Vietnam’s Food & Beverage Industry: Market Trends, Demographics, Consumer Preferences
Vietnam’s food and beverage market was one of the most attractive markets globally (ranked 10th in Asia) in 2019 as per BMI. Total sales of food and beverage reached US$41.7 million (+ 3.8 percent YoY) in 2020. In this article, we explore the driving factors behind the growth of Vietnam’s food and beverage industry.
Vietnam is well known for its varied cuisine, which has reached markets around the world, from London to New York, and from Moscow to Johannesburg. Food from northern Vietnam emphasizes freshwater ingredients, such as fish, mollusks, and crab, due to geographic restrictions on spice growing and cattle rearing. Central Vietnam boasts of strong flavors enhanced by chili peppers and other spices. While southern Vietnamese cuisine incorporates bounteous fruit and vegetables, with fresh herbs, seafood, and frequently coconut milk.
Regardless of its cuisine’s global fame, Vietnam’s domestic food and beverage (F&B) industry is also steadily gaining in market value. The F&B industry had been growing at a fast rate before the Covid-19 pandemic, attributed to a cocktail of positive trends like population growth, increasing household incomes, and shifts in consumer behavior.
According to a report cited by the UK Department for International Trade in 2018, market demand for food and non-alcoholic beverages in Vietnam was forecast to grow 11.6 percent between 2018-2022 and be worth US$40 billion by 2021.
Presently, however, Vietnam’s F&B industry is recovering from the pandemic, which has globally impacted restaurants, cafes, and bars and daily consumption due to restrictions on public movement and open gatherings as well as temporary fiscal restraint shown by many in uncertain economic times.
Yet, long-standing trends are expected to stand in good stead for Vietnam as its economy reopens. The Vietnamese people spend a sizeable portion of their incomes on food and drink. Estimates suggest that somewhere between 20 percent to 48 percent of household income is spent on food and beverage consumption. Vietnam is also Asia’s top beer consumer.
Tourism is another sizeable contributor to Vietnam’s food and beverage industry. Tourists spend an average of 23.7 percent of their budget on food and drink while in Vietnam.
Besides, Vietnam also has a fast-growing middle-class population and sizeable youth demographic. In a 2018 report, PwC projected that Vietnam’s middle-class population could reach 44 million by 2020 – more than a third of the total population. This middle class is further expected to grow, spreading out geographically and becoming more diverse. And, by 2030, the size of Vietnam’s middle class is forecast to hit 95 million.
Additionally, the UN population fund notes that 25 percent of Vietnam’s population (which is around 100 million) are aged between 16 and 30, and over 20 percent of the population are under 14.
How are Vietnam’s middle class and youth cohort shaping F&B market prospects?
As Vietnam’s middle class grows, and disposable incomes rise across all sectors of the population, greater spending power will further spur demand within the food and beverage industry, particularly eating out.
Moreover, as noted earlier Vietnam is a relatively young country, which will influence future growth prospects, such as the emergence of new culture and lifestyle trends that balance local norms with global preferences.
Growing disposable incomes
Vietnam’s growing middle-class population reflects the country’s compound annual GDP growth rate of five percent over the past 20 years, which is 1.7 times faster than the global average.
As of 2020, the average household now has a disposable income of US$4,890, while the per capita disposable income is estimated at US$1,910.
Despite the setback of the pandemic, Fitch Solutions still expects the country’s disposable incomes to continue on this growth trajectory in the medium term (2020-2024).
Over the next five years, Fitch Solutions forecast household disposable incomes to grow by a CAGR of 9.0 percent in local currency terms (7.9 percent in US dollar terms), taking household disposable incomes to a value of US$6,800 by 2024.
As disposable incomes increase, the budget for food, accommodation, and utilities expand, and as a result, eating out is becoming common in Vietnam, and to some extent an essential part of modern life in the country.
Social media impact
Given changing lifestyles and socio-cultural norms, the younger population is more inclined to eat out and share their stories and experiences on social media – as in the rest of the world.
In fact, there are 76.95 million social media users in Vietnam as of January 2022. According to a survey among internet users conducted in Vietnam in the first quarter of 2022, Facebook was the leading social media platform among all generations. Meanwhile, compared to Generation X and Y, Generation Z had higher usage of international platforms, such as Instagram, Tiktok, and Pinterest.
Photo communities like Facebook, Instagram, or Pinterest would mean endless opportunities for F&B brands to increase their presence. The F&B industry can avail of such platforms to create promotional content, interact with the foodie community, and convert likes and shares into new customers.
We can also observe that urbanization trends and the increasing formalization of the country’s F&B industry are positively impacting the sector’s growth. It is predicted that 40 percent of Vietnamese people will live in cities in 2025, up from around 20 percent in 1990. People living in cities are more likely to eat out and are generally expected to earn more and therefore have a greater total spend on food and beverages.
Vietnam is Asia’s top beer consumer. The market was worth US$5.18 billion in 2015 and is expected to be worth US$10.1 billion in 2025. However, the pace of growth is slowing. Annual growth between 2020-2025 is forecast to be 5.57 percent per annum versus 8.75 percent per year registered in 2015-2019.
One of the most noticeable trends is the shift toward the consumption of low and no-alcohol beers, such as the Heineken 0.0 (zero alcohol) or Sabeco’s Sagota – the first Vietnamese brewery to introduce non-alcoholic beer as well as craft beers with common brand names, such as Belgo or BiaCraft Artisan Ales.
Sustainability and healthy eating
With Vietnam’s middle class growing, its population is becoming increasingly engaged with global trends, such as sustainability and healthy eating. In fact, brands are even looking to tap into this trend by finding synergies between Vietnamese local food culture and healthier market offerings. Vietnamese food, often characterized by its use of fresh vegetables and spices, is perhaps more naturally in-sync with healthy eating trends. For example, the country’s top food exports include healthy ingredients like pepper, fruit and vegetables, cashews, and coffee.
Hand in hand with the rise of healthy eating is the desire to ensure that food is coming from sustainable sources. In fact, government campaigns are raising awareness about the need for food safety and cleaner supply chains. This is enhancing the demand for organic products in combination with the desire for healthier diets. Vietnamese customers are becoming increasingly willing to pay higher prices for organic foods, environmentally conscious options, and foreign products.
Leading players in Vietnam’s food and beverage industry
The top F&B brands in the Vietnamese market include Vietnam Dairy Products JSC (Vinamilk), along with familiar global brands, such as the foreign-invested Nestle, Masan Consumer Corporation, and others, while Heineken, Saigon Beer Alcohol Beverage Corporations (Sabeco), and Pepsico Vietnam Beverage Co., Ltd. are among the key players in the beverage industry in Vietnam.
Vietnam’s F&B industry is characterized by the prevalence of smaller companies. 84 percent of food companies have less than 50 employees. Over time, one would expect larger companies to develop from the food and beverage ecosystem. These firms may be more likely to standardize production and guarantee quality while benefiting from economies of scale in areas like e-commerce adoption.
How has the post-COVID-19 recovery affected Vietnam’s F&B industry?
Vietnam’s F&B industry is facing labor shortages and rising costs but is nearing a full recovery after the pandemic.
Revenue in key segments
According to the country’s General Statistics Office, revenue generated in the catering and accommodation services sector reached VND 124.4 trillion in the first quarter of 2022. The figure represents a year-on-year increase though it is 1.79 percent lower than in the first quarter of 2019.
According to e-wallet player Payoo, sales in Vietnam’s F&B industry were up 50 percent year-on-year in the first quarter of 2022. The group said that the number of transactions had risen by 24 percent, indicating sector recovery. A Payoo spokesperson told VN Express that revenues were likely to increase further in Q2 as the pandemic eases and people become more comfortable eating out.
Securities brokerage VNDirect has reinforced this sentiment. The group suggested that the F&B industry could grow between 10-12 percent in 2022. The resumption of dine-in services and the recovery of domestic demand were cited as key drivers. F&B spending is also likely to increase as tourists return to Vietnam.
Retail digitalization and popularity of delivery apps
The pandemic and accompanying restrictions pushed grocery shopping online in Vietnam. Covid-19 saw ride-hailing services like Grab, GoJek, and Bee & Baemin pivot into food and parcel delivery. Meanwhile, e-commerce giants like Tiki and Shopee, along with supermarket chains like VinMart and BigC, started or enhanced their home delivery offerings. Traffic on online grocery websites continued growing throughout the pandemic and grew by 13 percent in Q1 2021.
Online food delivery from food cooperatives or restaurants also grew during the pandemic. According to a report by the IMARC Group, Vietnam’s online food delivery market size reached a value of US$597.1 million in 2021. IMARC contends that the current growth rate will be sustained and that the market will be worth a huge US$1.55 billion by 2027. This represents a compound growth rate of 16.4 percent in the five years between 2022-2027. A young, tech-savvy population will help accelerate this trend.
Some of the most popular players in the food delivery sector include:
- Now.vn; and
- Grab Food.
The IMARC Group also noted that many people have created accounts and have been added to the mailing lists of companies offering home delivery during the pandemic. While people may have fewer concerns about going to restaurants or supermarkets in the current environment, they are more exposed to the marketing of food delivery companies. This is also likely to be a driver of growth and market penetration in the years to come.
Delivery apps also allow customers to peruse multiple menus and explore new cuisines without necessarily visiting the restaurants in question. This is deemed another possible driver of online food delivery in the years to come.
(With research contribution from Thu Nguyen.)
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