkets due to food safety, quantity requirements, and delivery conditions. Many open wet markets in Asia lack the necessary hygiene facilities to meet the growing demand for safe products. Traditional markets and street vendors are the major participants in the food distribution lines in Vietnam. Supermarket numbers are increasing due to consumer demands for safe food and the Vietnamese Government promotion of ideals on safe food. As Vietnamese wages increase and consumers demand a safe product, the number of supermarkets has increased dramatically in Ho Chi Minh City between 1990 and 2004, at a rate of 17% per year. In Hanoi, supermarket expansion also occurred at a rate of 14% per year from 2000 to 2004. In 2004, there were 43 supermarkets and nine trade centres in Hanoi. In 2005, there were 71 supermarkets in Ho Chi Minh City (Moustier, et al 2006). Producers must be highly adaptable; inflexible producers will not be able to generate added value to the supply chain and will be forced out of their industry. Producers must adopt new supply chain strategies that will deliver value for money to their customers and ultimately the end consumer. INTRODUCTION This report provides baseline information on investigations undertaken as part of the Collaboration for Agriculture and Rural Development CARD Project 050/04VIE “Improvement of export and domestic markets for Vietnamese fruit through improved post-harvest and supply chain management”. This collaborative project is funded by AusAID and administered by Hassall and Associates International. The project is between the Queensland Department of Primary Industries and Fisheries (QDPI&F) and the Vietnamese organisations, Southern Sub-Institute of Agricultural Engineering and Post-Harvest Technology (SIAEP), and Southern Fruit Research Institute (SOFRI). The aim of this report is to investigate and understand mango supply chains in Mekong Delta, Vietnam by: • determining pre- and post-harvest technology practices of these supply chains • determining the quality of the product produced by these supply chains • identifying participants in the existing domestic and export supply chains • map the existing mango supply chains and their and distribution channels METHODOLOGY Several methods were used to collect baseline data on mango supply chains operating in the Mekong Delta of Vietnam. Relevant data and information was collected from the internet and reports produced by the Ministry of Agriculture and Rural Development (MARD), The Government Statistics Office (GSO) of Vietnam, and provincial government offices in the Mekong Delta, Vietnam. Further information was obtained from the internet and published reports and databases of the Food and Agricultural Organisation (FAO) of the United Nations and World Bank. Survey sheets and process analyses were developed and tested by Vietnamese project staff. This was part of the training conducted by the Australian collaborators for the CARD Project 050/04VIE. The supply chain was segmented into the various supply chain participant groups, consumers, wholesalers, collectors and farmers. A full investigation was carried out via interviews and surveys with the consumers, AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 6 wholesalers, collectors and farmers along the mango supply chains operating in the Tien Giang, Vinh Long, Dong Thap and Ben Tre Provinces and Ho Chi Minh City, Vietnam in July 2005 to May in 2006. Stratified random sampling and random sampling techniques were used to collect survey data. Interviews were conducted on a 100 consumers, 560 retailers, including 30 supermarkets, 46 high class shops, 397 retailer markets and 87 push cart and sidewalk shop vendors. Retailers were segmented into four groups, based on store classification type list. These classifications are: • Supermarkets are more than 250 m 2 in size and selling both consumer goods and fruit and vegetable • High class fruit shops are retailers specalising in selling high quality fruit and vegetable only • Retail markets are fruit and vegetable retailers selling fruit and vegetable in a general market (traditional as well as wet markets retailers) • Push cart, sidewalk shops and travelling street vendors A stratified random sampling technique was used to select the retail businesses to interview. Numbers of retailers surveyed for each store classification type are presented in Table 1. Table 1. Retailer classification and number surveyed in Ho Chi Minh City. Classification Type Number surveyed Supermarkets 30 High Class Fruit shops 46 Retail Markets 397 Vendors (push-cart, sidewalk shops) 87 Total 560 Further investigations on mango sales during both the main mango season and off season were undertaken. A total of 98 retailers were interviewed during the main mango season and a further 100 retailers interviewed during the off season. A total of 8 wholesalers from the city of Cai Be, Tien Giang Province were interviewed and a further 10 collectors were interviewed in the Vinh Kim and Cai Be Districts. Interviews of 299 wholesalers were conducted, including the wholesale markets in Ho Chi Minh City, Ton That Thuyet floating markets (which no longer exist), Cho Lon, Thu Duc as well as wholesale markets in the production areas of Binh Thuan, Bin Duong, Ben Tre, Tien Giang and Don Thap. A further survey of wholesalers was also carried out in 2006 and an investigation of HCMC Fruit and Vegetable Central Markets was undertaken on the 29 th of April 2006. A total of 64 farmers were interviewed within Cam Son district, with 34 new mango farmers and 30 established mango farmers. In Hoa Hung district, 24 surveys were conducted with established farmers. All farmers interviewed produce fruit for market in January to March period. A further 100 farmers were interviewed while they attended mango training courses at the Agricultural Extension Centre. Further information was obtained via interviews with 3 grower cooperatives/groups in November 2005 and April 2006. AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 7 SURVEY OF MANGO CONSUMERS IN HO CHI MINH CITY I NTRODUCTION The retail and consumer scene, especially in Ho Chi Minh City, is undergoing a great deal of change that is beginning to benefit the end consumer. Not only have supermarkets and department stores grown in number, but many are already modernising their services and products, from better-designed shelves, promotions, to point-of-sale (POS) terminals to help boost sales and competitiveness. Fast moving consumer goods (FMCG) have experienced the highest growth rates, growing at a rate of 10% per year for the past four years (Vietnam Economy, 2007). Vietnam Economy (2007), reported growth rates for 2006 for FMCG are: • 18% for dairy products (milk) • 13% for personal care items (shampoo, facial moisture, skin care and beauty products) • 13% for non-alcoholic beverages (tea, fruit juice, etc) In contrast, the traditional markets and street vendors are the major sellers of fruit and vegetables in Vietnam. This is based on quantities sold, area of sales and employment (Moustier, 2006). These markets and vendors are the main point of sale to poor customers, who rarely purchase from supermarkets because of high prices and inconvenient locations. In Ho Chi Minh City, 33% of the poor households have never shopped in supermarkets and only 38.5% shop there regularly. This sharply contrasts with the figures for non-poor households in Ho Chi Minh City, where only 2% have never shopped in supermarkets and as many as 81.2% shop there regularly (Vietnam Economy, 2006). RESULTS DEMOGRAPHICS OF HO CHI MINH CITY POPULATION CHANGES The population of Ho Chi Minh City (HCMC) has been increasing at a rate of 3.5% per annum. Estimates now place the population to be over 7 million, of which migrants make up about a third. The city occupies approximately 2,000 square kilometres, but due to the urban development history, the city’s population density is not allocated equally. The population density in the inner city is over 30,000 persons per square kilometre, whereas the density in suburban and rural areas of the city is considerably lower. Ho Chi Minh City consists of 24 urban and rural districts (Figure 1), among which 13 are inner districts; 6 are newly established urban districts, and 5 are suburban districts (Thanh, 2007). See Table 2 for topology and characterisations of the districts of Ho Chi Minh City. AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 8 Figure 1. Administration map of Ho chi Minh City Table 2. Topology of districts in Ho Chi minh City, Vietnam Categories Rapid Urbanisation Medium Urbanisation Slow Urbanisation Total Urban Districts 1, 3, 4, 5, 6, 10, 11, Phu Nhuân 8, Bình Thanh, Gò Vấp, Tân Bình,Tân Phu 13 Semi-urban Districts 7,12, Bình Tân, Thu Duc 2, 9 6 Rural districts Cu Chi, Bình Chánh, Hóc Môn, Nhà Bè, Cân Gio 5 Total 13 4 7 24 Previous research into urban life claimed that rural poor people (migrants) who leave their villages to seek a livelihood in the cities fall into the urban poor class, and their prospects do not improve. Despite this, the rural poor, many of whom have lost their access to land and a livelihood, still view the city as a means to escape rural poverty. According to the 1999 general census of Ho Chi Minh City, the rate of female migration to the city is higher than that of men (Ho Chi Minh City Office of Statistics 2000). This was also higher than the number of female migrants moving to other areas in Vietnam. Nationally, women made up 45% of all migrants within Vietnam, but they accounted for 58% of all migrants moving into Ho Chi Minh City (Gubry et al. 2002). AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 9 Table 3. Occupation before and after migration to Ho Chi Minh City Occupation Before migration At present Agriculture 49% 0% Wage Labour 21% 18% Handicraft production 11% 22% Student 6% 0% Employee 1% 2% Small trading 10% 31% Petty trading 0% 27% Housewife 2% 0% Total 100% 100% E ARNING CAPACITY AND INCOME LEVELS OF THE CITIZENS OF HO CHI MINH CITY Ho Chi Minh City is the largest and fastest developing city and has the highest per capita income in Vietnam, yet around 12% of its population was classified as poor in 2001. Although this rate is lower than any other city in Vietnam, the gap between the rich and poor is widest in HCMC. According to several social surveys, the majority of poor families still struggle to earn money. During the past 5 years in HCMC, only 25% of people have improved their situation while 50% have been worse off (Leonhardt, 2001). The Vietnamese Household Living Standards Survey (VHLSS) of 2002 estimated the total annual expenditure calculated on the basis of Purchasing Power Parity at approximately Int$ 5 510 (approximately 12 738 624 Vietnamese Dong (VND). The total annual expenditure per capita was Int$ 1 345 (approximately 3 109 518 VND) and the total annual food expenditure per capita at Int$ 581 (approximately 115 364 VND) with 11.4% on livestock foods (meat, eggs and milk) and 9.2% on fish and the remainder on agricultural products (Maltsoglou, 2007). Poverty affects food security of men and women differently in Vietnam. Women are more vulnerable to malnutrition because they eat less than men. Especially when pregnant, they need a high level of nutrient intake (Colwell et al., 2002). In addition, women take an active role in working and looking after the family and the custom of men eating first may contribute to malnutrition. Information on women and their earning capacity are presented below to provide a guide to the overall earning capacities of the poor in Ho Chi Minh City, Vietnam. Most of the women who migrated to Ho Chi Minh City for work, work in the informal sector and are poor. 60% said that they brought less than 100 000 VND ($US 1=14 000 VND), and more than 90% come to the city with less than 500 000 VND. Most of the women found work in petty trading or wage work, which required little to no money. While the capital needed to cover costs was relatively small, the average monthly amount earned by a female migrant worker from trade related activities was approximately 640 000 VND (Thai Thi Ngoc Du et al 2006). About 45% of these women earned over 600 000 VND a month. Within the various occupations, women engaging in petty trade earned a higher monthly income, grossing about 740 000 VND, and women who traded goods in the market place earned over 650 000 VND. Women undertaking handicraft production averaged over 600 000 VND per month and wage labourers received the lowest monthly salary of about 480 000 VND (Thai Thi Ngoc Du et al 2006). Some of these monthly incomes show that many women were not able to earn as much as they needed, as average monthly expenses for most women was more than 500 000 VND. Food costs came to approximately 345 000 VND, while rent and utilities were about 130 000 VND. Some women earn more than this and AusAID CARD Project 050/04 VIE Improvement of domestic and export markets through improved post harvest and supply chain management January 2008 Page 10 spent the remainder on miscellaneous goods. Other women saved some of their earnings and sent it back to their families in the country areas (Thai Thi Ngoc Du et al 2006). Ben Thanh ward (District I), is a high-income area of Ho Chi Minh City, where many residents are business persons, officials and workers In contrast, most residents in the suburban Phu Thuan village (Nha Be District) are workers and farmers (Thanh, 2007). HOUSEHOLD CONSUMPTION Per capita consumption expenditure has grown dramatically in Vietnam since 1993, almost doubling by 2004. Urban areas have experienced faster growth. The richer have done better; most recently, however, it is the middle groups that have experienced the highest rates of growth. Households have increased their expenditure on all major categories, but mostly on education, which grew at 12 per cent per annum over the eleven year period (ADB, 2006). In 1998, expenditure on food consumption was, on average, 47% of the household budget (MARD, 2001). Rice consumption only varies slightly by income group, but above a certain income threshold, additional income is spent on high value food such as meat, fat, oil eggs and non food items (Oxfam 2001). The Asian Development Bank (ADB) project ‘Making Markets Work Better for The Poor’, categorised household expenditures into four categories: • Food • Education • Health • Housing. Food continues to account for the bulk of household expenditure today, but costs have grown at the lowest rate (2.19% p.a.). The amount spent on education grew the most over the 11 year period, at nearly 12% p.a., with the bulk of the increase occurring in 1993-1998. Expenditure on health grew only 4.5% p.a. over the 11-year period, but rose nearly 17% between 2002 and 2004. Housing expenditure grew nearly 7% over the whole period. (ADB, 2006). The share of food per capita in household expenditure fell from 62% of total expenditure in 1993, to 42% in 2004, while that of education increased from 3% to 5%. The share of housing remained virtually unchanged (around 7 %). The share of health dropped from 7.6% to 5.9% (ADB, 2006). Households in rural areas have lower expenditure levels and higher food budget shares compared to urban areas. As incomes increase, the discrepancies in expenditure levels between urban and rural households increases, while the food budget shares reduce. Urban households spend more on livestock products and consume 1.5 times the amount consumed by rural households. In the case of livestock products, both in rural and urban areas, the expenditure levels, the consumption levels per capita and the food budget share increase as income increases. The pattern is slightly different in the case of fish. In urban areas across different income levels, expenditure levels increase, shares reduce and quantities per capita is slightly reduce. In rural areas, expenditure levels, food expenditure shares and quantities consumed increase as income increases (Maltsoglou, 2007). S HOPPING BEHAVIOUR Consumers in Ho Chi Minh City who do not buy food and household items in supermarkets, cite prices, time and distance as their main reasons for not shopping there. According to the study, poor consumers generally have a positive opinion of their primary food outlets (which generally consist of formal markets, informal markets such as street vendors and shops). In particular, poor consumers have specific and opposing perceptions of supermarkets and street vendors: the former offer good quality but also require [...]... indicated that the purchase price was reasonable, including respondents from the poorer social classes in Vietnamese society About 30% said the purchase prices were too high in comparison to their income, even during the main season, but especially at the beginning of the main season, when many consumers purchase mangoes to give as gifts Less than one percent said the prices were too low and they mainly purchased... competition was high The second highest ranking difficulty retailers faced was time of season/year At the end of the mango season, consumers become bored with mangoes and turn to other types of fruit The survey found that vendors sold mangoes for 10 000 VND per kg in the main season, did not sell mangoes in the off season due to the high prices and lack of supply The price of mangoes at the retail markets in. .. improved post harvest and supply chain management Reasons for purchasing mangoes CONSIDERATIONS USED BY CONSUMERS WHEN PURCHASING MANGOES About 60.9% of consumers surveyed considered; ‘where did the mango they are about to purchase come from?’ (origin of production) The remaining 39.1% of survey respondents did not consider origin of production About 69.5% of survey respondents purchased mangoes for prestige,... purchasing due to habit and the remaining 8.5% through marketing (Figure 6) Marketing Purchasing habits Habit Prestige 0 20 40 60 80 100 Percentage (%) of the total number of consumers surveyed Figure 6 Consumers’ reasons for purchasing mangoes in Ho Chi Minh City, Vietnam PRICE PAID BY MANGO CONSUMERS IN HO CHI MINH CITY When asked to compare mango prices against their income, 70% of interviewees indicated... harvest and supply chain management Consumer suggestions CONSUMER SUGGESTIONS TO IMPROVE MANGO MARKETING About 60% of consumers surveyed indicated that mango fruit quality is the single most important marketing factor that could be improved to increase mango sales The next factor indicated by consumers was the distribution system at 16%, closely followed by packaging (12%) and the remaining 12% had... suggestions on how to improve the marketing and sales of mangoes in Ho Chi Minh City, Vietnam (Figure 14) Consumer suggestions for improvements in the marketing mangoes Other (No idea) Distribution system The package The quality 0 20 40 60 80 100 Percentage (%) of the total number of consumers surveyed Figure 14 Aspects of mango marketing and sales that consumers believe should be improved upon January... volumes in Ho Chi Minh City from the main season to the off-season THE RETAILER WHOLESALE PURCHASING PRICE OF MANGO IN HO CHI MINH CITY Survey results showed that most retailers purchase mangoes of various size and quality in 35kg bamboo baskets Retailers purchasing the mango variety ‘Cat Hoa Loc’ paid an average price of 10 000 VND per kg during the main mango season and 25 000 VND per kg during the off... improved post harvest and supply chain management During the main production season, the price paid for ‘Cat Hoa Loc’ was reasonable and not too expensive for all income levels living in Ho Chi Minh City This pricing level, offers low income workers the ability to purchase and consume this particular mango variety Vietnamese consumers in Ho Chi Minh City purchase mango fruit for eating, gifts and for worship... used Uncontrolled temperatures of 26-35°C and inadequate air circulation and temperature control during the ripening process can have serious consequences in for mango fruit, causing: • uneven colouring occurring (green patches with a yellow background on skin of the mango) • uneven ripening of the flesh, and • the possibility of increasing disease presence, such as stem end rots and anthracnose Consumers... to be paid by a set time period agreed to by the wholesaler and retailer RETAILER SALES, QUANTITY OF MANGO SOLD IN HO CHI MINH CITY All retailers surveyed reported that they only sell to fruit to consumers in the Ho Chi Minh City area No fruit are on sold to other retailers or vendors in other areas or regions of Vietnam During the main mango season, 40% of mango retailers sell 1 000 – 2 000 kg per year, . of these supply chains • determining the quality of the product produced by these supply chains • identifying participants in the existing domestic and export supply chains • map the existing. REPORT ON INVESTIGATIONS INTO MANGO SUPPLY CHAINS IN THE MEKONG DELTA VIETNAM 2005-2007 By Robert Nissen 1 , Tran Thi Ngoc Diep 2 , Nguyen Duy Duc 2 , Nguyen Minh Chau 3 ,. existing mango supply chains and their and distribution channels METHODOLOGY Several methods were used to collect baseline data on mango supply chains operating in the Mekong Delta of Vietnam.