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Vietnam Food Sector Proves an Appetising Prospect for Foreign Buyers

With its rising middle class and expanding economy, Vietnam has become an enticing prospect for overseas companies in the food sector, with acquisitions and mergers expected to wholly transform the domestic industry in the coming years.

Photo: The Vietnam FoodExpo: An industry showcase and a clarion call to raise standards.
The Vietnam FoodExpo: An industry showcase and a clarion call to raise standards.
Photo: The Vietnam FoodExpo: An industry showcase and a clarion call to raise standards.
The Vietnam FoodExpo: An industry showcase and a clarion call to raise standards.

Organised by the country's Ministry of Industry and Trade, the Vietnam International Food Industry Exhibition (Vietnam FoodExpo) had a dual focus of improving the quality of domestic food production and promoting exports within the sector. Ultimately, the event was as much about raising the standards of the country's agriculture, fishery and food industries as it was about facilitating overseas trade.

Speaking at the opening of the event, Ho Thi Kim Thoa, Vietnam's Deputy Minister for Industry and Trade, was keen to emphasise that the country's food industry could now not only meet domestic demand but was also in a position to export a wide variety of high-quality food products. She also noted that membership of the ASEAN Economic Community (AEC) had boosted Vietnam's prospects when it came to the international trade in food.

Further acknowledging the importance of both the event and the sector, Ta Hoang Linh, Deputy Director of Vietnam's Trade Development Council, said: "This is the most important event for the country's agricultural, fisheries and food industry. It is the perfect showcase for the development of the sector and plays a key role in helping food producers promote their brands and reputation to both the domestic and international markets."

Although a relatively new event, the FoodExpo has already proved to be successful in attracting many of the country's most prominent players in the food sector. Commenting on its international appeal, Sang Hyup Park, a Director of the Korean Trade Investment Promotion Agency (KOTRA) said: "This is a hugely significant event. Many South Korean businesses are keen to exhibit here, something that is sure to increase trade between our two countries."

One returning company was Biscafun, a specialist domestic biscuit-maker based in the south central coastal province of Quảng Ngãi. Explaining why it had become such a keen supporter of the event, a spokesman for the company said: "This is the second time we have exhibited here. As one of Vietnam's leading bakeries, FoodExpo allows us to showcase our product range to the rest of the world.

"We stand by the quality of our products, all of which are produced using state-of-the-art equipment. As a result, people frequently buy our products as luxury gifts for friends, family members and business acquaintances."

Overall, the prominence of the event reflected the successful development of Vietnam's food sector in recent years, a period of rapid diversification and expansion. This has been driven by a number of factors, including Vietnam's rising GDP – which grew by 7% in the year ending September 2015 – and the official launch of the AEC in January 2016, a development that vastly simplified export procedures within the ASEAN bloc.

Perhaps most significantly, though, it is estimated that Vietnam's burgeoning middle class will double in size over the next five years. Inevitably, the accompanying rise in disposable income levels will lead to escalating domestic demand for higher-quality food products.

One company keen to access this expanding market is Biohoney, a New Zealand specialist in honey products. Outlining its hopes for the local market, a company spokesperson said: "Even though we conducted a considerable volume of market research prior to visiting Vietnam, we have still been surprised by the interest we have seen from local consumers and businesses. This bears out our belief that many young people in Vietnam are increasingly concerned about their health and their daily nutritional needs.

"Many people who have visited our stand have been very aware of the role that diet plays in staying healthy. As a result, we have no doubt that this market will prove successful for us."

Photo: Mainland food-processing know-how on show.
Mainland food-processing know-how on show.
Photo: Mainland food-processing know-how on show.
Mainland food-processing know-how on show.
Photo: Export aspirations: Korean cuisine.
Export aspirations: Korean cuisine.
Photo: Export aspirations: Korean cuisine.
Export aspirations: Korean cuisine.

At present, relatively few of the global food brands are well-established in the Vietnamese market, with the possible exceptions of Nestlé, the world's largest food company, Mondelez International, the American confectionery, food, and beverages giant, and FrieslandCampina, a Dutch dairy producer.

In July 2015, Mondelez acquired 80% of Kinh Do Corporation, a Ho Chi Minh City-headquartered food group specialising in bakery items, confectionery, snacks and soft drinks. Following the takeover, Mondelez's policy has been to fully develop the potential of the existing Kinh Do brands, while investing in a nationwide distribution network.

Seeing the likelihood of other similar deals rewriting the shape of the domestic food industry, Harris Rahmanto, an Analyst with Rabobank, a Dutch financial-services company specialising in the food and agriculture sector, said: "There is considerable potential for more food industry mergers and acquisitions within the Vietnamese market. This is particularly likely to occur in cases where companies are looking to expand into rural areas in order to maintain high growth rates."

Echoing his sentiments, Lianne Van Den Bos, an Analyst with Euromonitor International, said: "Domestic companies have an advantage when it comes to understanding the demands and habits of local consumers, as well as when it comes to minimising production costs, while international companies have stronger capital and economies of scale on their side.

"By acquiring local businesses, global players can make up for their lack of knowledge about the domestic market. It also tackles the problem of having no local network and no resources within the country."

As to changes within the local market, Van Den Bos said: "We have noticed that the number of people working overtime is continuing to increase. This has led to growing demand for convenience food, such as cereals and energy bars – basically anything that can be eaten quickly going to and from work."

Despite this growing penchant for convenience food, it was clear from the range of foodstuff on show that fresh, organic and additive-free products remain the mainstay of the domestic market. In line with this, many exhibitors saw this as their primary focus for 2017.

Highlighting this, Dang Thanh Trung, one of the buyers at the event, said: "Traditionally, vegetables in Vietnam have been grown using natural fertilisers, rather than with chemical treatments that may have detrimental side effects. As a result, people are becoming increasingly concerned about how their food is produced.

"Like many people, I am here today specifically to source fresh organic products. I am also interested, however, in using organic agricultural technology to grow vegetables at home."

One company well-equipped to serve that particular requirement is Hanoi-based Vietnam Hydroponic Produce Import/Export, with company Director Tran Quoc Tuan saying: "We offer consumers a whole new way of growing vegetables at home, allowing them to be cultivated on high shelves without the need for fertiliser, soil or large spaces.

"Our shelving system allows buyers to grow their own fresh organic vegetables at home, with each shelf costing about 6,500,000 Vietnamese Dong (US$285), including delivery and assembly. Typically, it only takes two to three weeks from seed to harvest using our system."

Photo: More than 500 exhibitors signed up for the second iteration of the FoodExpo.
More than 500 exhibitors signed up for the second iteration of the FoodExpo.
Photo: More than 500 exhibitors signed up for the second iteration of the FoodExpo.
More than 500 exhibitors signed up for the second iteration of the FoodExpo.

The Vietnam FoodExpo 2016 was held from 16-19 November at the Saigon Exhibition and Convention Centre (SECC). The 10,000-square-metre venue hosted more than 500 booths from some 300 businesses from 20 countries and regions.

Pham Tuong Vi, Special Correspondent, Ho Chi Minh City

Content provided by Picture: HKTDC Research
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