Rising prices of raw materials needed to make Tet (Lunar New Year) festival sweetmeats have made enterprises worry their production costs will be higher than selling prices mandated by the Government's price stabilisation programmes.
They are also concerned that high prices of the foodstuff sold during the festival season will reduce demand and affect their sales.
Phan Van Thien, Deputy General director of confectionery maker Bibica, said the prices of many raw materials used to make cakes and sweets have been increasing rapidly, especially for sugar and wheat flour.
Many suppliers are only agreeing to sign short-term contracts to sell sugar because of continuously rising prices, Thien said. Hoang Dang Tien, deputy general director of the Southern Nutrition Food Ltd Company (SNFOOD), said the price of sugar has risen from VND16,000 (US$0.75) per kilo at mid-year to VND20,000 ($1) at present, while that of wheat flour has surged from VND7,000 ($0.35) to VND20,000.
The prices of packing or wrapping materials have also soared by 20 per cent compared to the same period last year, he said.
Thien of Bibico said that the prices of all input materials are generally expected to rise by 20 per cent compared to the same of period of the previous year.
But the prices of foodstuff like cakes, sweets and jams for Tet are expected to increase only by 10 per cent, Thien said.To reduce costs, foodstuff producers are trying to negotiate with material suppliers to fix prices until Tet, increase productivity of assembly lines and undertake power saving measures.
The consumption of foodstuff products is currently very low, almost 50 per cent less than the same period last year, according to the Phu Nu (Women) newspaper.
Many producers are wary of making large quantities of foodstuff because of the low demand and they have also not announced prices of their products, afraid that rising input prices could exceed their calculations.
Hoang Thi Tam Ai, Director of the Tri Duc company which makes cakes and jams for Tet, said she has refused to announce her prices to large supermarkets, because prices of most input materials have risen remarkably.
For instance, the price of coconuts has risen from VND16,000 per kilo up to over VND20,000, and that of lotus seeds from VND110,000 to VND150,000.
A representative of Acecook Viet Nam, which makes instant processed foodstuff, said most suppliers of input materials were rejecting large orders, or posing very strict payment conditions.
Producers of consumer goods are also facing a similar situation. In case input materials have to be imported, things get even more difficult, said a representative of the Kim Hang company, which makes aluminum products.