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Packaging companies in Vietnam: Chances and Challenges

Packaging companies in Vietnam: Chances and Challenges

Wednesday 08, 09 2021
International market studies predict that the sales of the packaging industry will tend to increase rapidly in the next decade. However, experts also say that this industry will soon see a transformation.

Overview of packaging industry in Vietnam

Vietnam's packaging industry has been developing since the 1990s when the market economy began to innovate. In the beginning, the packaging industry mainly focused on producing paper and cartons and was completely spontaneous. At the beginning of the 21st century, the market economy developed along with the appearance of FDI enterprises. That movement spurred Vietnamese packaging to thrive.

During the period of international economic integration, Vietnam has built a free trade relationship with the ASEAN market of more than 600 million people. Vietnam has also established good relations with the United States, the European Union, China, Japan, Russia, etc. Those relationships have boosted the economy, including the development of the packaging industry.

With many foreign companies choosing Vietnam as an investment destination, the packaging industry has been given a chance to burgeon. As the economy develops and urbanizes rapidly, consumer demand also increases. Many famous supermarket brands such as Aeon, Lotte, etc., entered Vietnam. Vietnam's e-commerce industry is developing like a storm. All those events created opportunities for investors in manufacturing factories in Vietnam.

Packgaging

From 2015 to 2020, packaged food industry grew by 38%, baby food by 76%, processed meat and seafood by 58%. With such rising demand, the packaging industry has to improve its design and preservation. That is both an opportunity and a challenge for the industry.

Packaging is diverse in terms of types and designs, and packaging materials are also diverse. Packaging materials in Vietnam are mainly plastic, carton, paper, metal, and glass.

Chances and challenges for Vietnam’s packing companies

The demand for packaging is currently in the ascendant, predicted to increase by over 45% in the next five years. This growth is driven by strong demand from e-commerce shipping and delivery, food and beverage, personal care, healthcare industries, etc.

Consumers are interested in packaging that is convenient, sustainable, flexible, efficient, anti-counterfeiting, traceable. They also expect those parameters to come at a low cost. Those demands have led the packaging market vendors to focus on new packaging designs or redesign existing packaging for greater convenience and portability. That is also driving the growth of the packaging market globally.

Consumer need

In addition, the Fourth Industrial Revolution is increasingly influencing the lives of people around the world. That is also expected to have a strong impact on the current packaging market.

However, along with the strong demand and development of the international packaging market, Vietnam also faced many difficulties in this strong transformation.

Vietnam's packaging industry has an average growth rate of 15-20% per year. However, foreign companies account for most of the market share. Although Vietnamese products have gradually conquered difficult markets such as the US or EU, Vietnamese enterprises still cannot catch up with their competitors in the industry.

Some of the challenges that Vietnamese packaging companies are facing include:

-       Strong foreign competitors: The arrival of giants in the packaging industry has made it difficult for businesses to compete because of their growth and financial ability.

-       The packaging design is not eye-catching: Product designs without enough appeal are a factor that makes Vietnam packaging companies weaker than foreign ones. The domestic names are falling too far behind and are gradually letting foreign businesses dominate the market with creative and eye-catching packaging designs on store shelves.

-       Technology requirements: Not all enterprises have enough capital to invest in automatic and modern production lines. In addition, one of the weaknesses of Vietnamese enterprises is the lack of small weights packaging (such as 80g, 100g, etc.) or large weights packaging for raw materials (such as 500kg or 1 ton).

Development opportunities post-pandemic

The packaging market is forecasted to be more prosperous thanks to many developed countries that have reopened their economies after deploying the COVID-19 vaccine on a large scale. Accordingly, the packaging industry will bring many opportunities and benefits to domestic and foreign enterprises investing in this field.

COvid 19

With relatively low labor costs and domestic demand, while only a few domestic companies can afford to invest in advanced technology to develop packaging production because the investment costs are quite high, foreign companies with outstanding advantages have many long-term investment opportunities in Vietnam in the field of packaging.

Opportunities for businesses in the packaging industry are abundant. In the view of Viet Applied Investment For Packing Production Company Limited, the growth of the food, cosmetic, and pharmaceutical industries continues to be a great opportunity for the packaging industry to develop.

However, Vietnam's packaging industry needs to innovate more, especially in technology, to meet market requirements and be able to participate in the "race" of the global supply chain.

 

Compiled by VietnamCredit

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