Market Insight: Vietnam’s Wine Industry
By Fabio Zaca,
HANOI – As Vietnam’s consumer market continues to grow, more and more global products are pouring into the country. Among those products that have seen considerable growth in sales over the recent years, has been wine. Starting from a very low level, the Vietnamese wine market has exploded, with hotels, restaurants, and retailers now offering a wide variety of wines from around the world.
Currently, the local wine market features wines from such areas as France, Italy, Chile, USA, and Australia. The best-selling wines are reds with 65 percent of the market, followed by whites with 25 percent, and sparkling wines with 10 percent.
While there are no specific statistics on wine consumption during meals, the beverage has become a staple of many social interactions, such as business dinners. Statistically, the typical wine drinker is predominantly male, and prefers red, tannic and powerful wines with high levels of alcohol.
Despite the male dominance of the wine market, an interesting trend is taking place with regards to the evolution of the female alcohol consumer. Women in Vietnamese society are increasingly entering the business world, travelling more, obtaining higher education, and obtaining more purchasing power. Wine, with its association with sophisticated taste, is likely to attract a market that understands its value outside of simply physical effects. Of additional interest to wine sellers, women are much more open to new wines than male consumers are, often attending outings at wine bars and wine tastings – making them a clear target market for the future.
Selling in Vietnam
Selling wine in Vietnam is still a tricky business for a variety of reasons. A key stumbling block is that customers generally do not buy wine at wine shops. Reasons for this vary, for example, a poor range of products and overstaffed stores make the clients feel uncomfortable, which hinders their ability to choose the right wine. Often the staff are poorly trained, with knowledge of their product as insufficient as the customer’s, leading to an uninformed, and possibly unsatisfactory, purchase. In addition, the outward appearance of many wine shops is uninviting, the majority of them being homogeneous and lacking any attractive characteristics that might catch a passing eye. Successful wine shops in Vietnam offer a wider range of wines and have an attractive look.
Due to these problems, Vietnamese often prefer to go to the supermarket to buy wine as opposed to a designated wine shop; there is little difference in price, and clients feel less pressure to buy the “right” wine.
French wines tend to dominate the Vietnamese market, with Bordeaux wine the most popular.
However, as the wine market has grown in Vietnam, the dominance of the French imports has been slowly drained away. In 2007, French wine exports to Vietnam accounted for 46.8 percent of the market, while in recent years this number has dropped to around 15 percent. Meanwhile, over the same period, imports from Chile have increased nearly ten-fold. The 2011 bilateral trade agreement between Vietnam and Chile has largely accounted for this massive increase.
While still possessing a relatively small market share, in recent years, Italian wines have found considerable success in Vietnam. In 2012, Italian wines accounted for 2.5 percent of Vietnam’s wine market; however, this was an increase of 19.7 percent over 2011. There has been similar growth in the following years as well.
Driving the increased popularity of Italian wines has been the perception that Italy is a country that produces high quality and healthy food and beverages. This has led to the view among consumers that Italian wine is more carefully produced and crafted compared to other wines.
Chilean wine is increasingly popular in Vietnam. It is perceived as a quality wine with a good price, appropriate for business and social gatherings, and easy to pair with Vietnamese foods. Social networks, forums, and other forms of “word-of-mouth” marketing have played an immense role in the popularity of Chilean wine, which has garnered a place in everyday events.
As mentioned above, the recent free trade agreement between Vietnam and Chile has helped to drastically increase the amount of Chilean wine available – the FTA lowered customs duties applicable to Chilean wines from 56 percent to 20 percent. However, French wine is still preferred to Chilean wine when it comes to gift-giving, Chilean wine being considered too cheap for an appropriate present.
Still not cheap
While there have been recent positive developments with regards to regulatory changes, such as the suspension of the air imports ban and the lowering of taxes on spirits imports, Vietnam still uses a range of protectionist policies that raise the cost of operating in the wine industry. Some of the key taxes that businesses wishing to import wine will find themselves subject to include:
- 50 percent customs duties on cost, insurance, and freight (CIF)
- 25 percent excise duties
- 10 percent value-added tax (VAT)
Despite its difficulties, Vietnam offers an exciting opportunity for those involved in the wine industry. There is significant room for growth and a growing interest amongst the public towards wine. The consumption of alcohol is a daily event for many Vietnamese, and with the nation’s growing consumer class, the number of consumers available over the coming years should be significant.
However, as with any emerging market, opportunity comes with risk – when competing in a market where the government controls a large part of organized retail, market access is never assured.
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