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 Food Products Industry

 Although the number of enterprises operating in the food processing industry is not large (accounting for nearly 1% of the total number of enterprises), it is one of the key industries with great development potential in Vietnam, contributing more than 20% to net revenue of the manufacturing and processing sector annually. Vietnam's food processing industry has been experiencing rapid growth. It has generated highly competitive products that can dominate the domestic market and meet the requirements for export markets.


Food currently accounts for the highest proportion in monthly spending of Vietnamese consumers, and Vietnam's annual food consumption value is estimated at 15% of GDP and is on the rise.


Because of its huge potential, Vietnam's food market has been paid a lot of attention by foreign investors. In recent years, there have been many M&A deals in the food industry, and this trend is expected to continue in the years to come. Demand for organic foods that are healthy from Vietnamese consumers is increasing, which promises to be an opportunity for strong growth for health food manufacturing companies.


The number of enterprises operating in the field of processing & manufacturing vegetables and fruits currently eclipses the number of other food processing companies, and the frozen seafood processing industry is the most labor-intensive food processing industry.

(Source: Vietnam Credit)

Beverages Industry

Vietnam is one of the highest beverage-consuming markets as well. Compared to 2010, Vietnam's alcohol consumption increased by nearly 95%, ranks first in the world, and doubles the second-ranking country- India, and 16 times more than the United States.


The beer segment is the strongest in the Vietnam beverage industry. This sector only accounts for more than half of beverage revenue, leading by Sabeco, which takes over 40% of the market share. However, the company had been acquired by Thailand giant – ThaiBev at the end of 2017, making this sector mainly controlled by a foreign firm.


Vietnamese government plans to decrease its stake in state-owned enterprises to encourage the country’s private sector, supporting the positive outlook for Vietnam’s beverage industry. This,  accompanied by Vietnam’s membership of WTO and a number of free trade deals such as CPTPP and the EVFTA, aims to attract multinational companies to invest in the drinks sector as well as generate opportunities for Vietnamese companies to expand their exports.

(Source: Vietnam Credit)

Fruit and Vegetable Industry

The value chain of the fruit and vegetable industry in Vietnam is not particularly efficient. Vegetables and fruits are mainly produced by farmers, who are unable to fully exploit available potential. As a result, before reaching consumers, their crops are passed through many intermediaries.


The fruit and vegetable industry in Vietnam consists of four main sub-sectors including the manufacture of juice, processing and preserving of other fruit and vegetables, wholesale of fruits and vegetables, and retail sale of vegetables and fruits in specialized stores. Currently, there are 2,217 enterprises registered to operate in the fruit and vegetable industry in Vietnam - of which the number of wholesale of vegetables and fruits companies accounts for the largest proportion with 53%.


Production of fruit and vegetables in Vietnam has increased steadily over the years., with a continually increasing land area given over to cultivation and production. Vietnam is a country with a surplus of fruit and vegetables and the import and export turnover of Vietnamese fresh produce has shown rapid growth. In 2019, the export turnover of this commodity was 2.1 times the import turnover.


With rising income, Vietnamese consumers are increasingly concerned with the quality of their food and tend to use pesticide-free and organic vegetables. Fruits imported from the US, Australia, and New Zealand are very popular in Vietnam, although they are not cheap.

(Source: Vietnam Credit)


Tea Industry

The tea industry has long been an important sector in Vietnam to not only creates a myriad of jobs for local people, alleviates poverty, but also provide stable incomes for millions of growers across the country. The value chain of the tea industry is operated based on the three main activities: producing raw fresh tea, processing tea, and trading tea products. Some of the important factors affecting the development of the tea industry include tea growers, traders or collectors, processors, distributors, and exporters. In recent years, the tea industry has made great progress in tea growing, processing, and trading. Tea production in 2019 will reach 1 million tons on an area of ​​123 thousand hectares. Tea export increased 8% in volume, reaching nearly 137.4 thousand tons, equivalent to 236 million USD. In which, the proportion of black tea and green tea accounted for 39.7% and 39.6% respectively.


Tea farmers in the industry are equipped with knowledge about tea production according to VietGAP standards, organic farming practices, and pesticide residues managing methods. In addition, processing facilities and enterprises are provided with machinery and automated equipment which continuously improves the quality of tea products. Currently, there are 257 industrial-scale tea processors in the Vietnamese tea market, with a workforce of up to 220 thousand people. The total designed capacity is estimated at 5.2 thousand tons of fresh buds/day. There are currently 60% of tea production is manufactured according to industrial process and 40% is hand-processed.


However, besides the achievements, the tea industry has been facing many difficulties. Despite being a country with a large tea export volume in the world, the competitiveness of tea products in terms of quality, designs, and brands in the international market remains low. Therefore, the average export tea price is not high compared to other competitors in the industry. Links in the value chain of the tea industry in Vietnam are weak, especially between enterprises and farmers, with many levels of middlemen collectors. Tea growers in numerous localities do not have proper attention to sustainable value chains. They are willing to break contracts with companies, sell tea to traders who offer higher prices, leading to a shortage of raw materials for processing and exporting enterprises.


After the EVFTA Agreement comes into effect, tea import tax to EU countries will be fully exempted, which is a huge opportunity to expand markets for Vietnamese tea exporters. Therefore, Vietnam needs to strengthen the chain of links between tea production and consumption, improve the quality of tea products, and promote the national brand of Vietnamese tea in the international market to take advantage of this agreement. It is forecasted that the tea market will continue to grow in the long term, especially in the Chinese market. Tea prices will tend to increase in the short term due to a shortage of supply resulting from the disruption in many tea-producing countries worldwide. This is a suitable time for Vietnam's tea industry to boost exports and increase market share in the global market.

(Source: Vietnam Credit)

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