Vietnam food drink report q2 2016

Q2 2016
www.bmiresearch.com

VIETNAM
FOOD & DRINK REPORT
INCLUDES 5-YEAR FORECASTS TO 2020

Published by:BMI Research


Vietnam Food & Drink Report Q2 2016
INCLUDES 5-YEAR FORECASTS TO 2020

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: March 2016
ISSN: 1749-3072

BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2016 Business Monitor International Ltd
All rights reserved.

All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
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of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.


Vietnam Food & Drink Report Q2 2016
INCLUDES 5-YEAR FORECASTS TO 2020

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: March 2016
ISSN: 1749-3072

BMI Research
Senator House
85 Queen Victoria Street

London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2016 Business Monitor International Ltd
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.

Vietnam Food & Drink Report Q2 2016

CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
Food & Drink ........................................................................................................................................... 9

Industry Forecast .............................................................................................................. 11
Consumer Outlook ...................................................................................................................................
Latest Updates .......................................................................................................................................
Structural Trends ...................................................................................................................................
Food .....................................................................................................................................................
Latest Updates .......................................................................................................................................
Structural Trends ...................................................................................................................................

11
11
11
13
13
14

Table: Food Sales (Vietnam 2013-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Drink .................................................................................................................................................... 19
Latest Updates ....................................................................................................................................... 19
Structural Trends ................................................................................................................................... 19
Table: Non-Alcoholic Drink Sales (Vietnam 2013-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Mass Grocery Retail ................................................................................................................................ 24

Latest Updates ....................................................................................................................................... 24
Structural Trends ................................................................................................................................... 24

Food & Drink Risk/Reward Index ..................................................................................... 26
Asia Pacific - Risk/Reward Index ................................................................................................................ 26
Table: Asia Pacific Food & Drink Risk/Reward Index Q216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Vietnam Risk/Reward Index ....................................................................................................................... 31

Market Overview ............................................................................................................... 33
Food ..................................................................................................................................................... 33
Drink .................................................................................................................................................... 36
Mass Grocery Retail ................................................................................................................................ 39

Competitive Landscape .................................................................................................... 41
Table: Key Players In Vietnam's Food Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table: Key Players In Vietnam's Drink Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table: Key Players In Vietnam's Mass Grocery Retail Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Company Profile ................................................................................................................ 45
Carlsberg ...............................................................................................................................................
Hanoi Beer Alcohol Beverage Corp (Habeco) ...............................................................................................
Masan Consumer .....................................................................................................................................
Nestlé Vietnam ........................................................................................................................................
Saigon Beer Alcohol And Beverage Corporation (Sabeco) ...............................................................................

© Business Monitor International Ltd

45
48

51
54
56

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Vietnam Food & Drink Report Q2 2016
Saigon Co-op .......................................................................................................................................... 58
San Miguel Pure Foods Vietnam Co Ltd ...................................................................................................... 61
Unilever Vietnam ..................................................................................................................................... 63

Demographic Forecast ..................................................................................................... 66
Table: Population Headline Indicators (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table: Key Population Ratios (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Table: Population By Age Group (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Table: Population By Age Group % (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Glossary ............................................................................................................................. 71
Food & Drink ........................................................................................................................................ 71
Mass Grocery Retail ............................................................................................................................... 71

Methodology ...................................................................................................................... 73
Industry Forecast Methodology ................................................................................................................
Sector-Specific Methodology ....................................................................................................................
Sources ................................................................................................................................................
Risk/Reward Index Methodology ...............................................................................................................

73

74
74
75

Table: Food & Drink Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table: Weighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

© Business Monitor International Ltd

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Vietnam Food & Drink Report Q2 2016

BMI Industry View
BMI View: Vietnam is one of the most promising consumer markets in Asia, benefitting from favourable
demographic dynamics, rapid economic growth fuelling household incomes and sustained levels of
investment. Reflecting this positive view, all categories within the food, drink and mass grocery retail
sectors will grow at a rapid pace throughout our forecast period to 2020.

Food & Drink Spending
(2013-2020)
1,000,000,000

750,000,000

500,000,000

250,000,000

0
2013

2014

Food, sales, VNDmn

2015

2016f

2017f

2018f

2019f

2020f

Non-alcoholic Drinks, sales, VNDmn

f = BMI forecast. Source: BMI, national statistics

Latest Updates & Industry Developments
■

While food sales are growing from a low base in Vietnam, we forecast rapid growth over the next five
years as households quickly climb the income ladder. Combined with a young and sizeable consumer
base, we expect strong investment from multinational food and drink companies.

■

Beer sales will expand at a rapid pace throughout our forecast period to 2020. Nonetheless, heavy
government intervention will limit opportunities for foreign investors. The government's decision to
reduce its stake in state-owned brewers Sabeco and Habeco had previously raised strong foreign interest.
Nonetheless, the government's willingness to sell stakes to domestic players will limit opportunities.

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Vietnam Food & Drink Report Q2 2016

■

The organised food retail sector will also experience strong growth. Casino's decision to divest its Big C
operations does not affect our positive outlook for the sector, as it rather reflects Casino's strategy to
deleverage and refocus on core assets.

© Business Monitor International Ltd

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Vietnam Food & Drink Report Q2 2016

SWOT
Food & Drink

SWOT Analysis

Strengths

■

Vietnamese consumers, particularly the young and affluent, are fairly brand aware by
regional standards. Accordingly, renowned Western products, backed by investment
in marketing and promotions, tend to have highly successful launches.

■

The wealthy urban centres of Hanoi and Ho Chi Minh City now provide highly
receptive consumer audiences.

■

Strong economic and private consumption growth will help fuel food consumption
growth.

■

Competitive pressure is increasing rapidly in the drinks sector, which is likely to drive
greater sector dynamism and fuel growth.

■

A growing multinational presence in the food retail sector has aided the acceptance of
modern retail best practices in Vietnam, particularly things such as added-value instore services.

Weaknesses

■

There are wide income disparities between urban and rural areas, and local
consumption patterns vary significantly according to income.

■

The food processing industry remains largely fragmented, except for a few key
sectors such as dairy and confectionery.

■

Vietnam's retail distribution networks remain underdeveloped, and expansionoriented firms must invest in infrastructural development as well as new store
opening.

■

Despite the growing presence of multinationals, local firms continue to dominate the
beer market.

Opportunities

■

The government's focus on investment within the manufacturing and exports industry
will help create a regional food and drink trade hub.

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Vietnam Food & Drink Report Q2 2016

SWOT Analysis - Continued
■

Rising income levels and changing lifestyles, particularly in urban areas, are
increasing consumer demand for snacks, convenience and luxury food and drink
items.

■

Vietnam's large domestic market, growing export opportunities and low labour costs,
as well as the prospect of acquiring newly privatised food companies, offer further
investment opportunities.

■

A growing tourism sector fuels interest in convenience categories, in addition to subsectors such as soft drinks and alcohol.

■

As the Vietnamese state plans to reduce its stake in state-owned brewers, interest
from regional and global brewers will pick up, translating into opportunities to
modernise the sector.

Threats

■

Vietnam's WTO membership may result in smaller companies who are unable to cope
with the increased competition being forced out of business.

■

If relations with China deteriorate, the Vietnamese economy will suffer and could lose
a significant political ally and trade partner.

■

Further tax hikes in the alcoholic drinks sector could threaten growth in the sector.

■

Rising operating costs, especially hikes in the legal minimum wage, will threaten
retailers' profit margins; price increases have to date been passed on to shoppers,
but this cannot continue indefinitely in the price-conscious market.

© Business Monitor International Ltd

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Vietnam Food & Drink Report Q2 2016

Industry Forecast

Consumer Outlook
BMI View: Sustained economic growth, combined very low inflation levels, will strongly benefit consumers'
spending power over the next five years. Positive demographic dynamics and existing sector immaturity will
also attract consumer-oriented companies.

Latest Updates
■

Real private final consumption growth in 2016: +6.4%; in 2017: +6.3%.

■

No change in forecasts since Q1 2016.

■

Inflation will head higher in 2016 but inflationary pressures will remain moderate, fuelling real
purchasing power.

Structural Trends
We hold a positive outlook for the Vietnamese consumer, as the government targets economic growth
through public spending and promoting investment and exports. In line with our positive outlook for the
Vietnamese economy, we forecast real GDP growth at 6.6% in 2016 and 6.4% in 2017, on the back of
supportive government policies, as well as a strong outlook for foreign investment and export resilience.
Our Asia Country Risk team expects investment to remain strong in the country, fuelled by relatively cheap
wages compared to regional peers and a reduction of the corporate tax rate. This will in turn support the
manufacturing sector, which has expanded at a rapid pace in recent months. On the services side, growth in
retail sales has headed lower over the past year. Nonetheless, growth rates are still around 10% y-o-y;
combined with historically low inflation levels, these suggest that retail sales continue to expand rapidly on
a real basis.

In the long term, rapid economic growth in Vietnam over the coming years is likely to translate into higher
income, in turn benefiting consumerism. Most exciting is the country's favourable demographic profile:
49.2% of the population is estimated to be younger than 30. This implies potentially dynamic opportunities
for consumer goods players targeting the mass-market segment in particular. Rapid urbanisation provides
additional opportunities for modern retail outlets.

What Vietnam offers investors is arguably one of the most attractive consumer bases in South East Asia
after India. With a youthful population of 93.4mn and GDP growth forecast at 6.6% in 2016, the country
provides attractive demographic potential for retailers keen to capture the vast consumer base. A flurry of

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Vietnam Food & Drink Report Q2 2016

international investment interest in the country over recent years has given continued focus on the merits of
the unravelling consumer story in Vietnam, particularly in its mass grocery retail sector. Overall, we believe
that Vietnam remains one the most exciting mass grocery retail Asian growth stories.

While incomes are still low by regional standards - we estimate that in 2015, 17.6% of Vietnamese
households had net incomes below USD1,000 - and the operating environment is still challenging, we
expect consumers to quickly climb the income ladder over the next five years. Rapid private consumption
growth will fuel households' disposable incomes, and we expect an additional 6.1mn households to enter the
USD5,000-10,000 income bracket over 2015-2020, which will boost sales of fast-moving consumer goods.

Emerging Middle Class To Drive Food Sales
Vietnam - Household Income ('000 Households)

Source: National sources, BMI

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Vietnam Food & Drink Report Q2 2016

Food
BMI View: The Vietnamese food industry will experience tremendous growth throughout our forecast
period to 2020. Growing consumer affluence will fuel purchases of branded items, while sustained domestic
and foreign investment will encourage sector dynamism.

Latest Updates
■

Food sales (local currency) growth in 2016: +10.2%; compound annual growth rate (CAGR), 2015 to
2020: +10.9%.

■

Staple products will continue to account for the great majority of food sales in the country.

■

Dairy products will outperform over the next five years.

Food Sales

(2013-2020)
750,000,000

12

11
500,000,000
10
250,000,000
9

0

8
2013

2014

2015

Food, sales, VNDmn (LHS)

2016f

2017f

2018f

2019f

2020f

Food, sales, VNDmn, % growth y-o-y (RHS)

f = BMI forecast. Source: BMI, national statistics

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Vietnam Food & Drink Report Q2 2016

Structural Trends

Vietnam will remain one of the most attractive investment opportunities in the region over our forecast
period to 2020 and beyond. Domestic consumer expenditure will continue to grow, and the country is a
major regional hub for exports. The food sector represents a large and growing portion of the country's
manufacturing output. We forecast food sales to grow by a CAGR of 10.9% over 2015-2020; given low
inflationary pressures in the country, this illustrates our positive outlook for the country's food and drink
sector.

Currently, income levels in Vietnam are a long way behind those enjoyed in developed economies, and
consumer purchases remain largely centred on food staples and daily necessities. However, with an
additional 6.1mn households moving above purely subsistence levels over 2015-2020 and falling into the
USD5,000-10,000 income bracket, consumer tastes and preferences are expected to calibrate towards the
higher-value food and beverage segments, which will be very likely to guarantee a receptive and growing
audience for branded food and beverage products in the medium term.

Breaking down by food category, staples continue to account for the great majority of food purchases,

which is consistent with low consumption levels. Bread, rice and cereals continue to account for more than
40% of total food sales in the country. While this will remain the case throughout our forecast period to
2020, currently under-developed categories - such as dairy products - will experience rapid growth.

The massive potential provided by the burgeoning middle class in Vietnam is already attracting the sights of
major consumer-facing players in the country. The ongoing expansion of the mass grocery retail industry
will drive up per capita food consumption levels, provided goods sold through such outlets remain
competitively priced. Ultimately, food consumption growth will be driven by the government's ability to
harness rural spending power and by modern retailers' ability to find a model that stirs consumer interest,
without forgetting that price will remain the major purchasing determinant.

As a regional manufacturing and trade hub, we also highlight Vietnam's strong food processing sector as an
ongoing investment driver. Food products account for 21% of all of Vietnam's manufacturing output, which
in itself makes up 19% of GDP. The manufacturing sector will expand robustly in the country on the back
of an improved macroeconomic and investment climate, a growing domestic market, and an abundant
working age population with competitive wages relative to regional peers.

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Vietnam Food & Drink Report Q2 2016

Confectionery

The longer-term outlook for the Vietnamese confectionery market is positive. Factors such as rising
purchasing power, favourable demographics, growing health awareness and continued investments in the
sector will support confectionery demand, especially with regard to chocolate.
■

Rising Disposable Incomes: Rapid wealth accrual is likely to translate into a greater discretionary
appetite for premium confectionery products. As an increasing number of domestic confectioners expand
their upmarket product ranges, this is likely to bolster value sales growth over the coming years.

■

A Massive Youthful Population: Almost half of the Vietnamese population is estimated to be younger
than 30, and the maturation of this demographic group means that there are dynamic opportunities in the
mass market. Moreover, this demographic group is generally more receptive to Western tastes and
innovative products, which will give an impetus to confectionery demand.

■

Growing Health Awareness: Health awareness is prompting shifts of consumption habits towards
functional and healthy confectionery products. Capitalising on the growing trend, domestic confectioners
such as Tan Tan Food & Foodstuff and Vina Mit are expanding their functional product offerings.
These products typically carry higher price tags, and their rising demand is likely to translate into higher
value sales in the sector.

■

Continued Sector Investments: Sustained competition levels in the Vietnamese confectionery sector
ensure that dynamism in the market is unlikely to cool off any time soon. Nabati Indonesia, a leading
Indonesian biscuit producer, recently announced plans to start distributing its biscuit products in Vietnam
- a testament to the attractiveness of the sector. In November 2014, Mondelez International, a global
leader in snacks and confectionery, acquired a 80% stake in domestic confectioner Kinh Do.

However, while we highlight the positive consumption picture, we caution that growth- especially in the
burgeoning chocolate sector- could be restricted by supply issues.

Pasta

The Vietnamese pasta market is underdeveloped, although the product has become more recognisable in
view of Westernisation of lifestyles, particularly in urban areas. Around half of the retail market is
dominated by Barilla, with other prominent importers including Italpasta and Pasta Zara.

However, the market for instant noodles is well established, with the market supplied by a mixture of
locally made (by companies such as Masan Consumer and Acecook Vietnam JSC) and imported products.
Goods are receiving strong marketing and advertising support, especially as the more challenging economic
times have prioritised non-discretionary spending. Instant noodles are expected to remain very popular, on
account of their affordability, versatility as a cooking ingredient, wide-ranging availability and convenience.

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Vietnam Food & Drink Report Q2 2016

Dairy

The Vietnamese dairy sector has experienced very strong growth in recent years. Key drivers of this growth
have been increasing urbanisation and rising incomes, supported by a shift in consumer eating habits. Huge
multinational companies have, in particular, managed to sway consumer preferences with their considerable
advertising and promotional power. Dramatic increases in cattle numbers and increased public and private
sector investment - part of the effort to reduce the country's growing import dependency - will be the main
boost to growth.

The local demand for dairy products is met by a combination of locally produced goods, which accounts for

20% of consumption, according to the US Department of Agriculture, and imports from countries including
New Zealand, the US and Australia. Vietnam Dairy Products Co (Vinamilk) is one of the key players in
the sector. Indeed, reflecting the promise of the Vietnamese dairy sector, Vinamilk aims to become one of
the largest 50 dairy firms in the world. The company is also expanding internationally, as Vietnam is in a
geographically strong place to take advantage of the growing Asian dairy story. Other prominent dairy
producers include Dutch Lady, Hanoimilk and Anco.

Table: Food Sales (Vietnam 2013-2020)

2013
Food,
sales,
VNDmn
Food,
sales,
VNDmn, %
growth y-oy

2014

2015

2016f

2017f

2018f

2019f

2020f

348,852,843 384,390,415 417,355,796 459,742,547 511,793,477 569,295,785 631,573,414 700,093,305

11

10

9

10

11

11

11

11

Bread, rice
and
cereals,
sales,
VNDmn
139,003,834 153,547,998 167,044,949 184,405,274 205,731,044 229,297,583 254,827,869 282,923,295
Bread, rice
and
cereals,
sales,

VNDmn, %
growth y-oy
Pasta
products,
sales,
VNDmn

10

11

9

10

12

12

11

11

457,290

504,866

549,013

605,793

675,539

752,610

836,099

927,974

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Vietnam Food & Drink Report Q2 2016

Food Sales (Vietnam 2013-2020) - Continued

Pasta
products,
sales,
VNDmn, %
growth y-oy
Meat and
poultry,
sales,
VNDmn
Meat and
poultry,
sales,

VNDmn, %
growth y-oy
Fish and
fish
products,
sales,
VNDmn
Fish and
fish
products,
sales,
VNDmn, %
growth y-oy
Dairy,
sales,
VNDmn
Dairy,
sales,
VNDmn, %
growth y-oy
Oils and
fats, sales,
VNDmn
Oils and
fats, sales,
VNDmn, %
growth y-oy
Fresh and
preserved
fruit, sales,

VNDmn
Fresh and
preserved
fruit, sales,
VNDmn, %
growth y-oy

2013

2014

2015

2016f

2017f

2018f

2019f

2020f

10

10

9

10

12

11

11

11

86,038,643

93,937,802 101,255,316 110,653,263 122,181,219 134,904,480 148,673,911 163,814,282

20

9

8

9

10

10

10

10

36,941,107

41,152,144

45,064,018

50,100,060

56,291,660

63,138,840

70,560,979

78,732,782

-4

11

10

11

12

12

12

12

6,359,386

7,046,023

7,683,470

8,503,651

9,511,499

10,625,552

11,832,708

13,161,393

11

11

9

11

12

12

11

11

11,249,087

12,459,814

13,583,760

15,029,857

16,806,781

18,770,901

20,899,115

23,241,543

12

11

9

11

12

12

11

11

20,959,246

23,290,512

25,455,537

28,242,052

31,667,153

35,454,142

39,558,451

44,076,709

17

11

9

11

12

12

12

11

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Vietnam Food & Drink Report Q2 2016

Food Sales (Vietnam 2013-2020) - Continued

2013

2014

2015

2016f

2017f

2018f

2019f

2020f

Fresh
vegetables,
sales,
VNDmn

19,028,281

21,075,822

22,974,544

25,415,279

28,411,296

31,719,290

35,299,881

39,236,979

Fresh
vegetables,
sales,
VNDmn, %
growth y-oy

9

11

9

11

12

12

11

11

7,304,657

7,513,296

7,700,321

7,933,649

8,211,722

8,510,778

8,827,488

9,169,501

6

3

3

3

4

4

4

4

21,511,312

23,862,138

26,044,869

28,853,667

32,305,564

36,121,611

40,256,915

44,808,847

14

11

9

11

12

12

11

11

Sugar and
sugar
products,
sales,
VNDmn
Sugar and
sugar
products,
sales,
VNDmn, %
growth y-oy

Other food
products,
sales,
VNDmn
Other food
products,
sales,
VNDmn, %
growth y-oy

f = BMI forecast. Source: BMI, national statistics

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Vietnam Food & Drink Report Q2 2016

Drink
BMI View: Soft, hot and alcoholic beverages sales will expand at a rapid pace throughout our forecast
period to 2020, driven by rising incomes, favourable dynamics and existing sector immaturity. The
alcoholic drinks sector remains at risk of further tax hikes, while heavy government intervention will limit
opportunities for foreign alcoholic drinks companies.

Latest Updates
■

Non-alcoholic drinks sales (local currency) growth in 2016: +10.5%; compound annual growth rate
(CAGR), 2015 to 2020: +11.2%.

■

Carbonated soft drinks will outperform in the non-alcoholic drinks sector, as consumer preferences are
not highly dynamic in the market.

■

The beer industry will expand at a fast rate, but heavy government intervention will limit opportunities
for international brewers.

Structural Trends
Alcoholic Drinks

In line with positive economic prospects and a developing mass grocery retail network, we maintain a very
strong outlook for Vietnam's drinks industry. In particular, we believe that the country's beer industry will
post good growth, as we expect foreign investment in the sector to flow in the country, as global beer
companies strengthen their presence in the country. A young and growing population and rising tourist
arrivals will ensure the prevalence of beer in the alcoholic drinks market.

Generally speaking, favourable demographic shifts, rising affluence, strong economic growth and a fastgrowing tourist industry imply massive scope for alcoholic drinks consumption, with beer, in particular, set
to benefit. The emergence of a thriving tourist industry in Vietnam is also likely to bolster alcoholic drinks
consumption given that tourists typically have a greater penchant for higher-value consumer products. We
caution that the tax rate levied on beer and spirits increased from 50% to 55% in January 2016. More hikes
are planned the following years. Nonetheless, it does not significantly affect our positive outlook for the
industry.

Beer will continue to dominate the alcoholic drinks sector, accounting for the vast majority of volume sales,
and will thus also remain the main contributor to value sales. This is due to the strong interest the beer
sector has been attracting from both local and international brewers. We also expect foreign brewers to take

on a more prominent role in driving beer sales growth in Vietnam as they seek to enter emerging markets.

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Vietnam Food & Drink Report Q2 2016

In the past, global brewers expressed a strong interest in purchasing stakes in state-owned companies
Habeco and Sabeco, as the Vietnamese government is seeking to reduce its participation in the two
companies. Nonetheless, we caution that recent reluctance by the government to sell stakes to foreign
players highlights heavy government intervention and operational obstacles.

Volume sales growth in the wine and spirits industries is also expected to be robust, albeit developing from
much lower bases. Both are fairly immature industries, having been held back by an absence of
multinational investment and by their relatively higher price tags. However, prolific wealth accrual among
Vietnamese consumers is fuelling shifts in consumption habits towards higher-value alcoholic drink
products, and this trend is particularly evident in the urban centres such as Ho Chi Minh City, Hanoi and
Danang.

Exposure to Western cultures is also driving the local demand for spirits and wines. The biggest consumers
of wine and spirits in Vietnam used to be Western expatriates and tourists, but local consumers are
developing a strong appetite for these products in line with their rapidly growing affluence. The spread of
organised retail in the country acts as another impetus behind spirits and wine sales, facilitating consumer
reach to a greater variety of brands in supermarkets, hypermarkets and local wine stores.

Looking ahead, investments in the Vietnamese spirits and wine sub-sectors are expected to intensify as an
increasing number of investors recognise the higher margin growth opportunities on offer in these subsectors, and this is likely to instil further dynamism to drive volume sales.

Non-Alcoholic Drinks

In line with our positive consumer outlook for Vietnam, we forecast rapid expansion of the non-alcoholic
drinks industry over the next five years. In particular, the soft drinks segment will benefit from a sizeable
and young consumer base.

We are witnessing a rapid emergence of competition in the Vietnamese soft drinks market. The
opportunities provided by an emerging middle class in Vietnam are firmly within the sights of domestic
drinks producers such as PepsiCo Vietnam, Tan Hiep Phat and Coca-Cola Beverages Vietnam, and the
companies' aggressive initiatives in terms of product innovation, portfolio expansion and advertising will
only instil greater dynamism into the sector.

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Vietnam Food & Drink Report Q2 2016

Non-Alcoholic Drink Sales
(2013-2020)
60,000,000

13

12
40,000,000
11

10

20,000,000
9

0

8
2013

2014

2015

2016f

2017f

2018f

2019f

2020f

Non-alcoholic Drinks, sales, VNDmn
Non-alcoholic Drinks, sales, VNDmn, % growth y-o-y

f = BMI forecast. Source: BMI, national statistics

A massive, young population and rising consumer affluence are translating into a burgeoning appetite for
soft drinks. As consumers move up the income ladder over the coming years, an accelerating
premiumisation momentum in the sector means that value sales are expected to increase more dynamically

over our forecast period.

An intensifying influx of sector investments will provide another major impetus to drive industry growth. In
particular, we expect domestic soft drinks manufacturers to ramp up their initiatives in terms of product
innovation, portfolio expansion and marketing. In terms of portfolio expansion, local soft drink
manufacturers are gradually calibrating their portfolio towards healthier and functional beverages such as
fruit juices and ready-to-drink teas, as they look to tap into a growing health awareness trend in the country.
For instance, Big C introduced its private label fruit juice range Casino Bio to cater to the burgeoning
domestic demand for health and functional beverages. Nonetheless, carbonates will remain the most popular
category and will continue to experience strong growth over our forecast period to 2020. The
outperformance of carbonated soft drinks - at odds with most markets globally - is common in markets
where soft drinks consumption is relatively low, and consumer preferences are not highly dynamic.

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Vietnam Food & Drink Report Q2 2016

Moreover, domestic soft drinks manufacturers will continue to engage in product innovation by offering
different bottle formats and sizes in an attempt to cater to the varying consumer tastes and preferences. For
instance, Coca-Cola Beverages Vietnam and PepsiCo Vietnam produce their soft drinks in varying sizes,
and this has facilitated their reach to the end-consumer market. As more companies hop on the product
innovation bandwagon, this will bring about greater dynamism in the sector and further fuel sales growth.

Focusing on hot drinks, Vietnam's strong economic growth forecast over the next few years will continue to
fuel demand for higher value food and beverage products such as coffee. Vietnam's youth population, for
whom visiting cafés and drinking coffee is a lifestyle choice, is another major positive factor. As this group
of young, aspirant consumers enters the workforce, the accordant rise in incomes will serve to further buoy

the demand for higher-value coffee products. Over the longer term, we also expect Vietnamese coffee
production to increase strongly.

The tea sector is also set to experience strong growth over our five-year forecast period, buoyed by rising
incomes and increasing domestic demand but will underperform the coffee category.

Table: Non-Alcoholic Drink Sales (Vietnam 2013-2020)

2013

2014

2015

2016f

2017f

2018f

2019f

2020f

Nonalcoholic
drinks, sales,
VNDmn

27,279,407

30,155,294

32,823,026

36,253,185

40,465,420

45,118,810

50,158,643

55,703,634

Nonalcoholic
drinks, sales,
VNDmn, %
growth y-o-y

12

11

9

11

12

12

11

11

18,456,254

20,404,011

22,211,102

24,535,079

27,389,557

30,543,774

33,960,822

37,721,390

12

11

9

11

12

12

11

11

8,823,153

9,751,283

10,611,924

11,718,107

13,075,863

14,575,036

16,197,821

17,982,244

13

11

9

10

12

12

11

11

Coffee, teas
and other
hot drinks,
sales,
VNDmn
Coffee, teas
and other
hot drinks,
sales,
VNDmn, %
growth y-o-y
Soft drinks,
sales,
VNDmn
Soft drinks,
sales,
VNDmn, %
growth y-o-y

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Vietnam Food & Drink Report Q2 2016

Non-Alcoholic Drink Sales (Vietnam 2013-2020) - Continued

2013

2014

2015

2016f

2017f

2018f

2019f

2020f

Fruit and
vegetable
juices, sales,
VNDmn

3,271,509

3,570,702

3,841,271

4,179,593

4,580,796

5,006,443

5,447,512

5,909,945

Fruit and
vegetable
juices, sales,
VNDmn, %
growth y-o-y

17

9

8

9

10

9

9

9

249,905

275,527

299,183

329,450

366,391

406,922

450,504

498,092

Mineral or
spring
waters,
sales,
VNDmn, %
growth y-o-y

17

10

9

10

11

11

11

11

Carbonated
drinks, sales,
VNDmn

5,301,740

5,905,055

6,471,470

7,209,064

8,128,677

9,161,671

10,299,805

11,574,207

Carbonated
drinks, sales,
VNDmn, %
growth y-o-y

10

11

10

11

13

13

12

12

Mineral or
spring
waters,
sales,

VNDmn

f = BMI forecast. Source: BMI, national statistics

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Vietnam Food & Drink Report Q2 2016

Mass Grocery Retail
BMI View: Rising incomes, favourable demographic dynamics and existing sector immaturity will fuel the
development of the mass grocery retail sector. As consumers familiarise with the concept of organised
retail, hypermarkets and supermarkets will outperform.

Latest Updates
■

Hypermarkets will slightly outperform other categories.

■

Casino's decision to sell its assets in the country does not affect our positive outlook.

Structural Trends
Reflecting the long-term potential of Vietnamese mass grocery retail (MGR), we expect strong growth in
the sector. Vietnam is one of the most attractive propositions for MGR growth, and therefore the formal
food and drink sector, in the Asia Pacific region.

Owing to the higher profitability per store for supermarkets and hypermarkets, these formats will continue
to garner the bulk of investment attention. Vietnamese consumers are most familiar with the standard
supermarket format, and are spending more at hypermarkets as they become more accessible in the country
and offer better value products.

Favourable demographics and robust economic growth largely underpin our optimism regarding the
Vietnamese MGR growth story. According to our estimates, Vietnam's population is roughly 93mn and is
forecast to grow over 2015-2025. More importantly, Vietnam has a youthful demographic profile, implying
attractive opportunities in the mass market.

Vietnam's rapid economic development also is likely to assist the emergence of a new consumer class - in
major urban centres at least - that has an interest, and can afford to participate, in modern consumption
methods.

Although Vietnam is equipped with the aforementioned elements that are necessary to support strong
growth in mass grocery retailing, the country is unlikely to reach the full potential of its retail growth story
in the near future. Organised retail accounts for less than 20% of overall grocery sales, highlighting the
prevalence of mom-and-pop shops. In our view, the low degree of formalisation, combined with market
fragmentation, leaves room for new entrants. Even for the largest players, store counts remain modest. For
instance, Big C, the second largest retailer in terms of revenue, only operates a network of around 40 stores.

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