According to FiinGroup, packaging is one of the fastest growing sectors in the Vietnamese market, with a growth rate of 13.4% per year in the period 2015-2020. In general, the packaging materials market is divided into different segments including paper and cardboard, plastic, metal, glass, wood, textiles, and other suitable materials such as foam, leather, etc. The majority of sales revenue belongs to the segment of plastic packaging, paper packaging and cartons with over 80%.
The Covid-19 pandemic has had both positive and negative impacts on the packaging manufacturing industry of Vietnam, thereby creating a lot of potential opportunities and challenges for businesses in the industry. Like in many other industries, the Covid-19 pandemic has created major disruptions in the packaging sector due to lockdown measures, travel restrictions, and labor shortages.
Vietnam’s packaging industry can be categorized into product groups and packaging materials. In terms of product groups, the consumer goods, pharmaceutical and health care products sectors, and e-commerce have seen strong growth, leading to a high demand for this kind of packaging. On the other hand, the demand for packaging for luxury and industrial products tends to decrease.
By packaging materials, flexible packaging is one of the least affected fields because food packaging accounts for a high proportion and is well maintained. Rigid plastic packaging has also seen good performance in the food and beverage sector. Due to the growing demand for packaging of auxiliary products, for online sales and direct distribution, and the growth in export activities, especially for industries with a high export proportion such as textiles, garments, leather and footwear, seafood, components, electronic equipment, etc., the segment of packaging paper, paper boxes, cartons has developed dramaticually.
Metal packaging is also seeing positive results as consumers switch to long-term food storage as a result of the pandemic. Glass packaging has been impacted by the closure of hotel and restaurant, and has only been offset to some extent by higher retail sales of beverages. In the high-end segment, glass packaging has been affected by a large decline in demand from the cosmetic industry.
Despite the fact that Vietnam’s packaging industry is considered to have high growth potential, Vietnamese packaging enterprises seem to be dominated in the competition with foreign enterprises. If the situation does not change, it is likely that Vietnamese businesses will not only lose their domestic market share, but the value from the export market will also fall into the hand of foreign investors.
Currently, there are many enterprises participating in the packaging market with different product categories such as paper, plastic, metal film, PET plastic bottle, etc. There is also a clear division between small businesses and branded packaging businesses. For example, most of the market shares of PET bottles are held by major brands including Tan Tien Plastic or Rang Dong Plastic. As for the paper packaging products for the dairy industry, the market share is held by Tetra Pak (Sweden) or Combibloc (Germany) due to high technology requirements.
One of the challenges faced by Vietnam’s packaging industry is that the technology is not advanced enough and businesses have not been able to participate in the value chain and create sustainable profits.
Assessing the development of Vietnam's packaging industry over the past time, Mr. Nguyen Ngoc Sang - Chairman of the Vietnam Packaging Association (VIPAS) said that this is one of the thriving industries, especially when domestic demand for consumer goods is increasing. Packaging industry grows at an average of over 10% per year. Currently, Vietnam has more than 900 packaging factories, about 70% of which are located in the southern provinces.
In addition, according to the Vietnam Plastic Association, in recent years, the plastic packaging industry has also developed strongly with an average growth rate of more than 25% per year. Plastic packaging thrives because the food industry has seen a good growth. Enterprises have invested in new technology lines and supplied to the market many types of high-class packaging, meeting strict standards of food safety and hygiene.
Declining global resources, population growth, rising consumption power of the middle class and the development of e-commerce via mobile platforms along with other "great trends" will be an unprecedented challenge to the packaging industry.
With a third of the food produced for human consumption globally being lost or wasted, equivalent to 1.3 billion tons annually, the world faces an urgent need to reduce food waste. This is where packaging technology can show its importance.
Packaging plays an vital role in preserving food and beverage products, however, as technology advances and consumers become more knowledgeable and sophisticated, packaging design becomes just as important as its function. To compete successfully, food companies need to find unique ways to make the emotional connection between consumers and brands stronger, and packaging is one way.
Source: VIPAS, Fiingroup
Compiled by VietnamCredit