According to the BMI Index, Vietnam’s food and beverage market was extremely attractive globally in 2019, ranking tenth in Asia. In 2020, the industry’s total sales reached US$41.7 million, a year-on-year increase of 3.8%. This article will explore the key drivers of growth in Vietnam’s food and beverage industry. Vietnamese cuisine is world-famous for its diversity. You can find Vietnamese cuisine from London to New York, from Moscow to Johannesburg. Vietnamese cuisine from different regions has its own characteristics: the north emphasizes freshwater ingredients such as fish, molluscs and crabs; the center is known for the strong flavor of chili peppers and other spices; the south incorporates rich fruits, vegetables, fresh herbs and seafood, and often Use coconut milk as a dressing. While Vietnamese cuisine is renowned around the world, the value of its domestic food and beverage (F&B) market continues to grow. Before the COVID-19 epidemic, benefiting from multiple positive factors such as population growth, rising household income, and changes in consumer preferences, the catering industry was growing rapidly. According to a report cited by the UK Department for International Trade, Vietnam’s demand for food and non-alcoholic beverages is expected to grow by 11.6% between 2018 and 2022, with the market size reaching US$40 billion by 2021.
Six major advantages
1. Vietnam has great economic growth potential: In 2022, Vietnam’s gross domestic product (GDP) increased by 8.02%, ranking first among ASEAN countries. The growth rate in 2023 will also reach 5.05%, which is high globally. level. Since 2000, Vietnam’s per capita GDP has increased 10 times and is currently about US$4,200. Its consumption capacity is also gradually increasing, providing unlimited consumption power for economic growth. In addition, Vietnam has a huge demographic dividend, which provides continuous driving force for its economic development. In April 2023, Vietnam’s population reached 100 million, becoming the 15th country in the world to enter the “100 million population club”. Moreover, Vietnam has a young population structure and strong consumption power. According to statistics, as many as 65% of Vietnam’s population is under the age of 35. This young group is the main force in the consumer market.
2. The food and beverage market is large: Statista, a German online statistics website, predicts that Vietnam’s food market will reach US$96.47 billion in 2023, an increase of 9% compared with the same period in 2022. The market is expected to maintain an average annual growth rate of 8.22% from 2023 to 2027. Within Southeast Asia, Vietnam ranks third in terms of food market turnover, after Indonesia and the Philippines.
3. E-commerce development has a good fundamental foundation: Vietnam has more than 60 million Internet users, and the penetration rate of smartphones continues to rise, which has laid a solid foundation for the rapid growth of the e-commerce market. Consumers are increasingly inclined to online shopping and enjoy a convenient and fast shopping experience. According to the “2021 Southeast Asia Internet Economy Report”, Vietnam’s Internet economy will reach US$57 billion by 2025, and is expected to lead in Southeast Asia. This prediction highlights the huge potential and broad prospects of Vietnam’s e-commerce market.
4. Low production and operation costs in Vietnam: From the perspective of basic resource costs, Vietnam’s industrial and commercial water and electricity costs remain at a low level. Specifically, the basic price range for industrial and commercial water in special cities and first-level cities is 0.15-0.79 US dollars/cubic meter, while the average retail price of commercial electricity is about 0.08 US dollars/kWh. This price is far lower than that in China, Thailand, Singapore and other places, saving enterprises considerable operating costs.
5. Labor cost is another major advantage of Vietnam. Vietnam has a population of nearly 100 million, of which nearly half are young people aged 15 to 24, providing a huge pool of young resources for the labor market. Currently, Vietnam’s labor force participation rate is as high as 70%, and the male participation rate is as high as 75%, which is at a high level globally. This abundant labor resource makes the monthly salary of Vietnamese workers relatively low, about US$300 (equivalent to 2,166 yuan in accounting). All the above provide significant cost advantages for Chinese food companies to set up production bases and expand production capacity in Vietnam.
6. Vietnam’s political, cultural and geographical advantages: The Vietnamese government has always been committed to maintaining domestic political stability and actively promoting economic reform and opening up. This stable political environment provides a good investment environment for enterprises and reduces their operational risks. At the same time, the Vietnamese government is also actively implementing various preferential investment policies, such as tax exemptions and concessions on land use rights, to attract foreign investors to invest and start businesses. The cultural similarities between Vietnam and China provide convenience for Chinese companies to invest in Vietnam. The two countries have many similarities in food culture, living habits, etc., which makes it easier for Chinese food companies to gain recognition and acceptance from consumers in the Vietnamese market. At the same time, due to similar cultures, Chinese companies’ operations and management in Vietnam are also smoother, reducing communication barriers caused by cultural differences. In addition, Vietnam borders China, and trade between the two countries is very convenient.