Food Losses in Vietnam: the shocking reality

Food loss and waste is a major issue worldwide and Vietnam is no exception. Julien Brun, managing partner and Roberto Mattos, senior consultant at CEL Consulting, which provides consultancy, technology and training for supply chain and logistics in emerging markets, report on solutions for Vietnam.

Food loss and waste is a major issue worldwide with deep socio-economic and environmental impacts. Vietnam is no exception, and it is actually ranked in the low performers in South East Asian region. Latest figures will reveal that, on average, a quarter of the harvested food in Vietnam is lost before it actually reaches processing plants or distribution centers. Adding retailer’s and consumer’s wastes, it could reach up to 60% for fruits and vegetables. Denial won’t help, only coordinate actions will.

According to the Food and Agriculture Organization of the United Nations (FAO), food losses occur during production, post-harvesting (handling, storage, and transportation) and processing stages of the food supply chain, whereas food waste is generated by retailers’ activities and consumers’ behavior.

With this in mind, the Food And Agriculture Organization in its Food wastage footprint & Climate Change report 2011, estimates that around one-third of all food that is produced in the world is lost or wasted, which represents 1.3 billion tons of food per year or US$ 990 billion in economic losses.

Additionally, food loss and waste represent an inefficient use of scarce natural resources (e.g. land, water…) and a considerable share in humanity’s carbon footprint, accounting for 8% of total anthropogenic greenhouse gas (GHG) emissions.

In this context, during the first quarter of 2018, CEL Consulting developed a pioneering survey to estimate food losses among three food chain sectors (fruits and vegetables, livestock, and fish and seafood) from major Vietnamese agricultural regions. The scope of the survey encompasses losses during production and post-harvesting handling, storage and transportation activities. However, it excludes losses from processing, and food waste by retailers and consumers, which will be studied by our team in the near future.

Next, we present the survey numerical results comparing them with Vietnam’s regional peers using The Food And Agriculture Organization South-Southeast Asia (SSA) benchmark2, then we analyze some of the root issues that cause food losses in Vietnam and we explore some initial steps to reduce the problem.

Food Loss survey results

The survey revealed that, on average, a quarter of the food produced within the three studied sectors is lost before it actually reaches processing plants or distribution centers (5% higher than The Food And Agriculture Organization SSA results). Total losses are estimated at 8.8 million ton or US$ 3.9 billion3 (2% of Vietnam GDP; 12% of Vietnam Agriculture GDP). Considering that Vietnam has 117,100 km2 of agricultural land (World Bank, 2018, data), a 25% loss represents 29,696 km2, which is 9% of total Vietnam area (equivalent to T.P. Ho Chi Minh, Binh Duong, Dong Nai, Baria – Vung Tau, Long An, Tien Giang, Ben Tre, Vinh Long, and Dong Tap altogether). Extrapolating to Vietnam the SSA region benchmark for food loss during processing activities and for food waste, the total average loss and waste for Vietnam would reach more than a half of what is produced.

The fruits and vegetable group accounts for the worst food loss percentage (32% of production). This represents approximately 7.3 million ton of fruits and vegetables lost per year. To illustrate the magnitude of the loss, this total amount converted into bananas would represent around 168 million units lost per day. For the meat industry, losses reach 14% (roughly 694 thousand ton per year General Statistics Office of Vietnam (GSO). Livestock population as of annual 1st October by Items, Year and Livestock), which can be translated into an equivalent of around 2,000 cattle, 11,000 pigs and 139,000 chickens per day4, when this loss percentage is calculated over the total amount of animal heads in the country. Finally, in the fish and seafood group, losses represent 12% of production (about 804 thousand ton per year5). Considering that a pangasius fish has an average weight of 0.95kg when fished, this total loss amount can be illustrated as an equivalent of losing 2,3 million pangasius per day.

Root issues of food losses in Vietnam

One of the major causes of food losses in Vietnam is the fragmentation of its agricultural production into micro-farms. For instance, the average fruit farm in Vietnam is approximately 0.4 ha, more than 400 times smaller than US ones. This configuration leads to complex and inefficient logistic system: hundreds of small trucks and boats, lack of proper storage, cooling infrastructure, and numerous middlemen that add little value to the trade. Besides, a large majority of farmers lack access to credit that would facilitate investments in improving currently poor production and harvesting conditions (e.g. more efficient tools that reduce food damage during harvesting, appropriate storage facilities).

Also, existing packing and handling solutions in the agriculture chain are basic and low grade (large bags, recycled carton boxes, polystyrene boxes, bulk…) leading to high losses due to spoilage during transfers. Practically, an affordable and efficient packaging solution is still to be designed and it must be developed according to the type of commodities: for instance, when fruits and vegetables are packed too tight or with many layers they end up damaging themselves, in contrast, if packed too loose they will be damaged by the impacts during road transit. When referring to live animal transportation, the maximization of space utilization in cages or truck trailers sometimes leads to animals suffocations.

When applied to the food chain, cold chain solutions are used to maintain food at a desired low temperature in all links of the chain, from farmers until retailers, to avoid premature spoiling and to extend the product’s shelf life. However, according to CEL survey, only 14.0% of Vietnam’s producers are using some kind of cold chain solutions. Despite the fact that cold storage capacity in Vietnam quadrupled in the last ten years, most of the high-quality facilities have an occupancy rate of above 90%6 (essentially taken by goods to be exported), which maintains high prices. Likewise, refrigerated transport is still in its infancy with a limited number of solid actors in the market.
In Vietnam, cold chain solutions have low adoption and are still incipient. Furthermore, the general trade channel, which is composed of family businesses and small-scale traders (e.g. distributors, wet markets, mom & pop stores) is still highly predominant in Vietnam, accounting for 94% of total grocery retail sales7. Most of them operate food product logistics under inappropriate storage and transport conditions. In this context, they usually lack awareness of the financial benefits in reducing food losses and waste (e.g. actual cost of losses, potential return on investment for cold chain equipment) for their business.
On the consumer side, Vietnamese are still unaware of food losses issue, its socio-economic and environmental impacts, and the importance and benefits of higher standards for the entire supply chain (and not only at the farmer or retailer level). For instance, the absence of increased food safety standards renders an indirect, but significant impact in the food loss problem.

Initial steps to reduce food losses in Vietnam

One of the most impacting steps to reduce food losses in Vietnam is the establishment of strong farmer’s cooperatives to cope with the complexity that arises from farmers’ fragmentation. Such associations could benefit from increased credit access and from taking the initiative to develop mutualized networks composed of collection facilities and vehicles. Well-coordinated, this agro supply network would allow much lower operating costs, better absorption of seasonal peaks, balance more easily demand and supply gaps, and thus reducing premature harvesting and post-harvesting food losses.

Additionally, Vietnamese Government together with food chain actors would need to develop an action plan to stimulate private sector investments in infrastructure (e.g. storage facilities), innovation (e.g. packaging solutions) and mass sensitization/education. In particular, the latter is essential to improve knowledge and skills of food chain operators, and also to make consumers more demanding towards food quality standards, which might play a key role in pushing agricultural chain improvements.
Also, cold chain solutions in Vietnam can be further developed. Simple and low-cost refrigeration equipment would need to be made available on the market so they can be easily deployed, even by food chain actors who currently have no specific expertise in the matter. At this stage, available refrigeration solutions in Vietnam are still expensive and require a high level of expertise to work properly.

Fresh products are what makes Vietnamese cuisine unique in the world, they are core components of the local culinary culture. They are also, since more recently, a major source of economic development through non-processed agricultural goods exports and has still huge growth potential for the next decades.

However, food losses and wastes put in danger the current vast availability of fresh goods in Vietnam, representing a major risk for the economic, social and environmental sustainability of the agro-sector. Additionally, this phenomenon could lead to quickly raising prices thus preventing the more modest consumers to access fresh food on a daily basis. Besides altering the local culinary culture over time, it would also have a devastating impact on obesity, which already reaches alarming levels for Vietnamese children in main cities.

With this in mind, this issue becomes every consumer’s matters and before practical solutions can be implemented, the mass, and especially the younger generations, needs to be aware of the reality behind the convenience of having access to fresh goods every day.

From a supply chain standpoint, the difficulty resides in the need to involve all agro-chain actors from “the farm to the chopsticks” together with government bodies to define a common objective and practically tackle the problem with legal, technical and training/sensitisation efforts. This challenge seems almost impossible given the numbers of small businesses involved in the industry. But given the stakes at play, the difficulty to initiate a change is not an excuse anymore. Much is to do to reduce food loss in Vietnam, raising awareness on the matter is the critical first step.