Food processing industry has ample space for development

There is an abundance of mutually beneficial co-operation opportunities in the food processing industry

Steady growth

Currently, food processing is one of the priority industries in the nation’s development plan, with initiatives to increase yield and the export value of agricultural and processed food products.

The Vietnamese food processing industry has been growing steadily at about 7% in the last five years. Annual food consumption value in the country was estimated to make up 15% of the GDP and the quantity also increases by approximately 10% per year, while beverage consumption grows at 6.66% per annum.

According to Do Thang Hai, Deputy Minister of Industry and Trade, Vietnam has abundant raw materials and is able to meet the demand of large-scale food processing enterprises. Vietnam is one of the leading exporters of rice, coffee, pepper, and cashew nuts, among others.

“The investment potential of the food processing industry is very big. This is an opportunity for foreign investors to break open the market. All Vietnamese enterprises, organisations, and localities should actively attract foreign investors to invest and co-operate in this sector,” Hai emphasised.

At the end of October 2017, as many as 128 nations and territories were investing in Vietnam with a total registered capital of US$312.91 billion, including US$184.4 billion in the processing and manufacturing industry, an equivalent to 59% of the total investment capital in Vietnam. Particularly, there were 295 food processing projects with over US$4 billion of registered capital in the first ten months of 2017.

A report of Business Monitor International recently forecasted that the growth speed of the food and beverage industry will maintain an annual dual growth of 10.9% in 2017-2019 and consumption demand will focus on food and necessities.

Investment potential

Vietnam is a big and promising market for all types of processed food. As it cuts down on housework, processed food products are becoming more popular, giving rise to deepening demand, both in quantity and diversity.

Food production and processing, especially milk, beverages, confectionery, and cooking oil, are seen as the most lucrative market segments. According to data from the Ministry of Industry and Trade (MoIT), fresh milk consumption is forecasted to reach 27-28 litres per person per year in 2020; confectionery consumption will increase by 10% per year; cooking oil consumption will hit 17 kilogrammes in 2020 and 20 kilogrammes in 2025; beverage consumption will hit 6.8 billion litres in 2020 and 9.1 billion litres in 2025.

The potential of this sector lies not only in domestic consumption but also in exports. A diverse range of Vietnamese agricultural products are exported to over 100 nations and territories.

Meanwhile, Vietnam has been making leaps and bounds to integrate into the world economy through a series of free trade agreements. This creates favourable conditions for food processing businesses to expand their market size, enhance export output, and reduce the import expenses of raw materials, machinery, and equipment—which will be manifest in product prices and the sector’s improved competitiveness.

“The Vietnamese food processing industry is oriented to develop based on modern equipment and advanced technology, as well as exploit and use domestic materials as much as possible in order to create diversified products, guarantee quality and food hygiene, develop sustainably, and improve competitiveness,” noted Bui Truong Thang, vice director general of the Industry Agency at MoIT.

Addtionally, a transparent investment environment, abundant labour force, and the available infrastructure of industrial zones will facilitate foreign enterprises to invest and do business in the country.

“Korean enterprises are moving to invest in Southeast Asia, and especially in Vietnam. The number of those paying attention and investing in the local food processing industry is increasing,” said Nam Sang Kun, a Korean investment promotion professional.

In additional to the Republic of Korea, the food processing industry also needs co-operation and investment from foreign investors not only to enable Vietnamese food products to access bigger markets, but also to support domestic firms to innovate, build new quality standards, and develop Vietnamese food brands across the globe.