Académique Documents
Professionnel Documents
Culture Documents
RESEARCH REPORT
This project is funded
by the European Union
Useful contacts
EU-Vietnam Business Network (EVBN)
More information
Useful contacts
www.evbn.org
Further reading:
Vietnam Ministry of Planning and Investment:
www.mpi.gov.vn
www.vietnam.unfpa.org
www.moit.gov.vn
www.unctad.org
www.intracen.org
www.trademap.org
www.thesaigontimes.vn
Vietnam News:
www.vietnamnews.vn
www.gso.gov.vn
Trading Economics:
www.tradingeconomics.com/vietnam/
www.news.chinhphu.vn
Vietnam Briefing:
www.vietnam-briefing.com
www.customs.gov.vn
www.vietradeportal.vn
www.en.vietnamplus.vn
www.worldbank.org/en/country/vietnam
www.ipcs.vn/en/
www.moj.gov.vn/
http://nifc.gov.vn/
The Landmark, 15th floor, 5B Ton Duc Thang St., District 1, Ho Chi Minh City, Vietnam
This publication has been produced with the assistance of the European Union.
The content of this publication are the sole responsibility of EVBN and can in no way be
www.evbn.org
TABLE OF CONTENT
1.
5
8
1.2. Beverage
14
1.3. Seafood
19
1.4. Dairy
21
1.5. Noodles
26
1.6. Ingredients
28
2.
29
2.1. Seafood
30
2.2. Rice
32
2.3. Coffee
33
3.
34
4.
36
36
41
43
5.
47
6.
49
52
INTRODUCTION
Domestic consumption in Vietnam is growing slowly and Vietnamese consumers are still cautious
in spending as the economy has yet to recover from its trough in 2008 as a result of worldwide
economic downturn. However, the emergence of retail systems together with changing
consumption habits shows a promising market for the retail industry in general and Agrofood in
particular.
In 2013, Vietnams Agro-food market was worth over USD 60.1 billion, accounting for 40.5% of
the total consumption of the country. In the same year, Vietnams F&B consumption was USD42.8
billion, representing an increase of 8.2% against 2012 and a compound annual growth rate of
11% during the period of 2010-2013. Domestic consumption in the country reached 42.8 billion,
accounting for 71.2% of the total industry production value, and the remaining 29% contributes to
exports (seafood, rice, coffee, cashew nuts).
Imports of agro-food have been an additional source, besides the local production, to supply the
expanding domestic consumption. These imports, however, were always exceeded by exports
since 1997, resulting in Vietnams trade surplus, which has increased at a faster pace over the
years (Shown in the chart below). Details of imports and exports market will be in the following
sections.
Figure 6. Evolution of the agro-food trade in Vietnam
01
Vietnam has a high domestic food consumption, with a double-digit growth. In 2013, food
consumption was USD34.8 billion, posting a remarkable CAGR of 11.4% over the period of 2010
to 2013. Despite recent slow growth in FMCG purchases, the combination effects of continuous
economic growth, golden demographic structure, rapid urbanization, emergence of middle income
earners and a mass grocery retail network, will fuel the growth of overall food consumption in the
medium- and long-term. Also, due to its nature as a defensive sector that is essential for living,
food is considered a key component of a balanced investment portfolio over investment horizon.
Vietnam food consumption is projected to retain its double-digit growth of 11.4% over the period of
2014 to 2018, according to Euromonitor International.
In 2013, agro-products, meats & eggs and seafood continued to be the three biggest categories
with USD26.7 billion or 76.8% value contribution to total local food consumption. Agri-products,
including rice, maize, coffee, tea, pepper, cashew, sugarcane, cassava, fruits and vegetables,
posted double-digit growth of 11.8% since 2012, the highest market value of all categories.
This $11.9 billion market couldnt be fulfilled if without foreign imports. In 2008, Vietnam imported
$7.3 billion worth of agricultural food. Vietnam's primary agricultural import suppliers include
China, Australia, Thailand, New Zealand, ASEAN countries, Argentina, the European Union (EU)
and the US.
The key staples of the Vietnamese diet (fish and rice) are produced in abundance domestically
and have naturally limited agricultural imports in the past. However, the makeup of agricultural
imports is changing as more affluent urban consumers seek more variety and convenience
options. In turn, the processing sector is looking to imports to supply this rapidly expanding
industry.
Vietnam's top five agricultural imports in 2008 along with their corresponding supplier in brackets
were:
Residues and waste from the food industries (used as animal feed) $1,329 million (India)
Meat and edible meat offal $900 million (India and US)
Animal or vegetable fats and oils $647 million, (Malaysia and Indonesia)
Beverages, spirits and vinegar $507 million (Singapore and Hong Kong)
Cereals $443 million (Australia)
Major food categories imported the most by Vietnamese market were raw feed, dairy materials,
seafood, oil and fats, wheat, and fruits and vegetables, with respective market shares listed in the
below table. Among these, three categories (raw feed, wheat, fruits and vegetables) are agri-food.
Key imports categories in 2013
Contribution
Raw feed
46.4%
Dairy materials
16.8%
Seafood
10.7%
10.7%
Wheat
9.4%
6.2%
Source: GSO Viet Nam
Key findings on each import category will be elaborated in more details in the following sections.
1.1
According to the Center for Information Industry and Commerce - Ministry of Industry and Trade
(VITIC) showed that Vietnam imported 107.1 million confectionery and cereal products, down
42,28% compared to import value over the same period last year.
In particular, products from Indonesia and Thailand accounted for over 50% of the import value.
Specifically, items of confectionery and cereals imported from Indonesia accounted for 30.3%,
equivalent to 32.4 million, up 23% from the same period last year. Followed is Thailand with 22.8
million in import value, accounting for 21.37% and increasing by 26.99% compared to the
previous year.
Besides, Vietnam also imported large amounts of candies, $12.5 million, from Malaysia. At the
same time, Vietnam also imported candies from other markets such as the Philippines (10.7
million), China (5.7 million), and South Korea ($ 4.3 million). These numbers have slightly
increased compared to the same period last year.
Meanwhile, the value of imports from the United States, Singapore, and the Netherlands have
declined dramatically from 80% to 96%, reaching just over $ 5 million in all 3 markets.
Bakery. Trends.
Vietnam was not an exception; its refined sugar wholesale price was down by 18.7% y-o-y to
VND13,000 per kg in the third week of May 2014. In contrast to sugar, wheat prices depended on
the weather conditions in main areas of world wheat production, such as North America and
Canada, Brazil, Australia and were affected by political turmoil in the Ukraine. Wheat prices were
USD334 per MT as of May 20, 2014, which was an increase of 15.2% compared to the beginning
of the year. In 2014, the confectionery business may not have a gross profit margin as high as in
2013, but we expect it will not be too low as long as sugars price downtrend persists.
10
Despite slower growth, Vietnams confectionery market still outpaced its regional peers
In 2013, Vietnams confectionery market grew at a slower pace, given its nature of being a
discretionary item in the context of slowing purchasing power. In 2013, the category sales were
VND16.6 trillion (USD0.79 billion), a rise of 9.4% from the 2012 sales. Despite this, Vietnams
confectionery market still remains attractive in the SEA region as it substantially outperforms the
average growth of 3% in the region and that of 1.5% in the world.
The category is appealing in the long run thanks to the increasing awareness of Western culture
and lifestyle among Vietnamese consumers and the much lower confectionery consumption per
capita of 1.8kg per annum relative to the global average of 2.8kg. Euromonitor International
expects the slow growth of the confectionery market to continue in 2014 and 2015, however, the
CAGR for the period of 2013 to 2017 is projected to hover between 10% and 11%.
11
Savory snacks
Demand remaining strong despite increase in unit price
With a 33% share contributed to the
confectionery market value, savory snacks
reported VND5.5 trillion (USD0.26 billion)
sales in 2013, recording a higher CAGR of
9.5% during 2010 to 2013 than biscuits,
cookies and crackers. Despite increases
of unit price over the period, the sales
posted a higher and flat growth rate,
suggesting that the demand for savory
snacks will remain strong. Extruded
snacks and nuts accounted for 58% of the
sub-category sales, equivalent to VND3.3
trillion (USD156.2 million) in 2013.
12
Sugar confectionery
Revenue growth of the sugar confectionery segment was 9.5% in 2013, which was much slower
than the levels recorded in 2011. This was attributed to rising consumer awareness of health
issues related to the level of sugar intake, such as high blood pressure, obesity and diabetes.
Thus, it led sugar confectioneries to confront strong competition from savory snacks which are
considered to have lower sugar content. Pastilles, gums, jellies and chews continue to be the
most popular sugar confectionery category in Vietnam, accounting for 58% of the value or
VND1.6 trillion (USD75.7 million).
13
1.2
Beverage
In 2013, retail sales of the beverage sector in Vietnam reached USD8 billion, a 7.6% rise
compared with the 2012 number. According to forecasts of the key players, in the period 2014 and
2015, beverage market value is expected to increase by 7.5%. So as consumers switch to
beverage products with higher value, expected profits in this sector would increase by 10.5% in
2016.
14
As increasing Vietnameses exposure to drinking cultures around the world couples with their
popular perception of drinking to socialize, Vietnam alcoholic drinks consumption continues
growing year over year and has gained the biggest retail sales among other beverage categories.
Further, rising numbers of tourists and expatriates living in big cities also incentivize alcoholserving retailers to expand, which in turn stimulates local consumption as rising adoption of
western lifestyle becomes more prevalent.
In 2013, Vietnamese people drank a remarkable 3.15 billion liters of alcohol, equivalent to
VND119.5 trillion (USD5.6 billion), representing a double-digit CAGR of 10.1% and 10.6% during
2010 to 2013. Despite their slowing growth since 2012 due to reaching maturity, alcoholic drinks
remain one of the potentially lucrative markets in Vietnam. It is expected to reach USD6.3 billion
in 2015 by Euromonitor International.
15
Beer
Alcoholic beverage consumption is largely driven by the beer category which accounted for 98%
of production volume and 91% of sales value in 2013. Spirits and wine accounted for only 2.3%
volume share (74 million liters) and 8.8% value share (VND10.4 trillion or USD492 million). In
2013, beer consumption recorded more than 3 billion liters, equivalent to VND109.1 trillion
(USD5.2 billion).
16
The Vietnam beer market had a CAGR of over 10% in volume and value during the period from
2010 to2013. However, as the market becomes saturated, growth cannot be as fast as it was prior
to 2011. Beer is forecasted to grow at a slower pace with an average 5.3% per annum and the
sales will be USD5.7 billion by 2015.
Lager dominating other types of beer
Lager is the main type of beer in Vietnam since Vietnamese consumers are already familiar with
the taste of lager and are reticent to try new tastes. Thus, other types of beer such as dark beer,
stout and low-alcohols have only a limited presence in the market. Standard lager holds the
biggest share of 67% of total lager, thanks to its price affordable for Vietnamese consumers who
still lived with low disposal-income per capita. Also, there was a large gap of at least 43% higher
in unit price range of each segment including premium, standard and economy.
In 2010, approximately 50 percent of imports of wine and spirits came from France, 14 percent
from Australia, 6 percent from the USA, 5 percent from Chile, 4 percent from Italy, and 2
percent from Spain.
Cabernet was the premier red variety of grape-based wine consumed, with 1.2 million liters
consumed in 2009, a 33 percent increase from 2006. Chardonnay was the leading variety
among the white wines, with consumption rising from 0.7 million liters in 2006 to 0.9 million
liters in 2009a 29 percent increase.
Demand for wine is seasonal. The highest demand occurs around the year-end festive season;
during the Tet festival (Lunar New Year) around February every year, Christmas holiday, and
New Year celebration. Some retailers state that between 60 and 70 percent of the wine sales
occur during this period. Demand was generally low during other periods of the year.
17
Imported wine is perceived as a luxury product in Vietnam (accounted for 73%), and demand for it
largely comes from expatriates and tourists. Only a small number of Vietnamese from the middle
to high income groups drink imported wines. This is because these groups of consumers
generally prefer spirits such as vodka, cognac, brandy and whiskey to wine. However,
Vietnamese that have acquired a taste for wine generally prefer old world wines, particularly red
wines. The most popular wine in Vietnam is Bordeaux, which is synonymous with wine.
Vietnamese consumers who have acquired a taste for wines consume imported wine while they
are out socializing/entertaining or dining during the week. In line with growth in incomes, rising
affluence in urban centers, the larger expatriate business community and emerging tourist cities,
demand for wine is expected to increase over the next five years. This trend reflects the prestige
associated with drinking wine compared with beer and spirits, in addition to the perception that
wine is healthier.
The presence of more and more highly-regarded brands of wine from Old World countries like
France and Italy as well as from New World ones, like Chile, Australia, United States of America,
South Africa, Argentina and New Zealand has demonstrated how much wine producers are
interested in this promising market.
18
1.3
Seafood
19
20
1.4
Dairy
The dairy sector, valued at VND62.2 trillion (USD2.9 billion) in 2013, is among the fastest-growing
in Vietnams non-discretionary consumer sector, with an increase of 16.5% in 2013 and a CAGR
of 14% over the period from 2010 to 2013. Vietnam dairy revenue comes mainly from two
segments: powdered milk and drinking milk. These two segments revenue accounts for 74% of
the total market value which is USD 2.2 billion (VND 45,900 billion). According to Euromonitor
International, Vietnams dairy market value will have increases of 20% and 23% for the year 2014
and 2015. Yogurt is reckoned to be the segment that will bring high profit thanks to the
underdeveloped market either in demand or supply.
21
Local raw fresh milk supply only meets less than one-third of production demand
The sector faces a supply and demand imbalance in raw fresh milk as domestic herds (184,216
cows) were able to provide only 420,000 tons of raw milk, meeting only 28% of total domestic
demand in 2013. Vietnam is ranked in the top 20 countries worldwide importing input materials for
dairy production. In 2013, the country imported around 1.2 million tons of raw milk powder valued
at USD841 million. Thus, heavy dependence on imported materials brings the attendant risk of
profit margins being squeezed out due to global price fluctuations. However, this risk is mitigated
by strong consumer loyalty for prominent brands and because milk products are exposed to low
price elasticity of demand relative to other categories. The Department of Livestock Production
estimates local milk production will surge to 856,000 tons in 2017 (326,000 cows herd) and
1,000,000 tons (500,000 cows herd) by 2020, yet the supply will only meet 30% of local demand.
22
Yogurt
Yogurt registering the fastest growth among other dairy categories
Yogurt is traditionally perceived by
Vietnamese consumers to be a healthy
food that provides digestion benefits
after meals. Hence, yogurt registered
the fastest value growth rate of 34.3% to
VND7.7 trillion (USD364.7 million) in
2013, producing an impressive CAGR of
32.7% during 2010-2013. In this market,
consumers have strong preference for
branded yogurt to unbranded ones
because of growing attention to food
safety and hygiene.
23
Condensed milk
Ice-cream
Steady growth in demand
Thanks to the escalating number of
youth who perceive ice cream to be a
tasty dessert or snack and the
growing number of modern style
coffee shops that serve a variety of ice
cream flavors and sizes, demand for
ice cream has grown steadily to
VND3.2 trillion (USD152.8 million) and
reported a CAGR of 12.8% over the
2010-2013 period.
24
After a hike in Q2 2013, the prices of skim milk powder (1.25% butterfat) and whole milk powder
(26% butterfat) have decreased significantly to this date. The skim milk powder spot price was
down 19.6% y-o-y from USD 5,225 per metric ton (MT) to USD4,200 per MT as of the end of May
20, 2014. Also, the whole milk powder spot price dropped 22.5% y-o-y from USD5,600 per MT to
USD4,337.5 per MT as of May 20, 2014. USDA expects the downward trend to be on-going
through the end of 2014 due to an increase in world production as a result of herd expansion and
higher yield outputs per cow. Therefore, we believe the favorable trend in world prices of raw milk
powder will positively benefit the gross margin of local producers in 2014.
25
1.5
Noodles
26
Instant noodles occupy almost all of the total noodle consumption, of which pouch instant noodles
was the major packaging with 92% contribution to the sales value. However, high convenience in
daily usage led cups or bowls of instant noodles to stay popular among Vietnamese consumers,
especially youngsters, workers and busy officers. This type of packaging reported a volume
growth of 8.4% in 2013.
According to our analysis, Vietnam consumes a great amount of noodles partly due to the desire
to save money in unstable economic situations and also because noodles meet the local peoples
taste: spicy and sour. However, we reckon that the noodle market will see a slowdown in growth
because of trends towards healthier nutrition while instant noodles are not considered to be
healthy food.
27
1.6
Ingredients
28
02
Vietnam's agricultural success mirrors the overall economic success of the country. Only 15 years
ago Vietnam was a net importer of food, while today the country has become the world's second
most important exporter of rice, and the world's largest coffee exporter and producer of cashew
nuts. Tea exports continue to rise while pepper, nuts and spices are all major international exports.
Despite impressive developments, the value of Vietnam's agricultural exports continues to be very
susceptible to international price fluctuations due to the fact that exports are largely commodity
based. Rice and coffee account for about half of agricultural export revenues.
Major food categories exported by Vietnamese producers were seafood, rice, coffee, cashew,
cassava, fruits and vegetables, pepper, and tea, with respective market shares listed in the below
table. Seven out of these eight categories are agri-food.
Key exports categories in 2013
Category
Contribution
Seafood
38.9%
Rice
17.3%
Coffee
15.5%
Cashew
9.6%
Cassava
6.3%
6.0%
Pepper
5.2%
Tea
1.3%
Source: GSO Viet Nam
Key findings on some export category will be elaborated in more details in the following sections.
29
2.1
Seafood
Export Volume
According to General Department of Vietnam Customs, in 2013, export of aquatic products
recorded USD6.7 billion, rising by 9.8% from the 2012 benchmark. The US, EU, Japan, China,
Hong Kong and Korea were primary export markets of the sector, together occupying 71% of the
export values. However, exports to the US and China were at the fastest growth pace of more
than 25% last year. In terms of aqua-product categories, the country exported USD3.11 billion of
shrimp, which accounted for 46% of total export value, followed by USD1.76 billion of pangasius
(26%) and USD526.7 million of tuna (8%).
30
Trends
High anti-dumping tax resulting in a slowdown in the countrys export of pangasius in the
foreseeable future
According to VASEP, the US Department of Commerce has recently announced the final results
of the ninth anti-dumping duty administration review between August 1, 2011 and July 31, 2012
towards frozen, processed pangasius imported from Vietnam. Therein, Vinh Hoan was entitled to
the most favorable rate of USD0 per kg instead of USD0.03 per kg previously. Hung Vuong
retained the last levy of USD1.2 per kg. The tax rate significantly increased from USD0.42 per kg
since the end of March 2014 to USD1.2 per kg at the present. The general rate of USD2.11 per kg
is applied for other Vietnam exporters. The representative of VASEP asserted that this was an
unreasonable, inconsistent and protective judgment that caused disadvantage to Vietnams
pangasius. We project that the countrys export of pangasius will slowdown in the foreseeable
future.
Export price of pangasius declined while that of shrimp hiked
The export price of pangasius in 2013 was USD2.2 per kg, a decrease of 9.1% due to a fierce
competition among 230 local exporters while it was expected to increase by 1.8% to USD1.7 per
kg because of reduction in output volume in the year. The export price of shrimp rose 20% in
2013, which was attributed to the outbreak of EMS worldwide. EMS spreaded through the major
shrimp producing countries of China, India, Vietnam and Thailand, causing global shrimp output
to drop precipitously 23% in the year. However, as mentioned earlier, the disease has been
brought under control and a gradual reduction in price is expected as production recovers.
31
2.2
Rice
Vietnam is one of the most important rice producers and exporters in the world. Rice is cultivated
on 82% of the arable land of Vietnam and provides 80% of carbohydrate and 40% of the protein
intake of an average Vietnamese. The two rich deltas of the north and south - The Mekong River
delta and Red River delta - accounts for 52% and 18% of Vietnams rice productions, respectively.
3,657
3,673
3,248
3,500
3,000
2,664
2,500
2,000
Export revenue
1,500
1,000
500
0
2009
2010
2011
2012
Source: General Department of Vietnam Customs
Vietnam Food Association (VFA) data shows that rice exports from Vietnam in 2012 reached a
record high of 7.7 million tons, thereby maintaining its place as the worlds second largest rice
exporter, following only India
2011
No.
Markets
1
2
3
4
5
6
7
8
9
10
TOTAL
China
The Philippines
Malaysia
Ivory Coast
Singapore
Ghana
Hong Kong
Indonesia
Angola
Algeria
Others
2012
Jan-Jun/2013
Value
(million
USD)
%
(of total
export)
Value
(million
USD)
%
(of total
export)
Value
(million
USD)
%
(of total
export)
3,657
161
476
292
139
198
77
89
1,019
28
20
992
100
4
13
8
4
5
2
2
28
1
1
27
3,673
898
475
403
203
131
150
121
458
55
36
714
100
24
13
11
6
4
4
3
12
1
1
19
1,582
536
132
103
89
77
77
58
45
38
24
403
100.00
34
8
7
6
5
5
4
3
2
1
25
Compared
with
Jan-Jun 2012
(%)
-9.90
17
-42
-41
-2
37
12
23
-71
31
-6
-3
2.3
Coffee
Over the past decade, coffee has been Vietnams largest hard-currency earner after rice and
seafood. The International Coffee Organization documents that Vietnam has become the worlds
largest coffee exporter, surpassing Brazil. As one of the worlds top coffee exporters, Vietnam
now has more than 525,000 hectares under coffee trees, 90% of which are in the Central
Highlands.
Vietnam has released a
master plan for coffee
production up to the year
2020 and a vision up to
2030, under which the total
area for coffee growing will
be maintained at 500,000
hectares by 2020, with an
output of 2.4 tons a hectare,
and 479,000 hectares with
an output of 2.5 tons a
hectare by 2030.
4.0
3.5
2.8
3.0
2.5
2.0
2.0
2007
2008
1.7
1.9
1.7
1.2
1.5
1.0
1.9
0.7
0.5
0.0
2005
2006
2009
2010
2011
2012 Jan-Jun
2013
According to the Vietnams General Department of Customs, the country exported 140,9 tons of
coffee in June, 2013, earning US$304 million, and pushing the 6-month coffee export to 1.1
million tons, worth US$2.2 billion. During this period, made-in-Vietnam coffee was exported to
30 countries. Germany and the United States are currently the two biggest importers of
Vietnamese coffee with market shares of 13.1 percent and 11.4 percent, respectively.
Vietnams coffee products export structure by market in first 6 months of 2013
The Phillipines
Russia
The U.K China
2.68%
2.73%
2.64%
3.00%
Belgium
3.48%
Japan
5.48%
Germany
13.09%
Italy
6.10%
Spain
7.34%
The US
11.40%
Source: General Department of Vietnam Customs
33
Trade. With Vietnams export partly affected by WTO memberships barriers and trade restriction,
Vietnam tend to import more goods from abroad. Various diets with a wider range of products are
in the increasing trend among Vietnamese consumers.
Urbanization. Currently, the wealthy metropolitan centers like Ha Noi, Ho Chi Minh City and Da
Nang City shape a big base of receptive and open minded consumers of Vietnam. However,
along with the urbanization of the country, rural regions remain significantly potential market
especially for agro-food products.
Rising population. Approximately half of Vietnams population consists of consumers under the
age of 30. This group is experiencing a substantial rise in living standards accompanied by an
increase in disposable income, rising demand for foreign goods, and a willingness to experiment
with new products. For example, while wine has not been a traditional aspect of the Vietnamese
culture, this market segment (ages 20-35), which accounts for around 25 million people, will likely
form the core consumer group for wine.
34
Distribution channels. Vietnam possesses a dense retail network, widely spread throughout the
country, including 424 supermarkets, 23 hypermarkets, 365 mini-marts and almost 779,000 of
traditional markets and small private shops. While supermarkets and hypermarkets account for
the majority, the convenience store model is still in its infancy. The continuous growth and
expansion of mass retail outlets strongly encourages consumer purchasing and increases
consumption value.
Westernization. According to BMI, Vietnam consumers are brand aware, specifically, the young
and affluent. In addition, a report from New Zealand Trade & Enterprise claimed that there is a
huge number of Vietnamese who have migrated overseas to such countries such as Australia,
Canada and US and which are now influencing the lifestyle of the local Vietnamese. Hence, these
factors have resulted in demand of well-known westernized food and beverage products.
Health consciousness. Recent health problems related to food poisoning, the avian flu crisis
along with intensification of health education led Vietnamese to be more aware of using healthy
products. As a consequence, the growth of demand for healthy products, advanced packaging
and some modern retail channels is expected in the near future.
Dairy category expects rapid growth. Amongst F&B categories, the dairy possesses the
strongest momentum to enter into a growth phase while other categories including seafood,
noodles, sauces and dressing condiments, confectionery and bakery, alcoholic drinks, soft drinks
and hot drinks are reaching maturity with a slower growth pace.
35
04
4.1
Competitor Analysis
The Agrofood sector in Vietnam is highly fragmented, while only a few large firms are presented.
It is primarily driven by non-organizational retailers, including traditional retailers and independent
grocers.
There are few players dominating Vietnams Agrofood market, including large domestic
enterprises such as: Vinamilk (dairy), Kinh Do (bakery), Masan Consumer (diversified products),
Minh Phu (seafood), Vinafood, Halico (beverage), Bibica (confectionery), and Sabeco (beer).
Foreign companies are presented by: Nestle (coffee), Nabati Indonesia (confectionery), Diageo
(alcohol beverages), Heineken, Carlsberg, SABMiller (alcoholic drinks), Kirin Beverage (soft
drinks), and a few others. In addition, large multinational companies are setting up independent
units and joint ventures to invest in such categories as coffee, candies, spirits, soft drinks, and
retail distribution system.
36
Alcoholic drinks
With a minimal presence in Vietnams beer market, foreign players mainly focused on the
premium segment, with brands introduced including San Miguel, Corona, Carlsberg, Budweiser
and Asahi. Vietnam anticipates foreign players to continue fueling the local beer market dynamics
as they continue to exhibit interest in the market potentiality and actively seek entry opportunities.
Sabeco continues to lead the beer market with 47.5% value share in 2013. Its prominent brands
such as Saigon Export, 333 export and Saigon Lager accounted for 46.8% market shares by
brands. Vietnam Brewery and Habeco hold the second and third positions with market shares of
18.2% and 17.3% respectively. While Hanoi beer brand of Habeco took 15.8% of brands share,
Heineken and Tiger of Vietnam Brewery occupied 11.5% of the pie. The top three players
Sabeco, Vietnam Brewery and Habeco, together, hold 83% of value sales of beer in 2013.
Example of a key player - Saigon Beer Alcohol Beverage JSC (Sabeco)
Year of establishment: 1977
Sabeco continues to lead the beer market with 47.5% value share as of the year 2013. Its
prominent brands such as Saigon Export, 333 Export and Saigon Lager accounted for 46.8%
market shares by brands. In 2013, Sabecos net avenue reached VND 24,006 billion (US$ 1.127
billion) and net profit accounted of VND 2,495 billion (US$ 117 million).
Example of a key player - Lam Dong Foodstuffs Joint-Stock Company (Ladofoods)
Lam Dong Foodstuffs Joint-Stock Company (LADOFOODS) is one of the largest producers
(distributors) of wine in Vietnam. It steps produces Dalat wine, Dalat red wine, strong alcohol,
juice and exported grain of nut. In 2013, Ladofoods reported net revenue of VND 284 billion (USD
13.3 million), and net profit of VND 23 billion (USD 1.1 million.
In the alcoholic drinks category, Ladofoods concentrates mostly on wine. The company has a
presence in both grape wine and local non-grape wine sectors, although its share of non-grape
wine is very small. The wine processing technology employed by Ladofoods comes from Italy and
Germany, thus its wine products meet international standards. All products from Ladofoods,
including wine and non-alcoholic products such as soft drinks and spreads, are manufactured at
its factory located in Dalat city.
37
Dairy
Vinamilk is currently the largest fresh milk collector, purchasing more than 60% of fresh milk from
farmers across the country, while the second largest fresh milk collector is Friesland Campina
Vietnam (Dutch Lady Brand milk). The company has purchased nearly 82,000 tons of fresh milk
from local farms in 2013, accounting for about 20% of total domestic fresh milk production. These
two companies dominate the local market with 46% and 20% of market share respectively.
With the advantages of worldwide large-scale farming of cow herds, big production capacity and
modern technologies, foreign players firmly control the local powdered milk market with 53.1% of
market share in 2013. Conversely, local players dominate the drinking milk market which is led by
Vinamilk with 45.5% of market share in 2013.
In 2013, Vinamilk continued to lead the yogurt market with 73% value share, as well as to
dominate the condensed milk market (approximately 80% of the total sale value).
Example of a key player - Vietnam Dairy Products Joint Stock Company (VNM)
Established in 1976, the Company currently operates five model cow farms with over 8,000 heads
of cattle which were imported from Australia, and provided 90 tons of milk per day. VNM also has
an extensive distribution network with over 224,000 points of sale throughout the country and
accounts for 46% of dairy market share in 2013.
Vinamilk was honored by Forbes Asia for its Top 200 Best under a Billion in Asia 2012. This was
the first and uniquely Vietnamese company to be honored in the Forbes Asia list. In 2013, VNM
reached net consolidated revenue of VND 30,949 billion (USD1.46 billion), a 16.5% increase, and
net consolidated profit of VND 6,534 billion (USD309.3 million), and a growth of 12.3%.
38
Confectionery
Kinh Do maintains the leading position in the sub-category with 30% market share in 2013. Kinh
Do plain biscuit is the most popular brand in Vietnam through its tasty flavor and reasonable price.
Perfetti Van Melle is still leading the sugar confectionery segment in Vietnam through its Mentos,
Alpenliebe and Golia brands, accounting for 20.1% of market share in 2012. Bibica and Hai Ha
closely follow the leader, taking second and third places with market shares of 19% and 18.2%,
respectively. While local companies target low and middle-income segments, international peers
confine focusing mostly on the high-end segment.
39
Bakery
The bakery market is highly fragmented, in which Kinh Do notably retained its first place with
13.4% market shares in 2013 while other typical competitors such as NhuLan, Duc Phat, Orion
Food Vina and Bibica presented an average of 5.1% market share each.
40
4.2
The companies described below represent an example of western F&B chains, successfully
taking over Vietnamese market despite strong competition from local enterprises as well as
necessity to change local consumption habits and tastes.
McDonalds
A recently entered Vietnamese market, McDonalds is looking forward expanding its operations in
Vietnam. It has announced plans to open a total of 4-5 restaurants in Ho Chi Minh City this year,
as a part of an ambitious goal for opening around 100 restaurants in Vietnam in the next decade.
McDonalds is currently forced to import much of its ingredients due to the lack of quality and
consistency of Vietnamese products. In particular, McDonalds only uses two ingredients that are
grown locally in Vietnam: lettuce and tomatoes from Da Lat. All of the restaurants beef is
imported from Australia, while pork and potatoes are from the U.S., paper boxes and cups are
imported from China and Malaysia.
The long-term plan for McDonalds in Vietnam is to use mainly Vietnamese resources. The
company is already working with local providers, who are to be trained in managing product
quality according to McDonalds global standards.
Starbucks
Despite the fact that Vietnamese coffee market is highly competitive, there are opportunities for
foreign companies to enter the market and succeed, what is proved by Starbucks performance in
Vietnam. There are a several segments of coffee drinkers in Vietnam and Starbucks targets
mostly business people, well-to-do families and young consumers who prefer an international
atmosphere in a caf.
The US famous caf chain has certainly made a good impression on Vietnamese. All shops in
HCMC are located at the most advantageous positions, called the golden land. Starbucks
decorated the downtown store with local art and artifacts to create a distinctly Vietnamese flavor.
It also came up with a drink, the Asian Dolce Latte, to appeal to local palates.
41
Nevertheless, some experts note, that Vietnamese consumers flocked to Starbucks just to taste
the coffee, but after that, they have returned to their familiar habits, such as drinking of traditional
Vietnamese coffee, which is much stronger and usually accompanied with a sweet condensed
milk..
Thus the main threats, faced by Starbucks in Vietnam are: intense competition coming from
strong domestic players and international companies providing the same type of coffee; inability to
significantly change traditional coffee consumption habits; barriers of complex legal system and its
dark side.
Caff Bene
Caff Bene is a famous Korean company with a system of shops providing beverages such as
coffee, fast food, milk and milk products, ice-cream and ice-cream products. Being aware that
Vietnam is a potential market, in 2012 Caff Bene decided to open shops in Hanoi and Ho Chi
Minh City through franchising.
Unlike most coffee chains that seek fast customer turnover, Caff Bene strives to create a
comfortable environment for visitors who not only drink coffee but also spend time reading books,
listening to music and chatting with friends. Caffe Benes aggressive marketing, backed by a
strategic partnership with Sidus iHQ, a major entertainment agency under SK Group, has also
helped the brand gain recognition in a short time span.
One of the main threats for such companies as Caff Bene in addition to the mentioned before is
a significant number of cafes from the similar segment, which are located in advantageous
positions and selling the ambience rather than the coffee.
42
4.3
Distribution Channels
Domestically, food is consumed mainly through commercial and traditional trade channels.
According to 2013 data, traditional channels include around 780,000 of traditional markets and
small private shops around the country which are suitable for small quantity and high-frequency
food purchases. Traditional channels account for about 75% of food retail value, while the
remaining 25% belongs to commercial channels including 447 supermarkets, hypermarkets,
convenience stores and food service operators with significant presence of 560,000 restaurants
and food outlets, and 12,500 hotels.
In general, the distribution system has 2 main channels:
1. Direct distribution channel
Sales of products at exhibitions or fairs
Sales at importing companies showrooms and branches
2. Indirect distribution channel (through agents of level 1, 2 and 3)
Agent level 1:
A company which directly provides agents with goods of the same price (agents have to make a
payment before delivery). Agents have a right to ask for discount negotiated in the contract by its
end.
Agent level 2:
These agents are in charge of importing goods from agent level 1 and their main customers are
often retail stores, shop, showrooms or supermarkets.
Agent level 3:
This is the channel which is similar to agent level 2, but carrying a wider network of small retail
spots in big cities or regions having a large population.
43
A number of retailers covered by a distributor in each area depends directly on its capability.
Usually the distributor with a wide presence in big cities has around 200-300 stores including
showrooms in supermarkets and restaurants. In Ha Noi and Ho Chi Minh City, a regular big
distributor has at least 7 key accounts (such as hotels, restaurants, hypermarkets, etc.), that are
considered as the main source of its income. From that point, the distributor expands and go
deeper to the market.
44
VINCORP JSC
VIET-ITALY CO.,
LTD
MTV IMPORT
EXPORT TRADING
JSC
Website:
http://vincorp.vn
Website:
http://ruoutanbinhmi
nh.com
Website:
http://monteverdi.
vn/
Website:
http://www.ruouvangh
p.com/
Website:
http://www.adtwine.c
om.vn
Address:
21 Ngo Hue, Ngo Thi
Nham Ward, Hai Ba
Trung District, Hanoi
Address:
47 Hau Giang, Ward
4, Tan Binh District,
HCMC
Address:
167 Xuan Thuy,
Cau Giay, Hanoi
Address:
109/8 Nguyen Binh
Khiem Street, Dakao
ward, District 1,
HCMC
Show room :
VINTAGE - 01 Thao
Dien Street, Thao
Dien Ward, District 2,
HCMC, VN
Address:
73 Ton Duc Thang,
Dong Da District,
Hanoi
Phone number:
(04) 39766167
Phone number:
(08) 39480626
Phone number:
84-437681543
Phone number:
(0313) 566 607
Phone number:
(04) 37321638
MALTHOP
VIETNAM
CO.,LTD
WINE
SUPERMARKET
CO., LTD
Website:
http://ruousojuhanqu
oc.com
Website:
http://mai-anh.vn
Website:
http://malthop.co
m.vn
Website:
http://phanphoibiaruo
u.vn/
Website:
www.sieuthiruoungo
ai.com
Address:
01 Song Da, Ward 2,
Tan Binh District,
HCMC
Address:
334-336 Kham
Thien, ong a, H
Ni
Address:
508 M2, Lang
Trung, Lang Ha,
Dong Da, Ha Noi
Address:
199 Tran Binh, Tu
Liem, Ha noi
Phone number:
(08) 66819916
Phone number:
(04) 35381323
Phone number:
(04) 37833147
Phone number:
04.22151506
45
Beverages
As an example of a sectors supply chain within the Agrofood industry, Beverages distribution
channels brief description is presented below.
The majority of alcoholic drinks are usually distributed through on-trade channels. In contrast, hot
drinks are mainly distributed through off-trade channels as Vietnamese consumers consider hot
drinks as a daily necessity and usually drink it at home.
The distribution channel for imported wines is quite simple and commonly has two levels only.
Wines are imported directly by importers or traders themselves (if they are licensed to do so), or
by importing companies on a fee basis (2-3% over the total contract value).
Wines that are distributed to hotels, restaurants, supermarkets and retail shops are usually
commissioned by 10-20% over the fixed price on each bottle sold.
46
47
Opportunities
Despite the recent slow growth in FMCG purchases, the combination of such effects as
continuous economic growth, golden demographic structure, rapid urbanization and
emergence of middle income earners as well as a mass grocery retail network, will fuel the
growth of overall food consumption in the medium- and long-term.
Even though income levels of Vietnamese are much smaller than in developed countries,
consumer expenditure depends largely on food and daily necessities, and higher-value
branded food and beverage segment seems to guarantee a receptive and increasing audience
for medium term.
48
Imported raw or preliminary treated products are subject to Import Tax only.
Imported processed products are subject to Import Tax and VAT.
The import taxes for wine and beer category are extremely high (from 35% to 50%), which is
considered as the main hindrance for importing companies as well as for foreign investors in
Vietnam. Apparently high taxes lead to higher prices, and as a results, the competitive capacity of
imported products can be in the brink of zero compared to domestic wine and bear.
Tax and duties for beverages
Import Tax
Special Consumption Tax (SCT)
From July 1,
Current
Current
2015 (Draft)
Wine > 20%
alcohol
Wine < 20%
alcohol
Beer
Soft drinks
(carbonate)
VAT
Current
45%
50%
65%
10%
50-55%
25%
45%
10%
35%
50%
65%
10%
20-40%
0%
10%
10%
In 2015, SCT is expected to increase 15%, from 50% to 65%, which leads the beer industry to
predicament for both domestic and international companies. Thus when the new tax policy takes
effect, the domestic beer enterprises will be affected in the first place, as the most domestic
companies belongs to the low profit margins segment, while foreign beer brands could be found in
high-end ranges coupled with high profit margin. Thus foreign brands could stay profitable in this
situation.
49
The import of beverages (wine, beer, spirits), in accordance with the provisions of Clause 2,
Article 12 of Circular No. 128/2013 / TT-BTC dated 10.9.2013 by the Ministry of Finance, requires
importing companies to sing Specified Paper, Power of Attorney Paper as a distributor or importer
of genuine manufacturer, as well as to sing an agency contract with foreign manufacturers. In the
meantime, a company has to register the publication of regulations with authorities before
importing and receive the Confirming the achieved food imports requirements Certificate.
For gourmet, fine food, food products and ingredients, import taxes are still under 40%, even
some categories have tax exemption such as agriculture products, livestock, aquaculture, which
have not been processed into other products or just in through ordinary pre-processing (including
imported products used as animal feed) according to Paragraph 1, Article 5 of VAT Law.
Therefore, in this section, foreign entrepreneurs as well as importing companies have more
chances to penetrate and do business in Vietnam market.
Tax and duties on imported products
Import Tax
Import Tax
Coffee, tea,
Seafood
0-30%
15-40%
pepper
Dairy
0-20%
Grains
0-40%
Livestock
0-5%
Oil & fats
3-30%
\Meat
7-40%
Sugar
0-40%
Eggs, honey
0-30%Decree 209/2013/ND-CP,
Raw feed
0%
Source:
VAT Law 31/2013/QH13
Circular 164/2013/TT-BTC
VAT
10%
10%
10%
10%
Local manufactured products are subject to special consumption tax (SCT) and VATs follows:
Special consumption tax (SCT) = SCT rate x Selling price before VAT (Including package value)
VAT = VAT rate x (Selling price before VAT (Including package value) + SCT)
Products for export are not subject to Export Tax and subject to 0% VAT.
Raw or preliminary treated products
Raw or preliminary treated products which traded among VAT deduction registered
enterprises, cooperatives are not subject to VAT.
Raw or preliminary treated products which are sold by VAT deduction registered enterprises,
cooperatives to other enterprises, entrepreneurs, individuals are subject to 5% VAT.
Processed products produced and traded by VAT deduction method enterprises / cooperatives
are subject to 10% VAT.
Processed or unprocessed products traded by enterprises / cooperatives / entrepreneurs /
individuals registered VAT direct method are subject to VAT of 1% of revenue.
Raw or preliminary treated products which produced / fished and sold by individuals or
organizations are not subject to VAT.
50
Seal Application. In order to carve a seal, companies need a seal-making license from the
Administrative Department for Social Order (ADSO) under the Municipal Police Department.
Tax Code Registration. Tax code registration must be undertaken with the tax department
within 10 working days from the issuance date of the IC.
Bank Account Opening. After obtaining the seal and tax code, companies need to open a
bank account.
Labor Registration. Newly set-up enterprises need to register employees at the local labor
office.
Public Announcement. To finalize the procedure, a newspaper announcement should be
published announcing the establishment of the company.
51
Vietbrew and
Vietdrink 2014
Vietnam
International
Food
Processing
Industry
Exhibition
52
Time
Place
Content
Saigon
Exhibition &
Convention
Center (secc)
Ho Chi Minh
City
12-14/11/2014
Saigon
Exhibition &
Convention
Center (secc)
Ho Chi Minh
City
22-25/10/2014
Saigon
Exhibition &
Convention
Center (SECC),
Ho Chi Minh
City
15-17/10/2014
Saigon
Exhibition &
Convention
Center (SECC)
Ho Chi Minh
City
21-23/04/2015
Vietfood and
Propack 2014
Vietnam
Fisheries
International
Exhibition 2014
Wine Festival
2014
53
10-13/09/2014
Tan Binh
International
Exhibition And
Convention
Center Ho Chi
Minh City
06-08/06/2014
Saigon
Exhibition &
Convention
Center (SECC)
Ho Chi Minh
City
02-04/06/2014
Saigon
Exhibition &
Convention
Center (SECC)
Ho Chi Minh
City
Debay Wine
Cellar - BaNa
Hill, Da Nang
27/06/2014
12/2014
EPINION HAMBURG
EPINION MALM
ERICUSSPITZE 4
20457 HAMBURG GERMANY
T: +45 87 30 95 00
E: TV@EPINION.DK
W: WWW.EPINIONCONSULTING.DE
ADELGATAN 5
21122 MALM - SWEDEN
T: +45 87 30 95 00
E: TV@EPINION.DK
W: WWW.EPINION.SE
EPINION AARHUS
EPINION COPENHAGEN
NORDHAVNSGADE 1-3
8000 AARHUS C
T: +45 87 30 95 00
E: TV@EPINION.DK
W: WWW.EPINION.DK
RYESGADE 3F
2200 COPENHAGEN N
T: +45 87 30 95 00
E: TYA@EPINION.DK
W: WWW.EPINION.DK
EPINION OSLO
EPINION SAIGON
EPINION STAVANGER
EPINION VIENNA
HOSPITALSGATA 6
4006 STAVANGER - NORWAY
T: +47 90 17 18 99
E: SM@EPINION.NO
W: WWW.EPINION.NO
SEMPERSTRASSE 1/2 - 4
1180 VIENNA - AUSTRIA
T: +45 87 30 95 00
E: TV@EPINION.DK
W: WWW.EPINIONCONSULTING.AT
54