This project is fundedby the European Union

AGROFOOD

RESEARCH REPORTRESEARCH REPORT

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Ho Chi Minh City, Vietnam

T : +84 (0) 8 38 23 95 15 (Ext:105)

www.evbn.org

Vietnam Ministry of Planning and Investment: www.mpi.gov.vn

United Nations Population Fund Vietnam (UNFPA-VN): www.vietnam.unfpa.org

Ministry of Industry and Trade Viet Nam: www.moit.gov.vn

United Nations Conference on Trade and Development (UNCTAD): www.unctad.org

International Trade Center (ITC): www.intracen.org

Trade Map - Trade statistics for international business development: www.trademap.org

Saigon Times Weekly: www.thesaigontimes.vn

Vietnam News: www.vietnamnews.vn

General Statistics Office of Vietnam: www.gso.gov.vn

Trading Economics: www.tradingeconomics.com/vietnam/

VGP News. Online Newspaper of the Government, Vietnam: www.news.chinhphu.vn

Vietnam Briefing: www.vietnam-briefing.com

Vietnam Customs Statistics: www.customs.gov.vn

Vietnam Trade Promotion Agency (Vietrade): www.vietradeportal.vn

VietnamPlus, Vietnam News Agency (VNA): www.en.vietnamplus.vn

World Bank Vietnam: www.worldbank.org/en/country/vietnam

Investment promotion Portal for South Vietnam www.ipcs.vn/en/

Ministry of Justice of Vietnam www.moj.gov.vn/

National Institute for Food Control (NIFC) http://nifc.gov.vn/

Further reading:

More information

Useful contacts

1. IMPORTS MARKET / DOMESTIC CONSUMPTION 5

1.1. Bakery & Confectionery 8

1.2. Beverage 14

1.3. Seafood 19

1.4. Dairy 21

1.5. Noodles 26

1.6. Ingredients 28

2. EXPORTS MARKET/ DOMESTIC PRODUCTION 29

2.1. Seafood 30

2.2. Rice 32

2.3. Coffee 33

3. KEY GROWTH DRIVERS 34

4. COMPETITOR ANALYSIS AND DISTRIBUTION CHANNELS 36

4.1. Competitor Analysis 36

4.2. Key foreign players in the market 41

4.3. Distribution Channels 43

5. CHALLENGES AND OPPORTUNITIES FOR EU SMES 47

6. REGULATORY AND LEGAL FRAMEWORK 49

APPENDIX. FAIRS AND EXHIBITIONS 52

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TABLE OF CONTENT

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, Vietnam’s 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, Vietnam’s 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 Vietnam’s 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.

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Source: VPBS research

Figure 6. Evolution of the agro-food trade in Vietnam

Source: UN Comtrade, 2010

INTRODUCTION

IMPORTS MARKET / DOMESTIC CONSUMPTION

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 couldn’t 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.

01

EVBN SECTOR STUDY5

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)

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Key imports categories in 2013 (US 6.5 bn)

Category Contribution

Raw feed 46.4%

Dairy materials 16.8%

Seafood 10.7%

Oil and fats 10.7%

Wheat 9.4%

Fruits and vegetables 6.2%

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

Source: GSO Viet Nam

Key findings on each import category will be elaborated in more details in the following sections.

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Bakery & Confectionery1.1According 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. Market size and growth rates

Growth in the expansion of modern style bakery outlets

The bakery market enjoyed a CAGR of 7.6% over the period of 2010 to 2013, reaching VND10.4

trillion (USD0.5 billion) by the end of 2013. This was due in part to a new style of bakery outlet

expanding quickly across Vietnam since 2010 and becoming more and more popular as a place

for people to gather, similar to coffee shops. Kido’s Bakery, Onoré Bakery, Tous Le Jour, Paris

Baguette, Bread Talk and Brodard Bakery are some examples of this new style of bakery in

Vietnam.

Bread retained the biggest sales among other bakery products

As one of the popular alternatives to rice and noodles, bread retained its status as a primary

consumption bakery product compared to other sub-categories (such as cakes and pastries) with

VND8 trillion (USD378.7 million) sales in 2013, equivalent to 76.8% of total bakery market

revenue.

Unpackaged baked goods growing presence

Thanks to the rising number of bakery outlets, sales value of unpackaged or artisanal products

has grown gradually, reaching VND4.1 trillion (USD195.2 million) and accounting for 39.6% of

total bakery sales. In 2013, packaged baked goods sales wereVND6.3 trillion (USD297 million).

However, there is a low probability that unpackaged products will have a strong impact on the

revenue of packaged goods, as each category serves different benefits. While packaged baked

goods offers great convenience for busier lifestyles, consumers can enjoy more delicious taste of

unpackaged or artisanal products served in the modern bakery outlets.

EVBN SECTOR STUDY9

Sugar price climbing downward, wheat price bouncing back

Sugar and wheat flour significantly account for about 35 to 40% of material costs of confectionery

and bakery production. Thus, any change in world production could cause price volatility and

shortages which in turn negatively affect local production. In 2013, the favorable trend of world

sugar and wheat price strongly supported the gross margin of local players. 2013 was a third

consecutive year world sugar prices dropped due to production exceeding consumption demand.

The USDA forecasts sugar production will reach 175 million MT worldwide and the oversupply

situation will continue in 2014, a prospect for a fourth year of price descent. Relative to the

beginning of 2013, Sao Paolo refined sugar’s spot price decreased by 16.9% to USD640 per MT

as of May 20, 2014.

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 sugar’s price downtrend persists.

EVBN SECTOR STUDY10

Bakery. Trends.

Despite slower growth, Vietnam’s confectionery market still outpaced its regional peers

In 2013, Vietnam’s 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, Vietnam’s

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%.

EVBN SECTOR STUDY11

Confectionery. Market size & growth rate

Savory biscuits / crackers and plain biscuits as the most consumed thanks to less sugar and more

vitamin content

Accounting for 42% of the confectionery

market value, biscuits, cookies and

crackers recorded VND6.9 trillion

(USD0.33 billion) sales in 2013, posting a

CAGR of 9.2% during 2010 to 2013. Since

savory and plain biscuits and crackers

contained less sugar and more vitamins,

these two segments are considered

healthier products among other sub-

categories. They remained the most

consumed with reported sales of VND5.3

trillion (USD0.25 billion) or 76% of total

category value in 2013.

EVBN SECTOR STUDY12

Biscuits, cookies, and crackers

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.

EVBN SECTOR STUDY13

Sugar confectionery

Sugar confectioneries facing intense competition from savory snacks

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).

In the beverage market, alcoholic drinks are the largest sector with 70% contribution to the total

market value. Revenue from this sector increased by 6.3% to USD 5.6 bil, the lowest growth rate

compared to other drinks. Beer accounts for the largest share of alcohol consumption: Sabeco

and Habeco are domestic companies that dominate Vietnam beer market.

Soft drinks saw the highest growth of 12.4% and reached $ 1.7bn sales in 2013, while hot drinks

were the smallest segment carries about 0.7 billion in sales. In the soft drinks market, Coca-Cola

and PepsiCo dominate the carbonated soft drinks market, whereas Tan Hiep Phat array occupies

none-gas soft drinks. Hot drinks are the smallest segment which brought only USD 0.7 billion in

revenue. Hot drinks market is currently under the control of Nestle and VinaCafe.

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.

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Beverage1.2

Market size & growth rates

As increasing Vietnamese’s 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 alcohol-

serving 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.

EVBN SECTOR STUDY15

Alcoholic drinks (Wine, spirits and 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).

Vietnam ranked fourth for beer consumption per capita in Asia

While Vietnam was leading in the SEA region with 29 liters of beer consumption per capita in

2012, the country captured the 4th position for the entire Asia region, only after Japan (64 liters),

South Korea (45 liters) and China (37 liters). According to Vietnam Breweries Associations (VBA),

beer consumption per capita rose approximately 10% up to 32 liters in 2013. As such, Vietnam is

considered one of the beer loving countries and is among the most attractive destinations for

international breweries.

EVBN SECTOR STUDY16

Beer

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.

EVBN SECTOR STUDY17

Wine and spirits

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 2009—a 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.

EVBN SECTOR STUDY18

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.

Vietnam possesses an interlacing system of rivers and a 3,260 km long coastline. It is ranked

third in 2013 among the largest countries for fishery and aquaculture activities, preceded only by

China and India. Fishery volume (mainly from tuna) has recently grown every year thanks to

favorable weather conditions and a new fishing technique of using high pressure lamps, which

helps double productivity and saves 15 to 30% of the fishing time. The decline in growth of

production value during 2012 and 2013 was due to approximately 100,000 hectares of shrimp

farms, which account for 15% of the country’s total shrimp farms, suffering from the Early

Mortality Syndrome (EMS). The disease, however, has been controlled since Q4 2013 and is no

longer a threat. In 2013, seafood production rose 3.4% to reach 6 million tons in volume and grew

7% to reach USD11.4 billion in value.

EVBN SECTOR STUDY19

Seafood1.3

Market size & growth rates

EVBN SECTOR STUDY20

Domestic seafood consumption reaching USD5.3 billion in 2013

The domestic market made a minor contribution of less than 5% share to the revenue of local

seafood producers. This was attributable to lower selling prices relative to export prices, while

cost of production, logistics and promotion advertising were still high. Further, Vietnamese

consumers are acquainted with purchasing fresh seafood from traditional wet markets while the

local producers concentrate on frozen, processed seafood. In 2013, domestic consumption of

seafood reached USD5.3 billion, accounting for 43.9% of total local production and import value,

which was USD12.1 billion. According to the Center of Planning and Development of Aquatic

Products, domestic consumption will increase annually at an average rate of 5.4% from 2011 to

2020.

According to Nielsen’s research, per capita milk consumption in Vietnam was just 15 liters per

annum, far behind Thailand (34 liters / year), China (25 liters / year) and the UK (112 liters / year)

in 2012, an indication of colossal market growth opportunity for dairy products. The Vietnam

Department of Livestock Production estimates Vietnamese people will consume 28 liters of milk

per year by 2020. Moreover, the customer base for dairy products has broadened thanks to the

manufacturers’ continued efforts to target different demographic segments, such as female

professionals and seniors. Thanks to low per capita milk consumption, rising health

consciousness, new habits of drinking milk, and a growing customer base, we believe this

category possesses the strongest momentum to enter a growth phase.

The dairy sector, valued at VND62.2 trillion (USD2.9 billion) in 2013, is among the fastest-growing

in Vietnam’s 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, Vietnam’s 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.

EVBN SECTOR STUDY21

Dairy1.4

Market size & growth rates

EVBN SECTOR STUDY22

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.

A robust consumption in powdered milk and drinking milk over the period of 2010 to 2013 is worth

to be mentioned. Powdered milk, which made up 45% of Vietnam’s dairy market, posted a CAGR

of 10.1% and VND27.9 trillion (USD1.32 billion) worth in 2013. Drinking milk accounts for 29% of

the dairy market’s value, or VND18 trillion (USD851.6 million), in 2013. The sub-category

recorded a remarkable CAGR of 18.9% during the same period. As the majority of input materials

for powdered milk and drinking milk are sourced from overseas, local producers will benefit from

the capability to pass on incremental costs to end users when import prices rise.

EVBN SECTOR STUDY23

Powdered milk and drinking milk

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.

Remaining a key dairy of low-income earners

EVBN SECTOR STUDY24

Condensed milk

In spite of low nutritional content,

condensed milk held 8.3% value share

within the dairy market thanks to its long

prevalence among Vietnamese

consumers, especially low-income

earners. However, as the performance

of drinking milk and powdered milk

posted robust growth, demand for

condensed milk is confronting the

maturity stage. The category’s growth

slowed to 2.5-3% y-o-y in value during

2010-2013 as consumers’ disposable

income has increased and they began a

shift to more nutrient rich dairy products.

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.

Downtrend in world price of raw milk powder benefiting local producers

Milk production in Vietnam comes from two sources: from local cow farms and imports. Imported

dairy ingredients include milk powder and raw milk products. Raw milk products are imported not

only to produce milk but also to produce confectionery, functional foods, and nutritional foods, etc.

Vietnam imports raw milk products mainly from New Zealand, America, Australia and Europe.

Costs of raw milk account for approximately 65 to 70% of total input costs. Thus, any change in

world production could cause price volatility and shortages that would negatively affect local

production.

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.

EVBN SECTOR STUDY25

Dairy. Main Trends

Despite slow growth, noodles hit USD1 billion sales in 2013

According to the Word Instant Noodle Association (WINA) Vietnam ranks number four in instant

noodles consumption with a demand of 5 billion units each year (56.2 instant noodles

units/person/year) behind China, Indonesia and India. Currently Vietnam has about 600 noodles

brands which are distributed in a system of supermarkets such as Co.opmart, Maximark, and

Lotte Mart. Domestic production accounts for 95% of market share. In 2013, noodles recorded a

slower increase in both volume and value, but the sales value surpassed USD1 billion (VND21.7

trillion), with a volume of 432 thousand tons. The growth for noodles was attributable to its

convenience as an alternative to rice, variety of flavors, diverse packaging size, prices as well as

marketing communication efforts of market players.

New launch of Kokomi of Masan Food, a brand targeting the low-income segment, was one of the

most successful combinations of running effective commercial advertising, boosting store displays

and competitive pricing. Both international and local producers retained their positive perception

of the noodle market’s potentiality.

EVBN SECTOR STUDY26

Noodles1.5

EVBN SECTOR STUDY27

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 people’s

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.

Most condiments have reached maturity

Fish sauce, Mono Sodium Glutamate (MSG) and soya sauce remain very popular and

irreplaceable condiments in the daily meals of Vietnamese people. Together, these accounted for

nearly 89% of the category sales valued at VND16.9 trillion (USD800.6 million). However, the

value growth rate of sauces and dressing condiments in Vietnam has dramatically dropped from

16.9% (2012) to 5.4% (2013). These categories have reached maturity as consumers are fully

aware of and have already used them for a long time. While fish sauces, MSG and soya sauces

are mature nationwide, bouillon cubes and powder, as modern alternatives, are poised to become

mature in urban areas.

Accelerating use of bouillon cubes as an alternative to MSG in rural areas

There was rising consumer usage of bouillon cubes for cooking as an alternative to MSG in rural

areas. By successfully delivering the ‘natural taste’ message, bouillon cube producers have led

rural people to enjoy meals with the natural sweetness of stock meat instead of consuming pure

MSG. The ‘Maggie 3 Ngot’ bouillon cube (Maggie 3 sweets) of Masan Food has gained significant

market presence.

EVBN SECTOR STUDY28

Ingredients1.6

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

Source: GSO Viet Nam

Key findings on some export category will be elaborated in more details in the following sections.

Key exports categories in 2013 (US 6.5 bln)

Category Contribution

Seafood 38.9%

Rice 17.3%

Coffee 15.5%

Cashew 9.6%

Cassava 6.3%

Fruits and vegetables 6.0%

Pepper 5.2%

Tea 1.3%

EVBN SECTOR STUDY29

EXPORTS MARKET/ DOMESTIC PRODUCTION02

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%).

EVBN SECTOR STUDY30

Seafood2.1

Export Volume

Trends

High anti-dumping tax resulting in a slowdown in the country’s 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 Vietnam’s

pangasius. We project that the country’s 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.

EVBN SECTOR STUDY31

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 Vietnam’s rice productions, respectively.

Vietnam’s export of rice, 2009 – 2012 (million USD)

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 world’s second largest rice

exporter, following only India

Source: General Department of Vietnam Customs.

No. Markets

2011 2012 Jan-Jun/2013 Compared

with

Jan-Jun 2012

(%)

Value

(million

USD)

%

(of total

export)

Value

(million

USD)

%

(of total

export)

Value

(million

USD)

%

(of total

export)

TOTAL 3,657 100 3,673 100 1,582 100.00 -9.90

1 China 161 4 898 24 536 34 17

2 The Philippines 476 13 475 13 132 8 -42

3 Malaysia 292 8 403 11 103 7 -41

4 Ivory Coast 139 4 203 6 89 6 -2

5 Singapore 198 5 131 4 77 5 37

6 Ghana 77 2 150 4 77 5 12

7 Hong Kong 89 2 121 3 58 4 23

8 Indonesia 1,019 28 458 12 45 3 -71

9 Angola 28 1 55 1 38 2 31

10 Algeria 20 1 36 1 24 1 -6

Others 992 27 714 19 403 25 -3

EVBN SECTOR STUDY32

Rice2.2

2,664

3,248

3,657 3,673

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012

Export revenue

The Phillipines2.68%

Russia2.64%

Germany13.09%

The US11.40%

Spain7.34%

Italy6.10%

Japan5.48%

Belgium3.48%

The U.K3.00%

China2.73%

EVBN SECTOR STUDY33

Coffee2.3

Over the past decade, coffee has been Vietnam’s largest hard-currency earner after rice and

seafood. The International Coffee Organization documents that Vietnam has become the world’s

largest coffee exporter, surpassing Brazil. As one of the world’s top coffee exporters, Vietnam

now has more than 525,000 hectares under coffee trees, 90% of which are in the Central

Highlands.

According to the Vietnam’s 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.

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.

Vietnam’s coffee export revenue in 2005

First 6 months of 2013 (billion US$)

Source: General Department of Vietnam Customs

Source: General Department of Vietnam Customs

Vietnam’s coffee products export structure by market in first 6 months of 2013

0.7

1.2

1.9 2.01.7

1.9

2.8

3.7

1.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2005 2006 2007 2008 2009 2010 2011 2012 Jan-Jun2013

KEY GROWTH DRIVERS

Recently released macroeconomic data indicates a steady growth of GDP, a curbed inflation, a

strong inflow of overseas remittances and FDI, as well as prospects for Vietnam dong to stay

stable. Along with the economic recovery, the country’s golden demographic structure, rapid

urbanization, rising disposable income, as well as growing retail network, present the impetus for

rising domestic consumption power and continued economic growth.

In 2012, Nielsen ranked Vietnam as the most rapidly growing fast-moving consumer goods

consumption country in Asia with a rate of 24.3%, followed by India (18.3%) and China (14.6%).

Despite the lull in consumption during 2013-2014, it is believed that agro-food sector will continue

to deliver double-digit annual growth during the period of 2014-2018.

Given the growing appetite for emerging market-based assets of global investors such as

Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) and the consolidation tendency

among local players, it is predicted that a bloom of M&A activities in the agro-food sector will be

on-going in the medium to long-term perspective.

Trade. With Vietnam’s export partly affected by WTO membership’s 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 Vietnam’s 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.

03

EVBN SECTOR STUDY34

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.

EVBN SECTOR STUDY35

COMPETITOR ANALYSIS AND DISTRIBUTION CHANNELS

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 Vietnam’s 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.

Example of a key player - Masan Group Corporation (MSN)

Masan Group is one of Vietnam’s largest private sector companies focused on building market-

leading businesses that capitalize on Vietnam’s structural consumption and banking.

Commenced operation in 2000, Masan Consumer, a part of Masan Group, is one of Vietnam's

largest local diversified FMCG companies with 30% of market share. The Company manufactures

and distributes a range of Agrofood products, including soya sauce (Chinsu), fish sauce (Nam

Ngu), chili sauce (Tam Thai Tu), instant coffee (Vinacafe), instant cereals (Kachi) and bottled

beverages (Vinh Hao). Receiving some significant investments from Kohlberg Kravis Roberts

(KKR) and Texas Pacific Group (TPG), Masan Consumer achieved a revenue of VND 11,943

billion (USD565.3 million) in 2013.

04

EVBN SECTOR STUDY36

Competitor Analysis4.1

Alcoholic drinks

With a minimal presence in Vietnam’s 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, Sabeco’s 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.

EVBN SECTOR STUDY37

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%.

EVBN SECTOR STUDY38

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.

Example of a key player - Kinh Do Corporation (KDC)

Established in 1993, Kinh Do Corporation is now a leading confectionery company in Vietnam

with about 200 SKUs: biscuits (Cosy) cookies (Korento), crackers (AFC), cakes (Solite), moon

cakes, bread (Aloha), bun (Scotti), etc. It also produces ice cream (Celano, Melano) and yogurt

(Well Yo). As the leading player in the confectionery field, the company has gained significant

market share (2013) in cookies (30%), crackers (56%), and especially in the seasonal moon cake

(76%) segment. Strong brand equity helps the company to maintain its market leadership in sales

and facilitates stronger market penetration for any new product launches.

EVBN SECTOR STUDY39

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.

EVBN SECTOR STUDY40

EVBN SECTOR STUDY41

Key Foreign Players in the Market4.2

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.

McDonald’s

A recently entered Vietnamese market, McDonald’s 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.

McDonald’s is currently forced to import much of its ingredients due to the lack of quality and

consistency of Vietnamese products. In particular, McDonald’s only uses two ingredients that are

grown locally in Vietnam: lettuce and tomatoes from Da Lat. All of the restaurant’s 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 McDonald’s 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 McDonald’s 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 café.

The US’ famous café 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.

EVBN SECTOR STUDY42

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”.

Caffé Bene

Caffé 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 Caffé Bene decided to open shops in Hanoi and Ho Chi

Minh City through franchising.

Unlike most coffee chains that seek fast customer turnover, Caffé 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 Bene’s 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 Caffé 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.

EVBN SECTOR STUDY43

Distribution Channels4.3

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.

EVBN SECTOR STUDY44

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.

Example of main distributors in Vietnam:

EVBN SECTOR STUDY45

VINCORP JSC

Website:

http://vincorp.vn

Address:

21 Ngo Hue, Ngo Thi

Nham Ward, Hai Ba

Trung District, Hanoi

Phone number:

(04) 39766167

TAN BINH MINH

CO., LTD

Website:

http://ruoutanbinhmi

nh.com

Address:

47 Hau Giang, Ward

4, Tan Binh District,

HCMC

Phone number:

(08) 39480626

VIET-ITALY CO.,

LTD

Website:

http://monteverdi.

vn/

Address:

167 Xuan Thuy,

Cau Giay, Hanoi

Phone number:

84-437681543

MTV IMPORT

EXPORT TRADING

JSC

Website:

http://www.ruouvangh

p.com/

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

Phone number:

(0313) 566 607

ADT CO., LTD

Website:

http://www.adtwine.c

om.vn

Address:

73 Ton Duc Thang,

Dong Da District,

Hanoi

Phone number:

(04) 37321638

ANH HUY CO., LTD

Website:

http://ruousojuhanqu

oc.com

Address:

01 Song Da, Ward 2,

Tan Binh District,

HCMC

Phone number:

(08) 66819916

MAI ANH TRADING

CO., LTD

Website:

http://mai-anh.vn

Address:

334-336 Kham

Thien, Đong Đa, Hà

Nội

Phone number:

(04) 35381323

MALTHOP

VIETNAM

CO.,LTD

Website:

http://malthop.co

m.vn

Address:

508 M2, Lang

Trung, Lang Ha,

Dong Da, Ha Noi

Phone number:

(04) 37833147

VIET TRADE JSC

Website:

http://phanphoibiaruo

u.vn/

Address:

199 Tran Binh, Tu

Liem, Ha noi

Phone number:

04.22151506

WINE

SUPERMARKET

CO., LTD

Website:

www.sieuthiruoungo

ai.com

Beverages

As an example of a sector’s 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.

EVBN SECTOR STUDY46

CHALLENGES AND OPPORTUNITIES

In general, establishment of a business for a foreign-owned company in Vietnam is considered

to be much harder for SMEs than for global players carrying well-known names and brands. It

usually takes authorities a long time to provide a license for SME – around 6-7 months or even

longer.

Legal issues can be very complex, a local lawyer is considered essential. Presently foreign

companies are commonly subjected up to 15 bureaucratic inspections per year, as well as to

some occasional, unclear and complex administrative licensing procedures.

Corruption is not only a widespread obstacle, but “a part of the game” that has to be accepted

by most companies, since it is much easier way than a lingering and unproductive controversy.

Favoritism is sometimes practiced by authorities towards local state-owned enterprises.

UE SMEs in agro-food market can confront significant competitive pressure from Trans Pacific

Partnership companies in the near future when the agreement takes place. In particular, TPP

technically allows the member countries to have free tariff for trading on other members’

markets.

In 2015, Special Consumption Tax for alcoholic beverages (containing less than 20% of

alcohol) is expected to increase by 15%, from 50% to 65%, which leads the beer industry to

predicament for both domestic and international companies.

Refrigeration infrastructure in Vietnam is improving but is still weak and does cause spoilage

issues with fresh and frozen products. For a HORECA sector, not all of domestically grown

foods can be used because of its poor quality.

Despite some changes in Vietnamese’ life styles and consumer behavior towards western

styles and an increase in awareness of health quality standards, some niches are still a price

sensitive market.

05

EVBN SECTOR STUDY47

Potential challenges

EVBN SECTOR STUDY48

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.

A competiveness of foreign SMEs in Vietnam can be reinforced by inability of local SMEs to

reach the basic PE investment standard, and thus grow their business. To be more detailed,

such problems as lack of information, business plan and vision of markets’ potential prevent a

part of local SMEs to grow and compete.

Consumer confidence in Western products is high and there is a notable fascination among

younger consumers with Western-styled goods.

While a growing number of tourists is driving development of Vietnam's hotel and foodservice

industry, modern hotels and restaurants are dominated by Australian and European managers

and chefs who show a preference for imported products.

As increasing Vietnamese’s exposure to western drinking habit couples with their popular

perception of drinking to socialize, pushing Vietnam alcoholic drinks consumption to grow year

over year. In the beverage market side, alcoholic drinks is the largest sector with 70%

contribution to total market value.

Vietnam is definitely one of the beer loving countries and it is among the most attractive

destinations for international breweries. Alcoholic beverage consumption is largely driven by

the beer category which accounted for 98% of sales volume and 91% of sales value as for the

year 2013, while wine can be considered as one of the top-growing trend in the category.

Vietnam is deemed to be as a "snack-happy" society. Since imported snacks are subject to

some of the highest import rates, Western producers are moving toward domestic production

to meet consumer needs and introduce new brands and products.

Opportunities

Tax and duties for beverages

Import Tax Special Consumption Tax (SCT) VAT

Current CurrentFrom July 1,

2015 (Draft)Current

Wine > 20%

alcohol45% 50% 65% 10%

Wine < 20%

alcohol50-55% 25% 45% 10%

Beer 35% 50% 65% 10%

Soft drinks

(carbonate)20-40% 0% 10% 10%

REGULATORY AND LEGAL FRAMEWORK

Imported products are subject to Import Tax, Special Consumption Tax (SCT) and VAT as

follows:

Import Tax = Import tax rate x Import price (Including package value)

Special Consumption Tax (SCT) = SCT rate x (Import price (Including package value) + Import

tax)

VAT = VAT rate x (Import price (Including package value) + Import tax + SCT)

• 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.

Source: Special Consumption Tax Law 27/2008/QH12, Circular 216/2009/TT-BT

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.

06

EVBN SECTOR STUDY49

Imported products

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.

\

Source: VAT Law 31/2013/QH13 Decree 209/2013/ND-CP, Circular 164/2013/TT-BTC

Source: VAT Law 31/2013/QH13 Decree 209/2013/ND-CP, Circular 164/2013/TT-BTC

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.

EVBN SECTOR STUDY50

Tax and duties on imported products

Import Tax Import Tax VAT

Seafood 0-30%Coffee, tea,

pepper15-40% 10%

Dairy 0-20% Grains 0-40% 10%

Livestock 0-5% Oil & fats 3-30% 10%

Meat 7-40% Sugar 0-40% 10%

Eggs, honey 0-30% Raw feed 0%

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.

Registration and sanitary regulations

As part of establishing a 100 percent foreign-owned enterprise or a joint venture in Vietnam, a

foreign investor must go through a series of licensing procedures, such as: engagement in an

investment project and preparation of an application dossier (file) to apply for an Investment

Certificate (IC), which is also considered to be the business registration for the enterprise. The IC

is the official license allowing foreign investors to carry out business activities in Vietnam.

The following Post-Licensing Procedures also applies:

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.

More information on: http://www.vietnam-briefing.com/news/licensing-procedures-foreigninvested-

enterprises-vietnam.html/

According to the Laws of food safety released in October 2012, any organization registered as a

manufacturer or distributor of food and beverage must be certificated by GMP, HACCP, and ISO

22000. Furthermore, regular examination (not more than twice a year) and sudden examination

will occur to make sure there is no violation. The certificates will be expires after 3 years and the

organization needs to apply again.

More information on: http://www.moj.gov.vn/ Ministry of Justice of Vietnam

In order to proceed in the industry, an F&B company needs to go through a process and product

testing by NIFC (National Institute of Food Control). Two stamps also called ISO/IEC Guide 65

are provided by NIFC. Since food safety is considered to be an issue in Vietnam, some

organizations, manufacturers and food companies even use the mentioned stamps in their

marketing campaigns

More information on: http://nifc.gov.vn/ National Institute for Food Control (NIFC)

EVBN SECTOR STUDY51

APPENDIX. FAIRS AND EXHIBITIONS

EVBN SECTOR STUDY52

FAIRS AND EXHIBITIONS

Name Time Place Content

Food and Hotel

Vietnam 201521-23/04/2015

Saigon

Exhibition &

Convention

Center (secc)

Ho Chi Minh

City

Frozen Food, Dairy Product, Drinks and Beverages,

Meat and Poultry, Wine, Spirits and Beers, Bakery

and Confectionery, hotel and restaurant products

and equipments, catering products.

Vietbrew and

Vietdrink 201412-14/11/2014

Saigon

Exhibition &

Convention

Center (secc)

Ho Chi Minh

City

Organized by UBM Asia, the leading exhibition

organizer in Asia, the event brings together

international and regional manufacturers and

suppliers of machinery. Opportunities to meet high-

level visitors such as beer, wine, spirit, soft drink,

and dairy drink manufacturers from Vietnam and the

ASEAN region. Over 500 delegates are expected to

attend. The Conference focus is Brewery, Alcohol,

Water and Beverage technology solutions.

Vietnam

International

Food

Processing

Industry

Exhibition

22-25/10/2014

Saigon

Exhibition &

Convention

Center (SECC),

Ho Chi Minh

City

Fruit Processing Technology, Alcohol Making

Machines and Equipment, Fermentation Equipment,

Storage and Process Tanks are presented on the

event.

Viet Meat 2014 15-17/10/2014

Saigon

Exhibition &

Convention

Center (SECC)

Ho Chi Minh

City

Cold Chain Equipment, Conveyor Systems, Food

Safety & Traceability Solutions, Labelling

Equipment, Laboratory Equipment, Meat Additives,

Meat Cutting Equipment, Meat Cooking Equipment,

Meat Products, Metal Detection Equipment,

Packaging Materials, Pump & Accessories and

more etc. are presented for the Meat, Poultry &

Seafood industry.

APPENDIX. FAIRS AND EXHIBITIONS

EVBN SECTOR STUDY53

Vietfood and

Propack 201410-13/09/2014

Tan Binh

International

Exhibition And

Convention

Center Ho Chi

Minh City

Food and Beverages Industry Exhibition

showcasing Beverages, Biotech Products, Canned

Products, Chinese Herbs, Confectionery Etc.

Vietnam

Fisheries

International

Exhibition 2014

06-08/06/2014

Saigon

Exhibition &

Convention

Center (SECC)

Ho Chi Minh

City

Vietnam Fisheries International Exhibition 2014 Will

Showcase All Types Of Fish Cages, Fish Firms,

Fish Hatchery Machinery, Sea Food Products Etc

Food Pack 2014 02-04/06/2014

Saigon

Exhibition &

Convention

Center (SECC)

Ho Chi Minh

City

Food Packaging Machinery And Materials,

Pharmaceutical Packaging Machine And Materials

Etc.

Wine Festival

2014

27/06/2014 –

12/2014

Debay Wine

Cellar - BaNa

Hill, Da Nang

Participating in the Wine Festival, tourists will enjoy

vibrant and bustling atmosphere along with special

sexy dances of professional dancers and have the

opportunity to try glasses of wine of world famous

brands serving with buffet in beautiful space of Le

Jarnin De’Amour flower garden.

EVBN SECTOR STUDY54

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