According to the USDA report released yesterday the Vietnamese food and beverage processing sectors continue to expand with registering strong growth over the past five years.
Vietnam’s food manufacturing sector grew at 9 percent in 2016 while growth in the beverage sector was at 10.5 percent. This expansion is driven by economic growth and macroeconomic stability, Vietnam’s deepening international economic integration and a rapidly urbanizing, modern, and youthful population, which is shifting its diet to include more processed and packaged food products.
According to the latest statistics from GSO, the number of food processors in Vietnam in 2015 was 8,820, of which 6,630 were registered food processing enterprises and 2,190 were manufacturing beverages enterprises. In 2015, the number of food and beverage processors in Vietnam grew 5.1 percent year-on-year. Some firms specialize in producing only food ingredients, while others handle retail-ready products in addition to ingredients.
USDA suggests U.S. exporters entering the Vietnamese market will need to consider two marketing efforts: one for targeting the northern part of the country, which has a higher concentration of government ministries and regulatory agencies; and, one for the South, which is the dominant commercial hub. The majority of food processors are located in the South.
To enter or expand in Vietnam, U.S. businesses can contact and appoint a local partner for direct import or appoint the partners as an agent to arrange importing, distributing, and marketing. U.S. companies new to Vietnam should conduct sufficient due diligence on potential local agents/distributors to ensure they possess the requisite permits, facilities, manpower, and capital.
The local partner should be familiar with the existing regulations for customs clearances, testing, certifications, labeling, and registration. The partner should also be capable to distribute imported products and responsible for the marketing efforts needed to create or raise awareness for new products among food processors or consumers.
An exclusive agreement is a common tool used by local partners to monopolize distribution of imported food and food ingredient products. Trade relationships are very important, and regular visits with local partners and key food processors should be a priority.
Training courses organized and sponsored by exporters or U.S. commodity export promotion groups about new food ingredient applications for local food processors are also important to increase the utilization of U.S.-sourced products in processing.
Larger food processors usually have a research and development (R&D) division, which evaluates new ingredients in product formulation. FAS/Vietnam recommends that technicians from R&D divisions be included in the training for new food ingredient applications.
Other small companies receive proposals of new ingredients through their purchasing divisions. Some large local food processors and most small food processors want to buy their raw materials from local suppliers or distributors due to better customer service, timely technical assistance, and the offering of more financing options.
Firms seeking a direct presence in Vietnam should establish a commercial operation utilizing the following options: (1) a representative office license; (2) a branch license; and (3) a foreign investment project license under Vietnam’s revised Foreign Investment Law.
As many local and foreign-invested food processors continue to establish themselves in the Vietnamese market, the prospects for U.S. food ingredient exporters will continue to improve. However, the overall market will remain very competitive, with preference continuing for regional ingredient exporters, such as Thailand, Malaysia, South Korea and Japan.
The increased consumption of packaged food products, ready-to-eat-meals, bakery products, and sauces is driving the demand for ingredients. Promising food processing ingredients to export to Vietnam include; minced pork, poultry products, beef, processed fruits, tree nuts, peanuts, and potatoes.