THE POTENTIAL OF F&B INDUSTRY IN VIETNAM

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Market overview of Vietnam Food and Beverage Industry 

Vietnam has become one of the most attractive and dynamic food and beverage (F&B) markets globally in 2019, ranking top 10 in Asia (IBM, 2019).  Total retail sales of consumer goods and services will always grow steadily until 2019. The growth rate in 2020 and 2021 will be slowed down due to the complicated situation of the COVID-19 epidemic.  In 2020, despite the ravage of the pandemic, the total revenue of F&B products landed at 975,867 billion VND, increasing by 3.8% YoY, with 15,8% contribution to the GDP. Food and beverage spending currently accounts for the highest proportion in the monthly expenditure structure of consumers (about 35% of spending).

Source: Vietnam General Statistical Office

With the reopening of the economy, the total retail sales of consumer goods and services will grow again in 2022. This is the basis for the recovery of the beverage industry.

According to Mordor Intelligence, the F&B industry in Vietnam would expand at 8.65%  annually in 2021-2026. The compound annual growth rate from 2021 to 2025 is projected at 4.98%. Experts anticipated that the market size will reach 678 million USD, with the predicted number of consumers being 17.1 million by 2025. According to the World Bank, people’s income is improving with a forecast that Vietnam’s GDP in 2022 will increase by 5.5% compared to 2.58% in 2021, which is a favorable condition to help boost consumer demand. According to F&B industry statistics via Payoo payment platform, by the end of Q1/2022, this industry’s revenue has increased by one and a half times, the total number of transactions increased by 24% compared to Q4/2021. Ordering application GoFood said that in the first quarter of 2022, the number of F&B orders doubled compared to the same period in 2021. According to Vietnam report, F&B holds the highest proportion in Vietnamese spending expenditure, accounting for 35% of monthly spending and 15% of country GDP, this number is still expected to grow in the upcoming years Moreover, It is estimated that there will be about 17 million middle-class households in Vietnam by 2030. Vietnam is expected to become the third-largest urban market in terms of consumer numbers and the fifth largest in terms of total spending in Southeast Asia by 2030.

Source: Phu Hung Security

Major Food and Beverage Industry Trends in Vietnam 2022

Young & affluent population

With 70% of the population under 35 and growing income, companies are required to come up with innovative solutions to meet consumer demand for convenient, high quality and unique food.  The young generation are trend-creators in food. Albeit relatively low income, Gen Z spends most of their money on food and drinks out of home, with almost 900.000 VND per month (equal to 40 USD). With high curiosity and aspiration for new experience, the Gen-Zs always find newness in exposure to diverse, foreign cuisines, which drives the growth of  exotic food and drinks from different cultures.  This generation is also more aware of the impact of their behaviour on the planet so they are critical drivers of food and beverage industry trends in Vietnam 2022 such as ethical sourcing, sustainability and a push for more local products. With a young population open to new experiences, the food and beverage industry trends in Vietnam 2022 will play an important role in economic growth.

High demand for organic food

Since the outbreak of the pandemic, consumers are concerned more about their health and well-beingAccording to Vietnam Report (2019), green and clean products will be the new market train in the coming years.  The new trend has presented opportunities for industry players and newcomers to the F&B market as they can take advantage of Vietnamese people’s new eating habit – love for green, healthy snacking and new eating style – eating out in groups. 

Expansion of convenience stores

The growth of local and foreign convenience stores and other modern retail channels create easier access for enterprises to bring their products into the local market.  Nguyen Van Quy, deputy general director of Ho Chi Minh City-based WinCommerce, said on Monday that the firm would open more than 700 new WinMart+ stores and over 20 supermarkets and hypermarkets this year. In addition to expanding its current sales network, this retail chain has also launched a new brand, Beng’s, which specializes in providing convenient, good-quality food at affordable prices. Similarly, Saigon Co.op, also based in Ho Chi Minh City, which runs the Co.op Food, Co.opSmile, and Cheers chains, plan to open 80-100 new points of sale before the end of 2022, with focus put on Co.op Food outlets, which show excellence in business efficiency.

Digitalization of Retail

Faced with stringent social distancing protocols in 2021, Vietnamese consumers had little choice but to turn to online shopping. Ride-hailing services like Grab, GoJek, Bee & Baemin pivoted into food and parcel delivery, while domestic e-commerce giants like Tiki, Shopee, Lazada, and Sendo, along with major supermarket chains like VinMart, BigC, and Lotte Mart, all embraced door-to-door shipping. The shift to e-commerce has been a complete game-changer for small businesses, drastically reducing the financial burden of maintaining offline stores.  Besides, according to the latest report by IMARC Group, The Vietnam online food delivery market size reached a value of US$ 597.1 Million in 2021. The market is expected to reach US$ 1,555.4 Million by 2027, that’s a compound growth rate of 16.4% during 2022-2027. 

Big Data and Artificial Intelligence

As it is in many industries, artificial intelligence (AI) is making huge waves in the world of food and beverage. More and more organizations within the industry are recognizing the potential of AI to drive greater efficiency and profits, reduce wastage and provide protection against supply chain disruptions. It’s all part of what is known as Industry 4.0 – the growing emergence of smart technology like AI in traditional industries like food and beverage. Technology has been applied to the F&B sector allowing immediate payment, source tracking and personalization from collected data.  Hằng, Managing Partner and Co-Founder of Eddie’s Diner, Shelley’s Comfort Food, Eddie’s Wok and GoDog, he uses a fairly basic POS system, Cuk Cuk, as it is reasonably priced.  Thuy Nguyen, Head of Vietnam Operations for Saladstop! the largest health food chain in Asia, she said they are leveraging Now, Grab, Baemin, Gojek and Capichi for Delivery and Savyu and Tap Tap as Loyalty apps.  According to JinwooSong, the CEO of Baemin Vietnam, Technology platforms today allows F&B businesses to approach potential customers, reduce fixed costs, explore more growth opportunities easily.  

Problems that are unique to the F&B sector

Most of the manufacturing companies in F&B industry have weak financial competence. Therefore, they faced with a common economic shock caused by Covid-19 pandemic Infrastructure for manufacturing, transporting and interrogating systems have not been properly invested and developed, thus increasing production and management cost. More than 85% of enterprises had difficulty in inventory management, distribution and human resource management in an economic downturn. However, 94.7% of enterprises realized their weaknesses and modified their production structure. Moreover, 68.4% of enterprises applied modern technology in production and distribution to create competitive advantages and enhance the customer shopping experience during the crisis. The export market lacks stability as policies on quality barriers are constantly changing, and Vietnam has failed to meet with requirements in FTAs concerning the technical procedures and product qualities.  Regarding F&B, foreign companies when entering Vietnam’s market not only have to face fierce competition with locally produced goods but also with other countries’. Vietnam is already a large producer of agricultural products such as pork, coffee, vegetables and fruits and has become more globally integrated by signing a wide range of FTAs, resulting in the proliferation of the partners’ products, especially Asian partners, on Vietnamese shelves. 

F&B opportunities for foreign investor

Vietnam’s F&B market is one of the most attractive markets globally. Due to changing consumer behavior, more mobility, rising affluence, and urbanization, Vietnam is expected to be among the top three nations in Asia in terms of food and beverage development.  Vietnam is especially attracting capital from Korea. In the first 10 months of the year, there are more investment projects from Germany, Singapore and Thailand. With digital transformation for seamless eating experiences, safety and security, the undeniable growing demand for high-quality products, potential new markets are waiting for newcomers. Insights into trends and the sustainable and innovative thinking towards the F&B industry can benefit investors in the Vietnam F&B market. Most importantly, investors should see ahead of the times and capture opportunities to reap desirable results. Industry players are growing more cautious about their environmental footprints, from their ingredients origins to the products processing and packaging.  The Vietnamese F&B market may still throw up challenges for an investor. Businesses need to balance competitive pricing strategies while maintaining food safety and hygiene standards – these being primary concerns for consumers. 

References

2023 the 21st Vietnam International Printing & Packaging Industry Exhibition (no date) Vietnam’s Food & Beverage Industry: Market Trends, Demographics, Consumer Preferences – 2023 The 21st Vietnam International Printing & Packaging Industry Exhibition. Available at: https://www.chanchao.com.tw/VietnamPrintPack/newsDetail.asp?serno=3920 (Accessed: November 8, 2022). 5 benefits of artificial intelligence in the Food Industry (no date) Aptean.com. Available at: https://www.aptean.com/en-EU/insights/blog/artificial-intelligence-in-food-industry (Accessed: November 8, 2022). Capturing opportunities to invest in Vietnam’s F&B Sector (2020) Updates | Dezan Shira & Associates. Available at: https://www.dezshira.com/updates/2020/01/capturing-opportunities-to-invest-in-vietnams-fb-sector-trent-davies-interviews-with-cna.html (Accessed: November 8, 2022). Chan, J. (2022) Serving up the future: Saigon restaurateurs discuss F&B Tech Opportunities and challenges, JOVEL CHAN. JOVEL CHAN. Available at: https://www.jovelchan.com/blog/fb-tech-opportunities-and-challenges-vietnam (Accessed: November 8, 2022). F&B investors enter Vietnamese market via Side Door (2016) Vietnam Foodexpo. Available at: https://foodexpo.vn/en/FB-investors-enter-Vietnamese-market-via-side-door.html (Accessed: November 8, 2022). The new outlook of Vietnam food and beverage industry and chances for (2022) Viettonkin. Trường Lăng. Available at: https://www.viettonkinconsulting.com/fb/the-new-outlook-of-vietnam-food-and-beverage-industry-and-chances-for-investors-post-covid-19/ (Accessed: November 8, 2022). New Zealand Ministry of Foreign Affairs and Trade (no date) MFAT market intelligence reports, New Zealand Ministry of Foreign Affairs and Trade. Available at: https://www.mfat.govt.nz/en/trade/mfat-market-reports/ (Accessed: November 8, 2022). Read, K.K. (2022) 6 food and beverage industry trends in Vietnam 2022 to watch out for, Kathryn Read. Kathryn. Available at: https://kathrynread.com/6-food-and-beverage-industry-trends-in-vietnam-2022-to-watch-out-for/ (Accessed: November 8, 2022). Vietnam beverage industry in the first months of 2022 – Virac (no date). Available at: https://viracresearch.com/vietnam-beverage-industry-in-the-first-months-of-2022/ (Accessed: November 8, 2022). The Vietnam consumer survey rebound, rebalance, and Renewal (no date). Available at: https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/consumer-business/sea-cb-vietnam-consumer-survey-2022.pdf (Accessed: November 8, 2022). Vietnam industrial construction report (no date). Available at: https://vietnamconstruction.vn/wp-content/uploads/2022/02/HOUSELINK-VIETNAM-INDUSTRIAL-CONSTRUCTION-REPORT-IN-2021_compressed-1.pdf (Accessed: November 8, 2022). Vna (2022) Technology to help F&B recover: Business: Vietnam+ (vietnamplus), VietnamPlus. VietnamPlus. Available at: https://en.vietnamplus.vn/technology-to-help-fb-recover/224517.vnp (Accessed: November 8, 2022). 

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THE POTENTIAL OF F&B INDUSTRY IN VIETNAM

Market overview of Vietnam Food and Beverage Industry  Vietnam has become one of the most attractive and dynamic food and beverage (F&B) markets globally in 2019, ranking top 10 in Asia (IBM, 2019).  Total retail