23-Sep-2022 Intellasia |
The recovery and development of the food and beverage (FB) market post-COVID-19 is providing opportunities not only for domestic companies but also those from the United Kingdom (UK), especially after the success of the UK-Vietnam Free Trade Agreement (UKVFTA).
After all COVID-19 restrictions were lifted and lives returned to normal, domestic consumption demand has rebounded, becoming the driving force to help the FB industry grow again.
According to a report on socio-economic performance in August by the general Statistical Office of Vietnam, the total retail sales of consumer goods and services were estimated at VND481.2 trillion (US$20.3 billion), up 0.6 per cent month-on-month and 50.2 per cent over the same period last year. The result was much better in scale and growth rate than that of the same period in previous years before the outbreak of COVID-19.
For the first eight months of the year, the total retail sales of consumer goods and services were forecast to increase by 19.3 per cent on-year to nearly VND3.7 quadrillion.
In the same period last year, that was down 3.5 per cent, if we exclude a gain of 15.1 per cent in prices, the total retail sales of consumer goods and services decreased by 5.1 per cent.
Last year, the total value of food and beverage consumption was estimated at VND816 trillion, a 10.5 per cent increase year-on-year, contributing about 13 per cent to GDP, according to Statista. Spending on FB accounted for the highest proportion in the monthly spending structure of consumers, which is about 35 per cent of total consumption expenditure, a survey made in 2018 by the Vietnam Report showed.
Experts said that even though the inflation pressure is still lingering for the rest of the year, prices of domestic commodities are basically under control, helping to gradually increase volumes of consumer goods in the future.
The research firm Business Monitor International said that total household spending in Vietnam tends to inch higher during the 2022 2025 period. Domestic consumers will maintain their strong purchasing power for essential items, including food and beverages.
A report from market intelligence and advisory firm Mordor Intelligence showed that the country’s FB industry will achieve a compound annual growth rate of 8.65 per cent during 2021 2026.
In the first half of the year, many enterprises in the FB industry, including dairy producer Vinamilk and Masan Consumer Holdings under Masan Group, recorded outstanding business results in terms of revenues and profits in both domestic and international markets.
This opens up a huge opportunity for UK food and beverage products to expand their presence in the Vietnamese market, especially under the UKFTA.
Under the deal, most food and beverage product tariffs will be gradually eliminated over 2 9 years. Some products may use a tariff quota, which brings tariff rates to 0 per cent for approved exporters as part of a pre-determined quota.
The reduction in tariffs under the UKVFTA secures a significant market advantage for UK exporters.
FB products that Vietnam imports most from the UK are beverages (mostly wine and spirits), fish and crustaceans, products of the milling industry, preparations of cereals, flour, starch, or milk and dairy produce. Vietnam’s most favoured nation (MFN) rates on FB products are between 3-60 per cent.
Economist Vo Tri Thanh said that the UK’s FB companies have two advantages in the Vietnamese market.
“The first advantage is that the UK’s FB products have had more chances to reach Vietnamese consumers since the EU-Vietnam Free Trade Agreement (EVFTA) came into effect, because it hadn’t left the bloc at that time,” said Thanh.
This helps Vietnamese consumers get familiar with the tastes and flavours of the UK’s FB goods.
In addition, in the past ten years, Vietnam’s wine-drinking culture has boomed, especially in big cities like Hanoi and HCM City. So, with market accessibility, tariff preferences, and higher demand, imports of the UK’s FB commodities will definitely increase, the economist added.
“In fact, the UK has a traditional alcohol line that Vietnamese people have come to favour, which is whiskey. This is also a positive point,” Thanh said.
Irish whiskey and Scotch whisky are two of the UK geographical indications (GIs) protected under the treaty.
However, Thanh emphasized that the Vietnamese FB industry is very competitive.
“Take wine as an example. Many countries in the world can produce wine and become well known thanks to it. Secondly, the taste of Vietnamese people has not completely formed according to a standard taste, so it is quite a challenge for marketing and advertising,” he said.
Category: Business, Vietnam
Article source: https://www.intellasia.net/vietnam-fb-an-appealing-industry-for-uk-companies-1094682