Food and beverage to Vietnam

Trends and opportunities

The market

Vietnam is one of the most attractive markets in South East Asia for consumer-oriented organisations due to its sustainable economic growth and low inflation levels, which strongly benefit consumers' spending power over the next five years. Positive demographic dynamics and increasing income will also attract retailers interested in capturing the mass-market segment. With just under half of the local population estimated to be younger than 30, of which about 6.1 million households are estimated to enter the US$5,000-10,000 income level towards 2020.

Vietnam’s food sector accounts for a substantial and growing part of the country’s gross domestic product (GDP). Total food sales are forecasted to increase at a compound annual average rate of 11 per cent over 2015-2020. Bread, rice and cereals continue to account for more than 40 per cent of total food sales in the country. Dairy products will outperform over the next five years (Source: BMI, Vietnam Food and Drink Report Q4 2016).

The Vietnamese food retail sector is growing and expanding rapidly. According to the Association of Vietnam Retailers, the country currently has around 750 supermarkets, 130 shopping centres and 9,000 traditional markets.

Foreign retail giants have shown their interest in developing modern retailing in Vietnam by investing into trade centres and supermarkets. Foreign retailers are leading the change from traditional to modern retailing. The growth of modern retailers presents opportunities for greater exposure to imported products.

Opportunities

On 1 January 2010 the ASEAN-Australia-New Zealand-Free Trade Agreement (AANZFTA) came into force. Many products imported from Australia enjoyed tariff reduction from 1 January 2016. Australian businesses are urged to take a close look at the opportunities created by the agreement, as it delivers real commercial benefit for Australian exporters and investors doing business in Vietnam.

The rapid growth of the fast food sector has increased the activity of businesses that service the industry including bakery, dairy, meat and poultry establishments. Fast food revenue in Vietnam in 2015 was US$748 million, an increase of nine per cent per cent over 2014. Many foreign fast-food chains are active in Vietnam’s food and beverage market.

Growth in the tourism industry has also resulted in a growing demand for beef, cheese, seafood, wine and seasonings which are used in western-style, Japanese and other international food outlets. According to the Ministry of Culture, Sports and Tourism of Vietnam, total international tourist arrivals into Vietnam reached around 8 million in 2015. Australia ranks eighth in the top 10 of international visitors in Vietnam.

Dairy

Given the French influence in Vietnam’s history, dairy products are well received and are associated with healthy diets and longevity. Low per capita milk consumption, rising health consciousness, new consumption patterns and a growing customer base underpins strong growth in the sector. The total imported value for dairy products increased 103 per cent in 2014 compared to the previous year. Besides, already an important market for dairy ingredients, the development of supermarkets and hypermarkets will present opportunities for dairy consumer goods such as milk, powdered milk, dairy spread, ice cream and cheese (Source: VPBS, Vietnam Food and Beverage Industry Report, June 2014).

In 2015, Vietnam imported a total of US$41.2 million value of dairy products from Australia, accounting for 4.6 per cent total imported values. The imported dairy market is dominant by New Zealand, United States (US), Singapore, Germany, and Thailand.

Beverages

In 2015, Vietnam consumed 3.4 billion litres of beer, 300 million litres of wine and spirits, and 4.8 billion litres of non-alcoholic drinks (Source: Vietnam Beverage Association, January 2016). Vietnam ranks first place in Southeast Asia for beer consumption, third place in Asia (after Japan and China), and is in the top 25 in the world.

Towards 2020, annual production of beer, wine and spirits, and non-alcoholic drinks will rise to 4.25 billion litres, 360 million litres, and 9.2 billion litres. In the future, Vietnam aims to modernise the industry, focusing on food safety, environmental protection, and anti-counterfeits. The industry is projected to grow at a compound annual growth rate of 8.44 per cent during 2016-2020 (Source: BMI, Vietnam Food and Drink Report Q4 2016).

The wine imports in Vietnam increase at a stable rate of 10 per cent annually from 2010 till now with an average consumption of 250ml/person/year (Source: Vietnam General Statistics Office). French brands holds 35 per cent market shares, Chile 25 per cent, and the rest comes from Italy, Spain, USA, and Australia.

Meat

Coupled with a growing population, urbanisation and increasing incomes, meat consumption has risen significantly over the last decade and is forecasted to continue increasing in the coming years to reach four million tonnes in 2019 and increase three - five per cent annually (Source: Vietnam Chamber of Commerce, Vietnam Meat Industry- Opportunities and Challenges). Meat (bovine, chilled and frozen beef, pork and chicken) consumption is rising as consumers move to a more westernised diet. Vietnam is in top six fastest-growing meat consumers globally. Meanwhile, total meat supply is estimated to grow at one – three per cent per year and, therefore do not meet the demand, especially beef and poultry will be dramatically shortage.

Relevant import tariffs for meat products from Australia include:

  • five per cent tariffs on live animals eliminated in 2016
  • tariffs on beef reduced to zero per cent from 2018
  • tariffs on fresh, chilled or frozen pork reduced to zero per cent from 2017
  • tariffs on sheep and goat meat reduced to zero per cent from 2016
  • tariffs on edible offal reduced to zero per cent by 2020, except for some poultry offal on which tariffs will be bound at base rate of 20 per cent or phase from 15 per cent to five per cent by 2020.

Processed food

Processed food and beverages are one of the key industries of Vietnam, contributing to 37 per cent of GDP. The consumption of imported products grows at a low level in Vietnam, mainly at big cities like Hanoi and Ho Chi Minh City. Overall, the country’s food processing industry is disjointed and ruled by relatively small domestic businesses. With the recent investment by foreign consumer goods investors the industry is expected to become more competitive.

Vietnam’s economy growth, increasing incomes, favourable demographics, rising health awareness and growing investments in the industry will encourage demands for confectionery, especially bakery products. Over recent years, consumption for bakery products has also been growing. Local consumers’ appetite has continued to change and accept more westernised bakery products like bread, cookies, and cakes.

The domestic pasta market is still underdeveloped although in view of more westernised lifestyle, pasta is more accepted by consumers in urban areas. Meanwhile, the market for instant noodles is well developed with dominating brand names owned by local companies, and some imported products from Korea, Japan, and Thailand.

Also under the influence of western gastronomy, cheese is also becoming popular for Vietnamese consumers. However, cheese consumption is still weak as its price is considered quite high by local market, and it is not a common ingredient in Vietnamese cuisine. The fastest growing is spreadable and processed cheese, accounting for 97 per cent market share in 2014.

Competitive environment

Competitors include low cost countries such as China and India, as well as suppliers of products perceived as higher quality, such as New Zealand, France, EU and the US.

Most products from China and South East Asian countries currently enjoy lower tariffs than Australian and US products due to market liberalisation under ASEAN or specific bilateral agreements.

Tariffs, regulations and customs

The trade between Vietnam and Australia is directly affected by the AANZFTA. For further information on tariff rates of specific products, visit the Department of Foreign Affairs and Trade's Free Trade Portal

Certain imported products must be inspected before being cleared at customs stations, covering quality, specifications, quantity and volume. Vietnam’s Custom Laws ratified by the National Assembly, provides a legal foundation for the operation of the customs sector and creates a favourable environment for import-export activities. Companies that import goods must submit a dossier of documents to the customs authorities, including the company’s registration certificates of business and import business code. Imported goods require the following documents:

  • bill of lading
  • cargo release order
  • commercial invoice
  • customs import declaration form
  • inspection report
  • packing list
  • technical standard/health certificate
  • terminal handling receipts.

Details of the circulars, decisions and decrees, which have been issued under the Customs Law, can be found on Vietnam Customs website.

Marketing your products and services

Market entry

Although Vietnam has an open market policy, the government is conscious of protecting the local agricultural sector. Exporters should be aware of the frequent regulatory changes in order to support this domestic focus. Vietnam has three distinct regions:

  • North including Hanoi
  • Central region including Da Nang
  • South including Ho Chi Minh City.

Consumers in each region have different purchasing habits and considerations. Given the regional difference, it makes sense for companies to focus on one region only when entering the market, unless tailored entry strategies to each region can be generated.

Distribution channels

Vietnamese consumers are very price sensitive and have little brand loyalty. However, with rising incomes and greater demand for western products, this is changing. Products are increasingly competing on brand and quality. Creative marketing and promotion strategies help products succeed in the market, but must ensure not to breech Vietnam’s strict advertising regulations

The most common market entry strategy when working with food and beverage products is a local partner, trader, distributor or agent. However, high volume products for use as raw materials in factories (dairy ingredients, salted hides, animal feed ingredients, etc.) are typically sold direct. Vietnam allows foreign companies to import food and beverage products and distribute them through wholesale and retail channels. However, companies need to be registered in Vietnam and have an investment license.

Some marketing restrictions include:

  • Mass advertising for alcoholic beverages with alcohol content above 15 per cent is not permitted.
  • Approval is required from the relevant government ministry to advertise certain products.
  • Advertisement and promotion spending cannot exceed 10 per cent of total spending.

Transport

According to the World Bank’s 2014 Logistics Performance Index (LPI), Vietnam ranks 48th out of 160 countries pertaining to infrastructure measures. Vietnam is a coastal country and in an ideal geographic location to facilitate international transportation by air, sea, railway and roads. There are two leading modes of freight transport in Vietnam; inland waterway transport (IWT) and roads.

Ports and Marine Terminals

Vietnam has 11 major seaports, including Ho Chi Minh City in the south, Haiphong in the north and Da Nang in the centre. Additional container ports are planned and a specific project continues to reduce traffic congestion in Ho Chi Minh City by relocating its eight port facilities to outlying areas by 2020. Container-handling activity is focused in the two main shipping centres of Ho Chi Minh City and Haiphong, including their respective satellite ports of Cai Mep-Thi Vai and Cai Lan. These locations make up 97 per cent of Vietnam’s total container-handling volumes.

Airports

Vietnam has two airports that manage cargo for international markets: Tan Son Nhat Airport (TSNA) in Ho Chi Minh City and Noi Bai Airport (NBA) in Hanoi. A third airport, Long Thanh Airport is currently under construction in Ho Chi Minh City and is expected to be completed by 2015. TSNA has two cargo terminals including Tan Son Nhat Cargo Services (TCS) and Saigon Cargo Service Corporation (SCSC). 

Trucking service

The majority of Logistics Service Providers (LSPs) consider trucking costs to be higher and standard of trucking service delivery to be lower in Vietnam relative to China, India, Malaysia and Thailand. Most of the trucking companies are small and operate second-hand trucks that are subject to poor maintenance.

Links and industry contacts

Food and Hotel Vietnam
Wine and Spirits Asia

Government, business and trade

ASEAN Free Trade Agreement
ASEAN tariff
Dong Nai Customs
Ministry of Industry and Trade
The National Agro Forestry Fisheries Quality Assurance Department (NAFIQAD)
Vietnam Customs

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