Cambodian agro-processors are achieving success through higher standards and responsible practices
Cambodia’s agro-processing industry has long existed in the shadow of its bigger, more established neighbours. For decades, the country’s agricultural sector has been relegated to exporting raw agricultural products to Thailand and Vietnam for processing. As late as last year, Cambodia was processing only 5 percent of the cashews it was producing, and many consumers who ate those nuts did so without knowing cashews even grow in Cambodia.
“Cambodia is mainly exporting raw commodities, but not making much out of it in terms of added value for Cambodians,” said Bryan Fornari, Head of Cooperation at the European Delegation.
Structural challenges such as high electricity and logistics costs, low labour productivity and lack of economies of scale, have made it difficult for Cambodian agro-processors to compete on cost alone. To punch above their weight class in global markets, Cambodian companies have turned to quality, social responsibility and green agricultural practices to establish a competitive advantage.
“There’s a consumer base in Europe that really likes high-quality products – where it’s not just the food that you buy, but also the idea that you are doing something good as a consumer, or buying responsibly,” said GIZ Business Scout for Development Christoph Janensch. “That’s Cambodia’s niche.”
For small companies – such as processor Handcrafted Cashew Nuts Stung Treng (HCST) in Stung Treng province – breaking into this market begins with the farmers themselves. Using their contract farmers’ own model cashew farm, they train in farming methods that improve resilience to climate change and crop management techniques. This enables the farmers to reduce their dependence on chemical pesticides and fertilisers. Compliance with company standards is maintained through monitoring and incentivised by access to interest-free loans and above-market-rate purchasing prices for raw cashews.
This community orientation, and the quality organic produce that results from it, helps to justify the high prices that come with small-scale production, said Sothnita Soeun, co-founder of HCST. “We make them feel like they are not just purchasing our products to eat, but they also help contribute to the community as well,” she noted. “And once they realise the quality, they tend to keep coming back for more.”
Small enterprises like this have been the pioneers of the sector. They make the business case for agricultural processing in Cambodia and raise the country’s international profile among buyers, through regular participation in trade fairs and exhibitions. While the industry overall remains small, an increasing number of successful enterprises could help crowd investment into the sector, said the EU Delegation’s Fornari.
“These are small-scale stories, but they show the potential there can be,” he said. “Once you meet that critical mass of businesses that manage to benefit from their investments, and this is seen by others, it can have a knock-on effect on the industry as a whole.”
For companies able to expand to a larger scale of production, competing on price becomes increasingly viable.
Company growth directed the success of Kirirom Food Production, said Holy Meas, deputy managing director. “Whereas other mango-drying factories in Cambodia can produce only 300 to 400 tonnes a year, we can produce 2,500 tonnes a year,” he said. “This enables us to offer a price competitive with other producers in Southeast Asia, Africa and Latin America.”
While economies of scale are critical to bringing down costs and competing in global markets, operating at a larger scale brings new challenges as well. While it is not difficult for a smaller business to source enough organic produce, the quantities available in the market are insufficient for a larger industrial concern. Kirirom has tried to manage this through developing its own 600-hectare plantation to produce certified organic mangoes.
As with HCST, engaging with contract farmers also plays a role. “We are seriously working with small-holder farmers to ensure a sustainable supply of fresh mango,” said Meas.
Cambodian agro-processors are not just expanding their place in existing export markets, but moving into entirely new market segments as well. UNIDO’s CAPfish Capture programme is on the verge of enabling the export of Cambodian fisheries products to the European Union, with an EU audit of the sector expected to be completed in 2024. Despite Cambodia’s abundant fisheries, the lack of a robust regulatory regime governing food safety has long hobbled the country’s access to international markets.
Through its work with small and medium-sized enterprises to improve food safety practices, as well as key regulatory stakeholders to develop the necessary capacities and legal instruments required, Cambodia appears poised to clear the high bar set by the EU for animal product imports. If the nation succeeds, the payoff is potentially huge.
“Once you meet the EU’s requirements, you’ve met the global food safety requirement,” said T.S. Shetty, Senior Technical Advisor at UNIDO. “The EU certification is like a global passport, because it is the best in the world.”
Acquiring this certification could go a long way to drive investment into the fisheries industry, said Shetty: “Once Cambodia is listed as an eligible country to export to the global market, including the European Union, then we expect that substantial investment will take place in the country.”
To spearhead this entry into European markets, CAPfish has selected a number of companies producing traditional Cambodian goods, like fish sauce and prahok, aiming to use the nation’s heritage as a way to differentiate Cambodian products from the competition.
“When our enterprises visited supermarkets and traders in Paris, they saw a great deal of products marked as ‘Cambodian style’,” said Shetty. “There is a great deal of interest in Cambodia because of the linkage to the country’s cultural heritage and history.”
While some of these companies are doubling down on heritage, others are looking to transform traditional Cambodian products for success in a different cultural environment. Confirel, one of four agro-processing companies selected by CAPfish to enter the European market, has developed an entirely new dried prahok product in a bid to introduce Western audiences to the traditional Cambodian condiment.
“The main disadvantages of prahok [for Western consumers] are its smell and saltiness,” said Hay Ly Eang, CEO and founder of Confirel. “Therefore, we adjusted the disadvantages.”
The goal is for Western consumers to adapt this prahok variant to be used as a seasoning in their own cuisines, the way pepper or chile might be. “Before, we had never thought of using prahok for making pizza,” Eang said, recalling a culinary experiment. “But when we tried it, we got a lot of positive feedback from foreign consumers.”
Introducing a completely new condiment to consumers who may have never even heard of prahok – much like expanding the agro-processing sector as a whole – has been a process of gradual growth from a low base rather than one of dramatic transformation.
“When we can only swim 100 metres, we cannot push ourselves to swim a kilometre,” said Eang. “If we do so, we’ll surely die.”
