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Vietnam’s processed food industry – an in-depth overview

Vietnam’s processed food industry – an in-depth overview

Thursday 16, 12 2021
The attractiveness of Vietnam's processed food industry is reflected in its continuous growth rate which has maintained at 7 - 8% in recent years.

Industry overview

The fact that Vietnam has a young population, most of whom are young and living in big cities like Hanoi or Ho Chi Minh city is a favorable condition for ready-made food production companies to develop.

The report for mid-2019 of Datamoniter's shows that the ready-made food market in Vietnam has witnessed positive growth rate in recent years. Canned meat of all kinds accounts for 50.5% market share, which is followed by canned fish with 28% and canned vegetables, tubers and fruits with around 20%. It is forecasted that by 2025, half of the meat in Vietnamese consumers' daily meals will be processed products. At that time, there would be a demand for up to 2.5 million tons of processed meat products per year, which is 5 times higher than the current amount.

Datamoniter's

There are nearly 6,000 enterprises operating in Vietnam’s processed food industry. However, most of the market share is held by well-established giants such as Vissan, CJ Cau Tre or Ha Long Canfoco. Others are just small businesses that provide products for larger brands or private labels for major retail companies.

As a member of Saigon Trading Corporation (Satra), Vissan Joint Stock Company is considered a leading company in the ready-made food market. Nguyen Ngoc An, General Director of Vissan, informed that in 2018, Vissan produced 22,660 tons of ready-to-eat food, and in 2019 it was estimated at 25,000 tons.

Many businesses that previously only traded fresh agricultural products have now also invested heavily in processed foods. For example, Ba Huan, which only specialized in selling poultry eggs in the past, has now offered processed products such as chicken balls, stewed eggs, or even chicken sausages.

processed foods

Consumption habits of Vietnamese people

For packaged food/beverage items, most Vietnamese consumers prefer Vietnamese-origin brands. Health and food safety are the main factors that influence purchasing behavior.

Vietnam is one of the largest food consumers in Southeast Asia. The growth rate of the food retail industry in the period 2016-2020 averaged at 10%, mostly contributed by fresh food, followed by canned food, non-alcoholic beverages, and alcoholic beverages. It is expected that from 2021 to 2023, the processed food industry in Vietnam will still maintain the current growth rate of around 7% due to the impact of the Covid-19 pandemic. However, the general consumption trend of the canned food industry is expected to be positive.

The growth rate of the packaged food industry in 2020 in urban areas of Vietnam was 23%, while in rural areas this figure was lower at 15%. However, the Covid-19 epidemic was expected to have a great impact on urban areas in 2021, causing the growth rate of packaged food in this areas to decrease sharply.

Consumers consider health as the leading factor that governs their purchasing decisions. However, reality shows that the most popular packaged and processed foods and drinks are not associated with health factors but with taste and usage habits.

For processed foods, 61% of Vietnamese consumers prefer to buy goods at modern trade channels such as supermarkets or convenience stores, while only 39% buy goods at traditional trade such as grocery stores or markets. This indicates the shift to modern sales channels in consumer buying behavior. At the same time, these channels also offer a variety of choices and let consumers choose the goods according to their preferences.

processed foods

Despite experiencing remarkable growth rate in recent years, E-commerce is not a preferred channel for processed food. As the prices of these items are relatively cheap, and consumers want to buy quickly at physical sales channels, they consider the shipping costs to be disproportionate. It can be seen that on popular e-commerce platforms in Vietnam, the number of people buying packaged food and beverages is quite small. However, retailers still have successful ways to increase sales coverage by providing customers with an omnichannel experience – ordering online but receiving in-store.

Source: Datamoniter, Euromonitor, Kantar World Pannel, Deloitte

Compiled by VietnamCredit

 

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