Food processing industries in Vietnam

Food Processing is one among the main industries in Vietnam which is seen as having great potential. This food industry in Vietnam is essentially export-oriented, dominated primarily by seafood and agriculture food products. Historically this industry has contributed to extend in export revenue. Size of the food industry in Vietnam is 15% of the entire GDP

The growing consumer preference towards branded food products, rising income due to economic growth, increasing awareness about food safety and increasing inclination towards western food are likely to drive the demand for processed food products in Vietnam for the approaching years. Major food industry in Vietnam are rice, coffee, seafood, and fruits and, vegetables Annual food consumption value within the Vietnam was estimated to form up 15 per cent of the GDP and therefore the quantity also increases by approximately 10 per cent per annum, while beverage consumption grows at 6.66 per cent once a year .

About the food industry: Vietnam has rich raw materials to satisfy the demand of large-scale food processing enterprises. Vietnam is one among the leading exporters of rice, coffee, pepper, and cashew nuts, among others.

At the end of October 2017, there are more than 128 nations were investing in Vietnam with a complete registered capital of $312.91 billion, which includes $184.4 billion within the processing and manufacturing industry, the same to 59 per cent of the entire investment capital in Vietnam. Particularly, there have been 295 food processing projects with over $4 billion of registered capital within the first ten months of 2017. As per the Ministry of Industry and Trade, Vietnam is among the world’s largest exporters of rice, coffee, pepper and cashew nuts.

Top Market Opportunities

An abundant source of raw materials, the country’s stable and high economic process , favorable investment environment, abundant human resources, and good infrastructure at industrial parks also are factors that help attract investors within the sector.

In addition, trade agreements have opened opportunities for domestic food firms to reinforce exports and attract more foreign investors within the sector.Total foreign investment into Vietnam food processing industry has currently it the US $ 11.2 billion mark,spread across the 717 projects and excluding mergers and acquisitions.

Over the past 20 years , Vietnam has actively sought economic integration into the international trading system and has negotiated variety of bilateral, regional, and international agreements, either as a member of ASEAN or individually. Currently, Vietnam has FTAs with China, Korea, India, Australia and New Zealand, Japan, Chile, and therefore the Eurasian Economic Union. An FTA negotiated with the EU is predicted to travel into effect in 2018. These FTAs help boost Vietnam’s economic process , and lower import tariffs for food and food ingredients. In turn, this creates more opportunities for business within the food and beverage sectors.

Market Drivers

Demand for high-value seafood products has gradually increased over the past five years. Strong GDP growth, higher per capital income, rapid urbanization, and concerns about food safety still drive the expansion of current food service, food retail, and food processing sector in Vietnam.

Furthermore, the growing consumer preference towards branded food products, inclination towards western food and growing interest of foreign investors in food processing industry are likely to spice up the demand for processed food products in Vietnam for the approaching years.

Additionally, growth of internet and smart phone penetration, e-commerce in Vietnam has had robust growth over the last five years, especially within the business-to-customer (B2C) segment. As per the Vietnam e-Commerce and IT Agency (VECITA), online purchasing per person per annum was about $170, and revenue from B2C e-commerce in Vietnam in 2016 reached $5.0 billion, up from $4.07 billion in 2015.

This accounts for 3 percent of the country's gross retail sales of products. Internet penetration has grown to over 40 percent, driven by increased usage of smart phones. E-commerce has attracted substantial domestic and foreign investments, and is predicted to still grow within the coming years.

Industry Challenges

·        High competition: Food processing industry is extremely competitive and increasingly aggressive. at the present, even if food and beverage enterprises within the country have established an edge within the domestic market but popular food and drink producers within the world are present in Vietnam, which mounts the pressures on other player.

·        Food safety issue: Food safety may be a major concern for the general public, with high levels of hysteria whenever there's a high-profile food safety incident. Vietnam’s reputation among its trading partners as a serious exporter of food products is susceptible to trade statistics showing levels of contamination. Food-borne illness is notoriously difficult to assess in any country but the extent of contamination found in Vietnamese food for domestic consumption justifies public and trade concerns.

·        Waste management: Waste management has been the main challenge that has got to be addressed to cut back the environment pollution in Vietnam. the use of less advanced technology, the strong emphasis on end-of-pipe treatment, poor environmental awareness, absence of environmental management systems, etc cause the environmental problem in Vietnam.

·        Packaging and Labelling: Although, Packaging and labelling standard has been improved over the years in Vietnam by the clear and specific rules by the govt but still issue associated with packaging and labelling has been arisen occasionally. as an example, On the heels of inspections administered in June, Coca Cola Beverages Vietnam Ltd. has been issued a US$19,300 fine and asked to temporarily suspend specific sales for not adheraing food safety licensing and labelling requirements

·        Infrastructure: Vietnam’s infrastructure remains weak. Roads, railways and ports are inadequate to deal with the country’s economic process and links with the outer world

Strategic Conclusion

Food Processing is one among the main industries in Vietnam which is seen as having great potential. This industry is essentially export-oriented, dominated primarily by seafood and agriculture food products.