F&B

The new outlook of Vietnam Food and Beverage Industry and chances for investors post – Covid – 19

Trường Lăng

June 16, 2022

F&B

The new outlook of Vietnam Food and Beverage Industry and chances for investors post – Covid – 19

Trường Lăng

June 16, 2022

What is the current situation of Vietnam food and beverage industry? Whether foreign investors stand any chances to levergage opportunities in this market? Let’s find out in this article!

Market overview of Vietnam Food and Beverage Industry 

Vietnam has become one of the most attractive and dynamic food and beverage (F&B) markets globally in 2019, ranking top 10 in Asia (IBM, 2019). 

Before 2020, Vietnam’s food and beverage industry continuously grew, and its market would be full of potential. In 2020, despite the ravage of the pandemic, the total revenue of F&B products landed at 975,867 billion VND, increasing by 3.8% YoY, with 15,8% contribution to the GDP.

Figure 1: Vietnam food and beverage revenue estimation (2018-2024) (Source: Phu Hung Security)

According to Mordor Intelligence, the F&B industry in Vietnam would expand at 8.65%  annually in 2021-2026. The compound annual growth rate from 2021 to 2025 is projected at 4.98%. Experts anticipated that the market size will reach 678 million USD, with the predicted number of consumers being 17.1 million by 2025.

Securities company VNDirect also forecasted that the F&B industry will blossom in 2022, from 10-12%, thanks to the reopening of in-person services and the recovery of domestic consumption. Additionally, according to market research firm – BMI, the spending of Vietnamese households would be on an upward trend in 2022-2025. 

The spending on F&B currently accounts for the highest portion in the monthly expenditure structure of consumers, with 35%. It is calculated that there will be about 17 million middle-income households in Vietnam by 2030. Thus, Vietnam will become the third-largest urban market in terms of consumer numbers and the fifth largest regarding total spending in Southeast Asia by 2030 (Phu Hung Security, 2020).

In addition, global financial services provider-Fitch Solutions-estimated Vietnamese people’s spending on essential goods, namely food and non-alcoholic beverages, housing and utilities, to grow between 8% and 10% YoY in 2022 and 2023 respectively, driven by rising spending post-pandemic. In this way, revenue of non-alcoholic drinks would increase by 10,5% in 2024 from an impressive annual rate of 12.5% in 2020. 

Figure 2: The estimation of Food sales in Vietnam from 2018-2024 (Source: Phu Hung Security)

The recovery of Vietnam F&B industry

The pandemic Covid-19 has substantially changed the landscape of F&B towards digital transformation. Thus, the application of technology to the F&B has helped this market in Vietnam back on track after two years of difficulties due to the pandemic. 

Since the beginning of 2022, the F&B industry has been robust, recording two-digit growth in the first quarter. In particular, the F&B revenue in January – March increased by 1.5 times over the last quarter of 2021, with a 24% jump in the number of transactions. In the second quarter of 2022, the F&B industry will continue to grow as the pandemic is under control in Việt Nam and the Government has issued demand stimulus policies, especially in tourism. 

According to the latest survey by Q&Me at the end of 2021, in Vietnam, 75% of respondents used online food delivery services and 24% were first users due to COVID-19. F&B businesses turned to technologies as a solution for their ongoing concern of revenue growth and new customer attraction during the pandemic. 

Some well-known F&B companies namely Starbucks, the Coffee House, Yen Sushi, among others, have set up their own online store to adapt to the Covid-19 situation and increase the customers’ experience. Further, F&B companies also cooperate with ride-hiding firms such as Baemin, Grab and Shopee Food to maintain their operation. 

Jinwoo Song – CEO of Baemin Vietnam assessed that technology platforms have assisted businesses in the F&B industry to easily approach potential customers, reducing fixed costs and exploring many untapped opportunities. With the support of technology, the recovery time for production and business activities of F&B enterprises is also forecasted positively. 47% of enterprises are estimated to recover in six months, 33% of enterprises from 7-12 months, and 13% after more than 12 months. 

Major trends in Vietnam F&B industry post- Covid-19

The new consumption trends will become a growth driver for the F&B industry of Vietnam in 2022. 

The rise in middle-class households

Domestic demand for high-end goods has been increasing. According to the General Statistics Officer of Vietnam (GSO), Việt Nam is the world’s 17th largest population country with approximately 100 million people. As for Fitch Solutions, disposable income per household in Vietnam will stand at 6,848 USD by 2024, with a 8% compound growth rate in the 2020-2024 period. Therefore, a rapidly rising middle-income class and increasing disposable income will boost the country’s demand for luxury products, namely high-quality wine, caviar, among others.   

The rise in Generation – Z

The young generation are trend-creators in food. Albeit relatively low income, Gen Z spends most of their money on food and drinks out of home, with almost 900.000 VND per month (equal to 40 USD). Decision Lab highlighted in a report “Generation Z is a cohort that the food and beverage industry needs to sit up and pay attention to.” With high curiosity and aspiration for new experience, the Gen-Zs always find newness in exposure to diverse, foreign cuisines, which drives the growth of  exotic food and drinks from different cultures. 

Figure 3: Frequency of Food ordering and delivery in Vietnam by gender (Source: Rakuten Group)

Consumer health and wellness 

Since the outbreak of the pandemic, consumers are concerned more about their health and well-being. Hence, they are willing to spend extra to keep themselves healthy. This, therefore, has given rise to new diet trends, with a high demand in healthier food, for example, gluten-free, eat-clean or keto meals. 

The new trend has presented opportunities for industry players and newcomers to the F&B market as they can take advantage of Vietnamese people’s new eating habit – love for green, healthy snacking and new eating style – eating out in groups. 

Beyond personal health, consumers have been more aware of their surroundings and seek F&B brands they share the same ethics with. As a result, industry players are growing more cautious about their environmental footprints, from their ingredients origins to the products processing and packaging. 

A shift in consumer payment habits

The pandemic has driven global consumers to adopt a digital – oriented approach in how they live, shop and work. The F&B industry is also affected by this trend as an increasing number of consumers have shifted to cashless habits such as QR codes, mobile phone payments and contactless cards to make everyday transactions in a safer and contact-free manner. 

Mastercard New Payments Index 2021 showed that 84% of consumers in the Asia-Pacific have used emerging forms of payments in 2020 alone. While 88% adopted at least one new payment type in the last year. Two-thirds of all respondents (including 75% of millennials) said they tried new payment methods due to the pandemic. Surprisingly, 60% of surveyees would avoid merchants that do not accept electronic payments of any kind. 

Winnie Wong, Country Manager, Vietnam, Cambodia and Laos, Mastercard critically commented that “The pandemic has accelerated a shift towards adopting digital-first habits in Vietnam, and these are here to stay for the long-term. As a result, consumers are now expecting more omni-channel and seamless digital experiences when they interact with businesses including F&B” 

To meet these evolving demands, F&B businesses must always adopt a digital-first method which puts consumer needs at the core of their businesses. This is imperative to mitigate the impact of the pandemic and stay ahead of the competition, she further advised. 

What chances are for the investors?

With digital transformation for seamless eating experiences, safety and security, the undeniable growing demand for high-quality products, potential new markets are waiting for newcomers. Insights into trends and the sustainable and innovative thinking towards the F&B industry can benefit investors in the Vietnam F&B market. Most importantly, investors should see ahead of the times and capture opportunities to reap desirable results. 

Yet, how can they know what trends to focus on? It seems quite a challenge for foreign investors looking for investment opportunities in Vietnam. In this situation, the best practice is to ask for help from the top-notch experts. Viettonkin is one of the leading professional firms with more than 12 year experience in diverse industries and majors. Our team of well-informed professionals in Vietnamese markets and legal systems are capable of assisting you navigate through the process of establishing a new business in Vietnam. With us by your sides, you can focus on what really matters to you. Let us be your trustworthy partner! 

Source:

  1. https://britchamvn.com/wp-content/uploads/2020/12/Vietnam-2020-%E2%80%93-Food-And-Beverages-Retail-Report.pdf
  2. https://vietnamnews.vn/economy/1109789/upbeat-outlook-for-food-and-beverage-industry-in-2022.html
  3. https://store.fitchsolutions.com/food-drink/vietnam-food-drink-report#:~:text=The%20Vietnam%20Food%20%26%20Drink%20Report,the%20mass%20grocery%20retail%20sector.
  4. https://www.phs.vn/data/research/PDF_Files/analysis_report/en/20210526/F&B–20210525-E.pdf

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