As an emerging economy located in a highly volatile region of Indochina, Vietnam with a population of close to 100 million offers a huge growth potential for the Food and Beverage Industry. It is considered a bright star among the other countries in Indochina. With the Myanmar uprising and political instability, coupled with Thailand’s continuous street protests, the ideal position of Vietnam as a safe and stable destination for investors in this region is sealed in the next few years.
The Food & Beverage Industry has always been one of the most important economic sectors to Vietnam with great development potential, according to a White Paper (Annual Report) on ‘Vietnam Economy 2021’ published jointly on 8 January by Vietnam Report and a group of economic experts. According to this report, this industry is projected to grow by 5-6% annually during the 2020-2025 period.
Despite the ongoing pandemic challenges, the food and beverage segment offers strong growth opportunities. Vietnamese consumers are now paying more attention to nutritional foods from plant-based ingredients, as well as organic foods and functional/healthy ingredients.
A recent survey conducted by the Vietnam Report at the end of 2020 showed that due to the COVID-19 pandemic, half of consumers now spent more on foods that can boost their immune system, as well as clean label foods. Meanwhile, 63.7% of consumers have cut spending on alcohol and beer. Therefore, businesses in this industry must adjust their production to suit the current demand trend – i.e. food businesses have to increase their production capacity by about 30%, while beverage businesses must cut down their production to lower than 80% of what they produce prior to the pandemic.
Vu Dang Vinh, general director of the Vietnam Assessment Report JSC, as well as the person in-charge for the content of the Vietnam Report said that COVID-19 has forced nearly 70% of food and beverage businesses to focus on the digital transformation for their business survival, continuity and development.
Many businesses have adopted modern processing technology in production and management. Food and beverage companies have also sped up investment activities to renovate the distribution system and adjust the proportion between traditional and modern trading channels. They also develop applications to enhance the customer experience when shopping (e-commerce) and innovate packaging design, eco-branding and product line development.
Vinh said food and beverage businesses need to focus on strategies such as revenue growth, market development, promotion of research and improving product quality. They should also diversify supply sources with priority for domestic suppliers and develop online distribution channels on e-commerce platforms.
In conclusion, the food and beverage industry stands to benefit from the stable macroeconomy and commitments in free trade agreements signed between Vietnam and its partners such as the European Union-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) which will bring export opportunities and more foreign investments. They will also promote the transfer of technology and technological advancement in the industry.
In the meantime, Vietnamese food and beverage companies must improve their competitiveness and double investments in infrastructures as well as modernise their production processes.
The following Chart 1.0 and Chart 2.0 are findings compiled from the Vietnam Report and survey done on F&B companies in Vietnam in August 2020.
