Vietnam Country Profile

Market Overview:

Euromonitor reports that the Vietnamese economy will continue to grow at a healthy pace in 2018. Strong growth in exports along with steady gains in private consumption will be important drivers. An improving manufacturing sector, a strong service sector and steady gains in Foreign Direct Investment (FDI) also help to keep the economy on a solid growth trajectory. A fragile banking sector is a concern. Weaknesses in the oil sector are another drag.

  • Vietnam’s economy will continue to be one of ASEAN’s better performers in 2018. Real Gross Domestic Product (GDP) will grow by 6.1% in 2018 after an increase of 5.8% in 2017
  • The real value of private final consumption rose by 6.3% in 2017 and gains of 7.1% are forecast for 2018 - A burgeoning middle class and a rapid rise in private-sector credit are the main drivers
  • Unemployment was 2.2% in 2017 and it will not change in 2018 - Roughly 1.6 million jobs are being generated each year and almost all come from the private sector
  • Vietnam’s outlook for the medium term is bright. Growth of real GDP is expected to average about 6% per year through 2025

Vietnam has improved its infrastructure but the quality is still a serious constraint. For example, just 20% of the country’s national roads are paved. Hanoi and Ho Chi Minh City have metro systems under construction, with the combined cost estimated at US$8 billion. A new international airport outside of Ho Chi Minh City is expected to cost about US$16 billion. A US$33 billion rail link between Hanoi and Ho Chi Minh City is also under development. Altogether, the Asian Development Bank puts Vietnam’s infrastructure needs at U$480 billion between now and 2030. Vietnam already spends 5.7% of GDP on infrastructure – second only to China among Asian countries. All this spending means that an increase in access to foreign capital is essential.

Total population was 95.5 million in 2017, an increase of 15.3 million since 2000. The country’s median age has been steadily rising over time. It was 31.2 years in 2017 and it will reach 37 years in 2030. The country is also undergoing a gradual ageing process but it is not so pronounced as in other countries such as China, Japan or Singapore. Nevertheless, the number of elderly is growing and this upward trend will clearly continue in the near future.

Vietnam is also the 2nd largest U.S. export market for consumer food products in Southeast Asia after Philippines. The 2017 total was US$806.6 million, nearly the same as in 2016. Vietnam is also a major importer of U.S. processed foods, totaling US$468.8 million in 2017, and a decline of 3% from 2016.

Top 2017 processed food exports to Vietnam included:

  • Food preparations
  • Processed/prepared dairy products
  • Prepared/preserved seafood
  • Non-alcoholic beverages
  • Distilled spirits and other alcoholic beverages
  • Processed vegetables and pulses
  • Chocolate and confectionery
  • Syrups and sweeteners
  • Processed fruit

The U.S. enjoys some advantages for exporting food products into Vietnam. They include:

  • Demand for high-value consumer-oriented and seafood products has steadily increased over the past five years.
  • Strong GDP growth, higher per capita income, rapid urbanization, and concerns about food safety continue to drive the growth of the modern food service, food retail, and food processing sectors
  • Consumers in Vietnam view U.S. products as high quality and safe
  • Since awareness of food safety is increasing, consumers are more willing to pay a premium for safe food

Challenges for U.S. food suppliers are:

  • Product registration for new items is costly and burdensome
  • U.S. products, in particular poultry, meat, fruits, dairy products, confectionery, wine and spirits, have become less competitive than those imported from ASEAN members, as well as countries with FTAs/potential FTAs with Vietnam (China, Japan, South Korea, New Zealand, Australia, Chile, India, and the EU), due to higher tariffs, high shipping costs
  • Therefore, U.S. market share has not kept pace with overall market growth
  • U.S. products are still expensive to low and middle-class households

The Government has recently concluded negotiations for Free Trade Agreements (FTAs) with many important trading partners, including ASEAN and AEC, ASEAN-China, ASEAN-Korea, ASEAN-Japan, ASEAN-New Zealand-Australia, and ASEAN-India. Through these efforts, Vietnam has pledged not just to lower import tariffs and eliminate quotas, but also to increase market access for goods and services, strengthen intellectual property protection, enhance legislative and regulatory transparency, and improve its commercial dispute settlement and trade facilitation processes. Along with 10 other nations (The U.S. now excluded), Vietnam is also a signatory of the TPP, and as a member of ASEAN now a partner in the Asian Economic Community, AEC, which integrates economic integration with member states even further.  

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in Vietnam had been estimated to reach nearly US$10.9 billion in 2017. That represents a period growth rate of 40.4% or over US$3.1 billion since 2013. The forecast for growth in this market is also promising. By the year 2022, the retail sales in the packaged food market in Vietnam is expected to reach over US$16.3 billion, a period growth rate of 38.5% or over US$4.5 billion.

High growth products in the forecast include:

  • Breakfast cereals
  • Ready meals
  • Ice cream and frozen desserts
  • Sweet biscuits snack bars and fruit snacks
  • Dairy products
  • Savory snacks
  • Rice pasta and noodles
  • Edible oils

Euromonitor reports with disposable incomes rising and the performance of the Vietnamese economy improving, consumers are allowing themselves to trade up to higher quality brands and products, including luxury goods. Moreover, time is becoming as valuable as money as life becomes busier for many Vietnamese households. Furthermore, as more women enter the workplace, the need for greater convenience and complementary products and services is being triggered. Thus, price is becoming a less important consideration in terms of the purchase decisions of Vietnamese consumers. Meanwhile, product availability, product quality, convenient outlet location and width of product assortment all play equally important roles in the in-store product selection process.

In 2016, Vietnamese hypermarkets witnessed double-digit current value growth, with sales rising by 16%, while supermarkets recorded slower current value growth of 8% during the year. In general, modern grocery retailers’ channels, particularly hypermarkets and supermarkets, have established better positions and are generating stronger performances in term of value sales growth than traditional grocery retailers.

Although value growth rates in hypermarkets and supermarkets continue to slow down, 2016 was a key year for the development of modern grocery retailers in Vietnam. Due to the emergence of busier lifestyles and increasingly long working hours, more consumers are becoming familiar with making large weekly shopping trips to purchase all of the groceries they need for the entire week, instead of the more traditional practice of shopping daily. In addition, with more spacious and comfortable shopping environments and a more abundant variety of products, hypermarkets and supermarkets are increasingly often preferred over traditional grocery retailers.

Saigon Union of Trading Cooperatives continued to lead grocery retailer in 2016 with 2% of value sales. With the advantage of having been one of the very first local pioneers in modern grocery retailers, Saigon Union of Trading Cooperatives has a very deep understanding of consumer needs and consumer behavior. Furthermore, the company has been increasing its nationwide distribution coverage. In 2016, the brand launched new outlets to increase its outlet coverage, scattering these new outlets all around the country. In addition, they also operates in the most channels of any grocery retailer in the country, with a presence in convenience stores, hypermarkets, supermarkets and food/drink/tobacco specialists, a positioning which substantially contributes to its leading position in value terms in grocery retailers.

With its recent successful acquisition of the Vietnamese operations of Casino Guichard-Perrachon SA, Central Retail Corp became the second leading player in grocery retailers in 2016 with a 1% value share. Accordingly, the acquisition deal for the Big C chain has enabled Central Retail Corp to gain control of an extensive network of retail outlets across Vietnam. Following its acquisition, Central Retail Corp is now committed to continuing using products from local suppliers, maintaining strong relationships with existing Big C customers and local authorities and sourcing local goods for Big C stores. Thus, the acquisition represents the strength of the company’s will to continue expanding its business in Asia in general and Vietnam in particular.

With regards to pricing strategy, Central Retail Corp and Saigon Union of Trading Cooperatives are two grocery retailers in Vietnam which constantly offer consumers wide ranges of products at the most competitive prices as well as engaging in considerable amounts of promotional activities. With regards to store design, meanwhile, Lotte Shopping Co is one player which is focusing on offering its customers a more pleasant shopping space through better design as it seeks to target upper-middle and high-income consumers.

Offering a particularly wide variety of imported products, especially products from Japan, is the core competitive advantage of Aeon Vietnam Co Ltd and Dong Hung Trading Service Co Ltd. Accordingly, co-branded loyalty schemes integrated with debit cards developed through collaborations between major chained retailers and banks are becoming more popular in Vietnam as these offer consumers the opportunity to benefit from loyalty points which are exchangeable between issuing retailers and their affiliated banks.

The proliferation of larger-format outlets in channels such as supermarkets and hypermarkets is set to have an impact on the development of convenience stores. However, in modern Vietnamese society, consumers are increasingly demanding products and services that can help them to save time as the lives become increasingly hectic. Therefore, convenience is now one of the most important factors influencing purchasing decisions, followed by product quality and brand, especially for fresh food and essential goods. Having caught onto this trend, many of the country’s leading grocery retailers, especially those positioned in the channel of convenience stores are now focusing on expanding their chains by adding new stores with more modern designs offering chilled ready meals.

Over the past few years, convenience stores continued to show an impressive performance, with strong value growth in line with the expansion of outlet networks in big cities such as Ho Chi Minh and Hanoi. As convenience stores are a channel which targets the young population, most convenience stores are located nearby high schools and universities. In order to attract the attention of consumers, convenience store players constantly expand the ranges of products in categories in which the young generation show high interest such as ice cream, snacks and fast food. In addition, convenience store players are also renovating outlets, installing more seating, which attracts younger consumers. This, combined with the rising demand for retail outlets which are within 24 hours per day, seven days per week led to convenience stores achieving the fastest value growth rates in grocery retailers in 2016.

Post reported U.S. products that are already present in the Vietnamese market with good sales potential include:

  • Tree nuts
  • Dairy products
  • Beef & beef products
  • Fresh & processed fruit and vegetables
  • Prepared food
  • Wine & beer
  • Nonalcoholic beverages
  • Snack foods
  • Baby food
  • Prepared/preserved seafood
  • Syrups & sweeteners

Food Service Sector:

Post reports that rising disposable incomes, urbanization, government policies encouraging market liberalization, changing consumer preferences, and growth in the tourism sector have all contributed to strong growth in the Hotel Restaurant and Institutional (HRI) food service sector making Vietnam an attractive market for U.S. consumer oriented food and agricultural products.

Euromonitor reports that consumer food service in Vietnam recorded a stable performance in 2016, but growth was not as strong as in previous years due to the maturity of the category. Moreover, a gradual increase in food prices and a number of food poisoning scandals had a negative effect on the further development of consumer food service; however, growth was still considered to be healthy, supported by modern lifestyles and the higher incomes of the Vietnamese.

Due to strong development of social networks and the penetration of Western culture, the younger generation was increasingly living modern lifestyles, especially those residing in major cities across Vietnam. Towards the end of review period, instead of cooking or having celebrations at home, the Vietnamese preferred to dine out when meeting friends as this was more convenient and saved a lot of time, despite being more expensive. On the other hand, companies paid strong attention to launching new dishes or menus, and had a particular focus on digital marketing activities as the best way of attracting customers.

There was a great deal of marketing activity from many operators in most categories of consumer food service in 2016. Indeed, within the same year, new products and marketing methods were launched as a way of attracting customers. Among these methods, online platforms such as social networks were a key tool in helping companies boost value sales and reach new customers from various age groups, especially those living in major cities. In addition, many service providers also paid attention to creating discounting events or offering membership cards during the year, which was to keep consumers interested and increase their reputations within the industry.

Not only foreign operators, but also several Vietnamese businesses have joined the trend towards food service franchising, such as Highlands Coffee, Trung Nguyen Coffee, Pho 24 and Mon Hue, among others. Among these brands, Highlands Coffee is one of the most visible Vietnamese franchise concepts. It is owned by Viet Thai International, which led chained cafés/bars in 2016 with a 25% value share. Most franchisees are organized entities that operate a number of brands and outlets. The most notable franchisee is Imex Pan Pacific Group, which operates a number of brands consisting of Burger King, Popeye’s Chicken & Biscuits, Domino’s Pizza and Dunkin’ Donuts.

Franchising is most apparent in fast food, specialist coffee shops and full-services restaurant. McDonald’s, Burger King, and Baskin-Robins are the most popular brands within fast food, while Starbucks, Gloria Jean’s Coffee, and The Coffee Bean and Tea Leaf are the most popular brands in specialist coffee shops. In the last couple of years

Mon Hue Restaurant Co with the Mon Hue brand expanded within the category of full-service restaurants.

Post reports the best export prospects for U.S. consumer-oriented products include:

  • Dairy products
  • Chilled & frozen beef products
  • Frozen poultry
  • Dried fruit and nuts
  • Packaged foods (canned fruit & vegetables, canned meat)
  • Condiments and sauces
  • Juices
  • Seafood
  • Alcoholic drinks (wine, beer, and spirits)

Food-Processing Sector:

Post reports that the Vietnamese food and beverage processing sectors continue to expand - registering strong growth over the past 5 years. Vietnam’s food manufacturing sector grew at 9% in 2016 while growth in the beverage sector was at 10.5%. This expansion is driven by:

  • Economic growth and macroeconomic stability
  • Vietnam’s deepening international economic integration
  • A rapidly urbanizing, modern, and youthful population, which is shifting its diet to include more processed and packaged food products
  • As many local and foreign-invested food processors continue to establish themselves in the Vietnamese market, the prospects for U.S. food ingredient exporters will continue to improve
  • However, the overall market will remain very competitive, with preference continuing for regional ingredient exporters, such as Thailand, Malaysia, South Korea, and Japan

According to the latest statistics from the General Statistics Office (GSO), the number of food processors in Vietnam in 2015 was 8,820, of which 6,630 were registered food processing enterprises and 2,190 were manufacturing beverages enterprises. In 2015, the number of food and beverage processors in Vietnam grew 5.1% year-on-year. Some firms specialize in producing only food ingredients, while others handle retail-ready products in addition to ingredients.

Many food processors in Vietnam use both locally produced raw materials and imported food ingredients in their operations. They also have their own distribution channels to wholesalers, distributors, and retailers, as well as to hotels, restaurants, and other industries nationwide. In Vietnam, some large food processors prefer to purchase raw materials through local importers or distributors to avoid the complication of import procedures. Most small food processors with low sales volume utilize local wholesalers who can take care of the necessary import procedures.

Depending on the scale of the operation, Vietnam’s food processing sector can be divided into the following categories:

  • Large domestic companies (either private, joint stock, or state-owned)
  • Foreign invested companies or joint venture companies
  • Medium-sized domestic food processing companies with a local or regional presence
  • Small-scale domestic companies or cottage industries in the “unorganized” sector

The biggest competitors for U.S. food processing ingredients are China, other ASEAN countries, Australia, and countries from the Eurasia Economic Union, and for select products, the local food industry. U.S. exporters should understand that Vietnam’s domestic food ingredient production already offers many products at competitive prices. Leading multinational food processors have established food processing operations in Vietnam and are able to offer a range of western-style products at reasonable prices. In addition, while many food processors and consumers are aware of quality differences and are very keen on achieving international standards, most will sacrifice quality for affordable production cost and prices.

Most products from China, other ASEAN countries, Australia, and countries from the Eurasia Economic Union also enjoy lower tariffs than U.S. products. Currently, Vietnam is in the process of negotiating several FTAs, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and an FTA with the EU. These FTAs with other trading partners will put U.S. agricultural exports at a disadvantage.

In addition to the freight cost advantages from ASEAN countries, most of the suppliers from these countries are more responsive and flexible to importer’s demands for smaller shipment sizes, mixed product shipments, or product specification modifications to meet Vietnamese regulations.

Best Product Prospects:

  • Soybeans and soy flour
  • Fish products
  • Tree nuts
  • Dairy products
  • Poultry meat and products
  • Beef and beef products
  • Fresh fruits
  • Prepared food
  • Processed fruit
  • Non-alcoholic beverage (excluding juices)
Loading...

View Calendar

Natural & Organic Products Europe
April 22-23, 2018
London, United Kingdom

Interzoo
June 12-14, 2018
Nuremberg, Germany

EXPHORE - Expo Hoteles y Restaurantes
June 23-14, 2018
Belen, Costa Rica

FOOD TAIPEI
June 27-30, 2018
Taipei, Taiwan

View Calendar

Export Intelligence Video Series -Vietnam

See more videos