Case Study: Pandora and Vietnam’s Jewelry Market
Pandora is set to establish its third jewelry factory worldwide, in Binh Duong province in Vietnam. This move not only demonstrates Pandora’s confidence in Vietnam’s jewelry industry but also signifies the country’s growing prominence as a destination for global jewelry manufacturing. It has, however, run into a handful of challenges. Here’s what foreign firms can learn from Pandora’s experience.
Throughout the course of Vietnamese history, spanning thousands of years, jewelry has held a significant and revered position within the country’s culture. During feudal times, jewelry was used to honor the dignity of the court and kings, highlighting its association with power and prestige. Evidence of its presence can be found at ancient archaeological sites, showcasing its enduring legacy.
Even in the present day, jewelry continues to hold deep symbolic meaning for the Vietnamese people, representing luck and prosperity during important occasions. A prime example of this can be seen in Vietnamese weddings, where the bride is traditionally gifted golden stirrups by her parents, grandparents, or close relatives, symbolizing love and cherished values.
This enduring fascination with jewelry has cultivated a thriving industry in Vietnam contributing to the development of both the jewelry-making profession and a demand for consumer jewelry.
Moreover, the emergence of a growing middle class in Vietnam has further propelled consumer spending and the desire for high-quality, fashionable jewelry products. As a result, there has been a noticeable increase in the presence of international brands such as Cartier, Dior, Swarovski, and, of course, Pandora. Pandora alone boasts a total of 16 stores in Vietnam’s two biggest cities, Hanoi and Ho Chi Minh City.
This is in line, with a rapidly growing jewelry segment in Vietnam. It is estimated that by 2023, revenue derived from the jewelry trade will reach an impressive US$1.09 billion. Furthermore, the market is expected to experience an annual growth rate of 4.39 percent (CAGR 2023-2026), surpassing the global growth rate of 3.68 percent, according to Statista.
These statistics underscore the robust and promising nature of Vietnam’s jewelry market. That said, it is not uncommon for foreign firms to run into the occasional obstacle during their Vietnam jewelry market entry. In this article, we discuss market entry considerations using the case study of Pandora’s latest Vietnam investment.
Pandora’s new factory
Recognizing the immense market potential in Vietnam, Pandora Group is embarking on a project that involves a substantial investment of approximately US$100 million. This will be used to establish a modern jewelry manufacturing facility at the Vietnam-Singapore Industrial Park (VSIP) III in Binh Duong. This facility will mark Pandora’s first venture outside of Thailand and will serve as a primary factory supplying products to markets worldwide.
Furthermore, it is estimated that the project will generate jobs for more than 6,000 skilled craftsmen and have an annual capacity of approximately 60 million jewelry products.
Vietnam was chosen for a number of reasons, Jeerasage Puranasamriddhi, Pandora’s Chief Supply Officer, told VN Economy last year.
“After looking carefully at 27 countries, we finally chose Vietnam. Factors included it being close to Thailand, its history, the skill of its artisans, its handicraft products, and its production capacity. Another point is that its infrastructure is very good and ready for us to invest.”
“There were three reasons behind us choosing VSIP Binh Duong. The first was the skill levels of local artisans. Pandora has access to a large pool of highly-skilled craftsmen in Binh Duong province, and this factor is related to competition and recruiting talent,” Puranasamriddhi said.
With Pandora’s revenue surpassing US$2 billion in 2022, the company needs a labor force that is not only experienced but also substantial in numbers. Vietnam, with its rich talent pool of skilled craftspersons and a sizable workforce, aligns perfectly with Pandora’s requirements.
In addition to recognizing the skills of Vietnamese workers, Pandora’s decision to establish a jewelry manufacturing facility in Vietnam is driven by the company’s desire for geographical diversity within its supply chain. With existing manufacturing plants in Thailand, Pandora is looking to expand its operational footprint and minimize supply risks by diversifying its production locations. Vietnam, as a neighbor to Thailand, offers strategic advantages in terms of proximity and connectivity, allowing Pandora to manage and connect its production facilities effectively.
The choice of Binh Duong as the location for Pandora’s facility also provides numerous logistical benefits, particularly in terms of exports. While Binh Duong may not have its own airport, it boasts a highly advantageous location in close proximity to Vietnam’s Tan Son Nhat airport, situated just 11.5 kilometers away. This ensures convenient travel and swift transportation of processed products for export. The accessibility to an international airport significantly streamlines the logistics process for Pandora, facilitating the efficient distribution of its products to global markets.
Furthermore, the region is well-served by seaports, which play a crucial role in transportation and logistics. The presence of seaports in Binh Duong provides Pandora with additional options for shipping its products, offering flexibility and efficiency in managing its supply chain.
In addition to Pandora’s investment, Binh Duong has recently attracted the attention of Lego, the renowned Danish assembly toy company. Lego has chosen Binh Duong as the site for their first carbon-neutral factory worldwide, investing over US$1 billion in the project at the same VSIP Industrial Park.
The selection of Binh Duong by prominent companies like Pandora and Lego highlights the strategic advantages and potential of the region. One of the key factors contributing to Binh Duong’s appeal is its proximity to Ho Chi Minh City, one of Vietnam’s bustling economic hubs. This proximity offers convenient access to a vast consumer market and an extensive network of suppliers and infrastructure.
Moreover, Binh Duong boasts well-planned infrastructure, including transportation networks, utilities, and industrial estates. This availability of suitable industrial land ensures a smooth and efficient setup for companies, allowing them to commence production without significant delays or complications.
Pandora’s market entry challenges
All of that said, Pandora has run into a few hiccups.
Initially, Pandora’s project planned to commence construction in the first quarter of 2024 and the factory was expected to be operational by 2025. However, the company has encountered challenges related to construction licensing procedures, resulting in a delay in the project’s timeline. As a result, the factory’s operation is now projected to begin in 2026.
The difficulties Pandora has faced stem from issues surrounding the acquisition of the necessary construction permits. According to an announcement from the Department of Construction Management, Pandora submitted its application in September 2023. However, it was determined that the application did not meet the requirements for obtaining a construction permit, and Pandora had to redo its application.
This delay in obtaining the construction permit has undoubtedly caused frustration and hindered the progress of Pandora’s plans.
Lessons learned from Pandora
Despite obtaining approval, investors can still encounter numerous challenges during the implementation process. Consequently, this case provides valuable insights for other investors seeking to enter this promising market.
Engaging with local authorities
It is crucial to establish robust connections and efficient lines of communication with local authorities. By actively involving and seeking guidance from the appropriate government departments during the application procedure, firms can effectively navigate potential obstacles and ensure adherence to local regulations.
Understanding regulatory requirements
Pandora’s experience also highlights the importance of thoroughly understanding and complying with regulatory requirements and procedures when undertaking a large-scale investment project in an unfamiliar jurisdiction.
Furthermore, before embarking on a major investment project, it is crucial to conduct thorough due diligence and ensure that all necessary permits and approvals are obtained in a timely manner. This includes understanding the specific construction licensing procedures and requirements of the jurisdiction.
Collaboration with local partners
Working closely with local partners, consultants, or legal experts who have in-depth knowledge of local regulations and processes can greatly facilitate the smooth execution of investment projects. Local partners can provide valuable insights and guidance to navigate through the complexities of the regulatory landscape.
The benefits of setting up shop in Vietnam are abundant but it’s also worth remembering there can be some challenges too. These can be best avoided by contacting local, seasoned professionals.
With a decade and a half of experience operating in the Vietnamese market, Dezan Shira & Associates is well-equipped to assist investors looking to enter Vietnam’s promising jewelry segment. Contact their business advisory experts today.
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