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 will 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 60 per cent of the local population aged 30 years old, of which about 6.1 million households are estimated to enter the US$ 5,000-US$ 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 forecast to increase at a compound annual average rate of 11.3 per cent over 2017-2021. Per capital food sales will experience the growth of 10.3 per cent per annum during 2017-2021, along with strong population growth. Bread, rice and cereals continue to account for more than 40 per cent of total food sales in the country and dairy products will outperform over the next five years (Source: BMI, Vietnam Food and Drink Report Q4 2017).

The Vietnamese food retail sector is growing and expanding rapidly. According to the Association of Vietnam Retailers, the country currently has around 800 supermarkets, 150 shopping centers, 9,000 traditional markets and 2.2 million mom-pop stores.

Foreign retail giants have also shown their interest in developing modern retailing in Vietnam by investing into trade centers 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. Details please refer to the AANZFTA information.

The rapid growth of the fast food sector has increased the activity of businesses that service the industry including baked goods, dairy, meat and poultry establishments. Fast food revenue in Vietnam in 2016 was VND 17.9 trillion, an increase of 9 per cent over 2015. 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 more than ten million in 2016, an increase of 26 per cent since 2015. Australia ranks 8th in the top 10 of international visitors in Vietnam, reaching 154,500 with an increase of 7.4 per cent.

Dairy

Given the French influence in Vietnam’s history, dairy products are well received and are associated with healthy diets. With higher disposable income, rising health consciousness, new consumption patterns and a growing customer base underpins strong growth in the sector.

Milk consumption will continue to increase over the next few years due to rising incomes and the development of modern chain stores however local production is limited and cannot meet domestic demand. Vietnam relies on imported raw material to meet the shortage of supply. 70 per cent of raw materials are imported from New Zealand, USA, EU and Australia.

According to the statistics from the General Department of Vietnam Customs, imports of milk and dairy products in 2016 reached US$ 849 million, a decrease of 5.6 per cent compared to 2015. In the first nine months of 2017 import value of milk and dairy products was US$ 650.9 million, increasing 3.49 per cent over the same period in 2016. The largest dairy export market to Vietnam is New Zealand with US$ 165.8 million, accounting for 25.4 per cent of total value, followed on by Singapore, Germany, Thailand, and the US. Dairy imports from Australia decreased 28.44 per cent compared to 2016 to US$ 27.7 million.

(Source: Vietnam Import-Export Report 2016 and Ministry of Industry and Trade ).

Beverages

Beer accounts for 94 per cent of alcoholic beverage consumption in Vietnam. In 2016, Vietnam consumed 3.78 billion litres of beer, up 9.3 per cent in 2015, 380 million litres of wine and spirits, and 5.5 billion litres of non-alcoholic drinks (Source: BMI, Vietnam Food and Drink Report Q4 2017 and Statista 2017 ). 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 2021, annual production of beer, wine and spirits, and non-alcoholic drinks will rise to 5.3 billion litres, 250 million litres, and 8.3 billion litres (Source: BMI, Vietnam Food and Drink Report Q4 2017 and Statista). In the future, Vietnam aims to modernise the industry, focusing on food safety, environmental protection, and anti-counterfeits.

The wine imports in Vietnam increased at a stable rate of 10 per cent annually from 2010 till now with an average consumption of 250ml per person per year (Source: Vietnam General Statistics Office). French brands holds 35 per cent market share, Chilean brands 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 forecast to continue increasing in the coming years to reach four million tonnes in 2019 and to increase 3 to 5 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 also rising as consumers move to a more westernised diet. Vietnam is in the top six fastest-growing meat consumers globally. Meanwhile, total meat supply is estimated to grow at 1 to 3 per cent per year and therefore do not meet the demand, especially beef and poultry will be dramatically in shortage.

Relevant import tariffs for meat products from Australia include:

• 5 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 baked goods. Over recent years, consumption for baked goods has also been growing. Local consumers’ appetite has continued to change and is more accepting of Westernised baked goods 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. Cheese records retail volume and value growth of 8 per cent and 10 per cent respectively in 2017, reaching 6,871 tonnes and VND 1.7 trillion in 2017. Trends from food service has affected retail cheese positively in 2017. The higher inflation rate caused imported brands’ prices to rise, and the impact of Western culture and cuisine caused volume sales to increase. Packaged hard cheese posted the fastest value growth of 2017, with a 12 per cent sales rise. Reconstituted cheese was the main type of spreadable processed cheese in 2017, with a 96 per cent value share. (Source: Cheese Vietnam 2017 Report- Euro Monitor)

Austrade and Hort Market Insight Report

Opportunities also exist for exporters to supply Australian fresh fruit produce during unique cultural festivals, particularly those that feature fruits as gifts or offerings. Further insight into the specific opportunity in Vietnam can be found in the following report

Competitive environment

Competitors include low cost countries such as China and India, as well as suppliers of products perceived as higher quality, such as those from 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 AANZFTA Tariff Finder.

Certain imported products must be inspected before being cleared at customs stations, regarding 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 not breach 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.

Key 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, rail and roads. There are two leading modes of freight transport in Vietnam: inland waterway transport 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 will commence its construction in 2019 and is expected to be completed by 2025. 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 beverage - related

Food and Hotel Vietnam – 24-26 April 2019
Vietfood & Propack 2018 – 8-11 Aug 2018
Vietnam Food Expo 2018 – 14-17 November 2018

Government, business and trade resources for Vietnam

Department of Animal Health (DAH)
Plant Protection Department (PPD)
Vietnam Food Administration
Ministry of Health (MOH)
General Department of Vietnam Customs
Ministry of Industry and Trade
ASEAN Australia New Zealand Free Trade Agreement (AANZFTA)

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

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