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Vietnam’s FMCG market pursues growth at home and abroad

Category: Retail

While slowing moderately, in line with general economic trends, Vietnam’s fast-moving consumer goods (FMCG) segment is continuing to expand, with strong areas of potential growth both at home and abroad.

The rate of expansion of FMCG sales in Vietnam’s six main population centres slowed somewhat in the first quarter, according to a survey conducted by market research firm Nielsen, rising by 3.6% year-on-year (y-o-y). This compared to 5.7% growth in the fourth quarter of 2015.

Beverages, including beer, dominated FMCG sales in the first quarter, accounting for 39% of turnover, with milk products contributing 16% and food 15%. This was followed by tobacco products (13%), personal care items (8%), household products (6%) and baby products (4%).

Market challenges

The easing of FMCG sales growth reflects a wider cooling in the Vietnamese economy, with GDP expanding at 5.52% y-o-y in the first half, down from 6.32% for the same period in 2015.

The slowing of sales is also the product of a more sophisticated client base, according to Nguyen Anh Dung, Nielsen Vietnam’s director of retail measurement services.

“Urban consumers are increasingly demanding and expecting better choices. They’re looking for more innovations and new consumption experiments,” he told local press earlier this summer. “With a lack of innovation, FMCG is becoming more basic items, which consumers would still buy, but only at a sufficient level.”

The Vietnamese public’s appetite for new products is both a challenge and an opportunity. According to a recent product innovation study, Vietnamese consumers try more new products than other South-east Asian shoppers, with 88% of Vietnamese consumers saying they bought a new item during their last shopping trip, compared to a regional average of 69%.

This trend is something of a double-edged sword. While maintaining customer loyalty to existing brands is a challenge for manufacturers, this willingness to try new things is also a key advantage for firms breaking into the Vietnamese market or existing players launching new product lines.

However, as trade barriers are lowered as a result of the ASEAN Economic Community and the Trans-Pacific Partnership, Vietnamese FMCG producers are likely to face greater regional and international competition.

Potential remains strong

Though there has been some slowing, medium-term potential in the market is strong, according to a report issued by the Ministry of Industry and Trade early this year. Fuelled by growing incomes and a young and active consumer base, FMCG spending is expected to reach $173bn by 2020, up 23.6% from the $140bn forecast for this year.

Indeed, consumer confidence remained strong heading into the second half of the year. Sentiment in the second quarter was only marginally down on the opening three months of the year, according to an August Nielson survey, with the index at 107 points, two below the first quarter’s peak.

The vast majority of Vietnam’s manufacturing and processing firms also have a positive outlook for the second half, a General Statistics Office survey reported, with more than 90% of respondents expecting production to either increase (55%) or remain stable (35.4%) in the second half of the year.

Market prospects

With Vietnam’s population expanding by 1m per annum, the potential consumer market is significant, and the penetration rate for many FMCGs has yet to be maximised, according to Mai Kieu Lien, CEO of dairy industry leader Vinamilk.

“As in other ASEAN markets, Vietnam’s rapid urbanisation and rising incomes led to a growing adoption of Western styles, which led to a boom in FMCGs,” she told OBG. “However, purchasing power in Vietnam is also one of the lowest in the region, so a localised strategy based on pricing has to be put in place.”

A number of leading Vietnamese FMCG producers are looking further afield for opportunities, with the country’s near neighbours seen as having strong potential.

Kajiwara Junichi, CEO of food manufacturer Acecook Vietnam, told OBG, “Most companies are not focused on South-east Asia, especially Indonesia, as they have their local giants. Laos, Myanmar and Cambodia are good markets to enter, as they are not as mature as Thailand.”

Another area of potential growth is Vietnam’s rural regions, home to roughly two-thirds of the population. According to a report by market survey firm Kantar WorldPanel, household income in rural areas is rising faster than in urban centres, albeit from a lower base.

Sales of domestic FMCGs are already increasing at more than twice the rate of foreign brands in the segment, and Vietnamese brands’ market share in non-urban areas is set to grow from 54% of total FMCG sales in 2015 to 64% by 2020.

This Vietnam economic update was produced by Rey Davis-Tuplano, Editorial Manager Vietnam, Oxford Business Group.

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VIETNAM RETAIL SECTOR BRIEFING 2016

Category: Retail

With increasing incomes, rapid urbanisation together with strong economic growth and young population, Vietnam is nowadays one of the fastest growing retail markets in Asia. The year 2016 has seen a significant emerge in retail sector with many remarkable events such as high-value M&A affairs or serial opening of convenience store chains so far; while the amount of FDI generally maintains robust.
For details of the report, please see attached file here 

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Vietnam Water Sector Briefing

Category: Environment

BBGV is pleased to bring you our latest sector briefing on Vietnam’s water industry. The briefing provides an overview on the country’s water profile, wastewater treatment and climate change. Vietnam has taken steps to improve its water resource management via several initiatives with the support from the international community. Key challenges are also featured alongside the technologies and services in demand.
Full briefing can be viewed here

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Vietnam ICT Sector Briefing

Category: ICT

BBGV is pleased to bring you our latest sector briefing on ICT in Vietnam. The briefing provides an overview on Information Technology and Telecommunication. The findings are further analysed for each IT and Telco’s products and are sum up in two SWOT analyses.


Full briefing can be viewed here

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Vietnam’s agriculture sector at a crossroads Oxford Business Review

Category: Agriculture

By Rey Davis-Tuplano

 

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New trade agreements, as well as a push for value-added processing, should help sustain export growth in Vietnam’s agriculture sector.

A World Bank report released in late September highlighted the need for Vietnam to revamp its agricultural sector to meet demographic, economic and environmental challenges.

The report, entitled “Transforming Vietnamese Agriculture: Gaining more from less”, suggests that the sector needs to boost value-added content and diversify its offerings to increase the country’s market access opportunities.

The recommendations are timely, given that Vietnam’s export market is expected to grow by some 500m people through the recent formation of the ASEAN Economic Community and the forthcoming EU-Vietnam Free Trade Agreement, to take effect in 2018.

From primary production to processing

As one of the mainstays of the Vietnamese economy, agriculture accounted for 17% of GDP in 2014 and currently employs nearly half of the workforce.

However, increasing urbanisation, which is forecast to reach 50% of the population within a decade, combined with a burgeoning middle class, is expected to result in a shift in consumption and employment trends in the sector.

Employment in the primary agricultural sector is predicted to decrease from its current 47% to between 25% and 30% by 2030, although much of this loss should be offset by a strong rise in jobs in the value-added component, with employment rates of up to 40%.

Domestic sales of snacks, processed and ready-to-eat foods have gained momentum in the last decade while Vietnam’s agricultural trade – which has traditionally been dominated by raw commodities – is starting to see a shift as well.

As a result, primary agriculture’s contribution to GDP is expected to decline by 0.5% annually, while agro-industry’s share could nearly double to account for roughly one-fourth of the country’s GDP by 2030, according to the World Bank report.

To this end, Vietnam is also looking to consolidate and scale its operations to meet the needs of agribusiness.

The small scale of most Vietnamese farms makes it difficult for agribusiness to make the most from local production, according to Nguyen Van Khai, CEO of Pan Group, an integrated agriculture and food manufacturer.

“Instead of dealing with one large producer, as is often the case in Western countries, companies operating in Vietnam have to deal with multiple small landholders,” Nguyen told OBG. “If you are dealing with 300 ha in Vietnam, you have to work with 300 people.”

Improving quality for export

While Vietnam’s agricultural exports are on the rise – recording a 11% year-on-year (y-o-y) increase to $10.2bn in the first quarter of 2016, and are expected to grow by between 4% and 6% annually – its products are perceived as being of lower value and quality.

The government is already looking to take suggestions from the World Bank report on board to overhaul the agricultural sector through the greater use of advanced technology and techniques for value-added processing.

According to Nguyen Xuan Cuong, the minister of agriculture and rural development, broadening the base of its export market is also a priority.

“In the long run, we should focus more on official trade with China while expanding our foreign trade with Japan, the US, Australia, the EU and others,” he told local media in September. “This is the right path for agricultural development.”

Currently, some 35% of Vietnam’s agricultural shipments are destined for the Chinese market, a level likely to rise this year, with exports to its northern neighbour rising 47% y-o-y in the first four months of 2016, according to ministry data.

At the end of September, the Asian Development Bank (ADB) lowered its forecast for Vietnam’s economic growth, projecting GDP to expand by 6% this year, down on its initial estimate of 6.7% made in March. The bank also revised its outlook for next year to 6.3% from earlier estimates of 6.5%.

One of the key reasons for the downward revision was the weaker performance of Vietnam’s agriculture sector, with the ADB citing recent drought conditions in the Mekong Delta and Central Highlands regions, along with falling global commodity prices impacting export returns.

Environment for change

In addition to the effects of climatic conditions on output, the environmental impact of poor agricultural practices is also becoming a growing concern for the sector, as Vietnam looks to expand its industry for export.

‘“Business-as-usual’ is no longer an option for the sector – growth has slowed down, it is vulnerable to climate hazards and leaves a large environmental footprint,” Ousmane Dione, country director for Vietnam at the World Bank, said at a press conference in September.

In early October, for example, tonnes of fish washed ashore at West Lake, Hanoi’s largest freshwater lake, while in April an incident at Formosa Ha Tinh Steel’s plant led to fish deaths, local media reported.

In a bid to address environmental issues, a joint delegation from the Ministry of Industry and Trade and Ministry of Environment and Natural Resources is planning to look into factories’ production and waste treatment facilities, which pose a risk to water contamination, according to press reports.

At the same time, the private sector is also looking to boost efforts in this area.

“Resources and waste management are key sectors in which foreign firms are able to contribute to Vietnam’s development,” Guillaume Crouzet, general director of the French Chamber of Commerce in Vietnam, told OBG. “One of the elements that helps a foreign firm decide to invest in Vietnam is access to proper resources.”

This Vietnam economic update was produced by Oxford Business Group.

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Vietnam sharpens focus on regional ties

Category: Doing Business in Vietnam

Vietnam sharpens focus on regional ties
by Rey Davis-Tuplano, Oxford Business Group

 

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The ultimate target is for Vietnam to have achieved the same average indicators for its business environment as ASEAN - 4 countries, namely Malaysia, Thailand, Singapore and the Philippines.

As it takes over as chair of APEC this year, Vietnam will be working towards promoting growth and enhanced regional integration, while also pushing its own reform agenda at home.

Founded in 1989 as a vehicle to promote regional cooperation between Pacific Rim economies, some of APECs core principles, such as free trade, are coming under pressure.

 

Roadblocks to prosperity

“APEC 2017 takes place as the world and our region experience profound and rapid changes,” Bui Thanh Son, permanent deputy minister of foreign affairs, told OBG in a recent interview.

“Prolonged economic stagnation, rising protectionism, anti-globalisation sentiment, terrorism and regional conflicts, along with more complex non-traditional security challenges, are significantly affecting our forum and each member economy.”

While the region faces a rising tide of challenges to development, some stakeholders believe that these could spur a new dynamism as economies look to foster more inclusive and sustainable growth.

“In 2017 APEC will have an even more important role to play in curbing protectionism and promoting the kind of trade that is not only free but also inclusive for all, creating business and employment opportunities for societies,” Bui Thanh Son said.

 

Pressing priorities

Operating under the theme “Creating New Dynamism, Fostering a Shared Future”, APEC will have four key pillars in 2017. The first of these aims to enhance economic resilience, increase productivity, alleviate poverty, narrow the development gap and empower women and girls through structural reform, innovation and human resource development.

The second priority for the year will be to develop greater regional integration and connectivity, seen as crucial to regional economic growth.

The third pillar involves boosting the competitiveness and innovative capacity of micro, small and medium-sized enterprises (MSMEs) – allowing them to better capitalise on the opportunities of the digital age – while the fourth looks to strengthen food security and sustainable agriculture to meet the demand of an ever-increasing population.

 

Home-ground advantage

Vietnam is set to host around 200 activities as chair of APEC this year, including eight ministerial-level conferences and the 25th APEC Summit in Danang.

According to Bui Thanh Son, this could all help add momentum to the region’s economic growth and integration and Vietnam’s own development push.

The third APEC pillar in particular dovetails with the directions of reforms being enacted domestically, with recent moves focusing on enhancing the business environment.

To this end, Vietnam issued its latest Resolution 19 reforms earlier this month – the fourth such package in as many years.

As part of the resolution, the government aims to reduce the processing time required for several types of administrative procedures. This includes lowering the average time taken for construction licence approvals from 82 to 63 days, bringing down the time spent on tax and social insurance payments to 168 hours per year from 540, and speeding up Customs clearance procedures.

Authorities also want to halve the number of days it takes for a company to connect with the state’s water supply to seven days.

The ultimate target is for Vietnam to have achieved the same average indicators for its business environment as ASEAN-4 countries, namely Malaysia, Thailand, Singapore and the Philippines.

The reforms should also help cut costs and the time needed to start a business in Vietnam, making it a more attractive investment destination for potential investors at home and abroad.

 

Business climate change

Furthermore, improvements in these area could help lift Vietnam on the World Banks ease of doing business index, where it ranked 82nd of 190 economies. While this was a nine-place improvement on the “Doing Business 2016” report, the country slipped ten positions in the “starting a business” category.

Areas where Vietnam registered improvements were in paying taxes and trading across borders. Improvements to the former were facilitated by simplifications to tax compliance processes undertaken in the previous Resolution 19 reform drive, which also saw the country implement an electronic customs clearance system to make trading across borders easier, cheaper and faster.

 

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The Training Gateway 2017 – Export Opportunity and Cooperation for Development

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The Training Gateway, which is held annually, is the occasion for UK delegates to visit Vietnam and work on Education and Corporate Training Trade Mission. This year, the Business Centre of BBGV is honoured to support this event.


The content of the training programmes delivered will cover many outstanding sectors, such as: teacher training, vocational training in hospitality and catering, oil and gas engineering, leadership and management training, English Assessment, etc.,. During the first 2 days in Ho Chi Minh City and another 1 day in Hanoi, the delegates would have the opportunities to introduce their training programmes to key participants, who are mostly Human Resource directors and educational buyers in the region, through Master class/ workshops, mini exhibitions along with B2B meetings and site visits.

 

Prior to the main event, there will be a pre mission webinar on Thursday 27th of April between 8:30 and 9:30 am (UK time) as a great opportunity to find out more about the mission and raise any questions. To register for the webinar, please Click here
For more information about the scope and schedule of the event, please find it here



If you would like to join as a delegate, please contact Ms. Amanda Selvaratnam by Amanda.Selvaratnam@york.ac.uk

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Consultancy field trips program with CASS Business School of London (CASS)

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On 29th of March, BBGV had the pleasure to once again welcome the MBA students from CASS to Vietnam for consultancy field trips, as a co-host annual activity since 2009.

 

CASS is located in the financial centre of London, educating MBA and Executive MBA students. Their two-year programme is ranked as one of the world’s best. CASS students are professionals and managers in their 30’s and represent the best institutions in the City of London and other European business capitals.

 

During their one-week stay in Vietnam, around 50 students are divided into groups and worked intensively on business development projects at Vietnamese companies. The projects are specialised in new marketing or cost cutting strategies, company restructuring, new distribution strategies or the possibility of entering new markets. The hosting companies benefited from working with experienced executives come from over 30 countries and different industries. For this year visit, they were Vietnam Airlines, Le Bros, Viglacera, Maritime Bank, Vietcombank, Canifa, IDC Group, Hanoia and PYS travel.
This program also gives the local senior management teams opportunities to utilise their skills and knowledge of international business to grow beyond the border of Vietnam.

 

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Doing Agri-Business in Vietnam Webinar


The webinar Doing Agri-Business in Vietnam was successfully held by BBGV on February 17, 2017. The invited experts, in the role of stakeholders, have provided valuable information on overview of agri-business in Vietnam, updates on recent legal frameworks for registering new agri-tech items (machinery & equipment), agricultural stuffs (animal feeds, feed additives, and fertilizer); and practical experiences in doing agri-business in Vietnam.

Please click download the full Audio and Presentation

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SCC – New Global Delivery Centre opened in Ho Chi Minh City

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source: UKINVIETNAM


With the key support from The Business Centre- British Business Group Vietnam (BBGV), SCC has successfully launched its second Global Delivery Centre in Ho Chi Minh City on February 24, 2017. The inauguration ceremony welcomed the participation of Dr Liam Fox - UK Secretary of State for International Trade, along with SCC founder - Sir Peter Rigby.

SCC, with 40 years of development, is the largest independent IT group in Europe, which not only provides businesses with quality IT infrastructure solutions and services, but also contributes to UK national charities and heritage.

After the earlier approach to Vietnam with a Preferred Partner framework agreement signed with Vietnamese software giant FPT Software in September 2016, SCC’s operation expansion to Vietnam has marked its “another important strategic milestone for the business”, said CEO James Rigby. The new operation also contributes to enhance the business partnership between two countries.

In his speech, Sir Peter Rigby sent great appreciation to the organizations, including BBGV, for the enthusiastic assistance to SCC expansion plan. With £32m revenue generated in fiscal year 2016, the new Centre aims to deliver great support to clients in both Eastern and Western areas.

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