Vietnam‘s retail food sector is gro

Vietnam‘s retail food sector is growing rapidly, fueled by a combination of strong economic growth, rising income levels (particularly disposable income), a large young population, a growing middle
class, and increasing exposure to a Western lifestyle. More and more urban consumers are opting for an international shopping experience, shifting from the traditional “Wet” markets to supermarkets and shopping malls. This trend has been a driving force in increasing imports of Western food products. See Section III: Market Sector Structure and Trends for more information on the retail, food processing, and food service sectors.

Still, there are obstacles to increasing the U.S. market share. It often seems that U.S. suppliers are either unfamiliar with the market or are unable to evaluate a potential importer. In addition, for some products, the small order size (typically case-lots, not container loads or consolidated container loads) is a disincentive to target this market; thus, many U.S. products are transshipped through Hong Kong or Singapore, which adds handling costs and increases delivery times. However, current marketing efforts have the potential to pay large dividends down the road as Vietnam‘s economy continues to grow.

Vietnam’s best consumer years are still ahead and prospects are very promising for faster expansion of the retail, food processing, and food service sectors in the next five years. The Agricultural Affairs Offices in Hanoi and Ho Chi Minh City (HCMC) are ready to assist you in fine-tuning your export activities for Vietnam.

Table 1: Advantages and Challenges for U.S. Exporters

Advantages of Exporting to Vietnam Challenges for U.S. Exporters
Increasing incomes and a rapidly-growing middle class enamored with American culture (food, music, movies, fashion). Strong preference for European (esp. French) and NZ/Australian foods due to 20-year U.S. absence from the market.
U.S. foods are recognized as high quality items and great value for the price. Consumers are very price-sensitive. Vietnamese urban dwellers are slow to try new types of Western food.
Low level of competition from other U.S suppliers in the market. Significantly higher shipping costs and transportation time than Asia and Oceania.
Vietnam’s accession to WTO in 2007 has helped reduce tariffs on several food items and created a better business environment with more liberalized trading and service practices. High tariffs, cumbersome and excessive customs requirements, and non-science-based sanitary and phytosanitary requirements on animal and plant products persist, and the regulations are slow to change.
Voluntary tariff reduction on dairy products, corn, soybeans, and soybean meal, even beyond final bound rates. Low tariffs applied on food products imported from South East Asian (ASEAN) Countries; China, New Zealand and Australia under Free Trade Agreements.
Growing number of Western-style fast food restaurant chains, bakeries, and coffee shops. U.S. exporters often are not flexible enough or responsive to importers’ needs or the local business



Franchising has been introduced and the retail food sector is transitioning to a more modern structure. environment.
Growing rural-to-urban migration. Limited infrastructure and distribution for perishable products.
USDA Guarantee Export Credit Program (GSM 102) has been available for use in Vietnam since 2008. So far, eight Vietnamese commercial banks have been eligible under the program. Limited/restricted supply of bank loans and foreign exchange as well as weaker ties between the U.S. dollar and the Vietnamese dong, resulting in more risk for non L/C payment terms for sales of U.S. foods.

Trade Shows
We encourage you to assess market prospects first-hand. Face-to-face contact is very important to the Vietnamese, particularly in the initial stages of business relationships. The FAS-HCMC Office organizes a U.S. Pavilion at Vietnam’s international food show, Food & Hotel Vietnam (FHV) (www.foodnhotelvietnam.com), held bi-annually in HCMC. The next FHV is April 21 – 23, 2015.
Regional shows are held in Hong Kong (HOFEX, often held in May) and Singapore (Food and Hotel Asia (FHA)), approximately every two years. Many leading Vietnamese firms attend all three of these trade shows.

Reports on Food and Agricultural Import Regulation and Standards (FAIRS)
The Exporter Guide should be used in conjunction with our other trade regulatory reporting, especially the Food and Agricultural Import Regulations and Standards (FAIRS) reports: (to be updated soon), series of Food and Agricultural Import Regulations and Standards narrative reports (FAIRS narrative); VM1052 (FAIRS Export Certificate); VM3057, VM3070, VM3071 (Maximum Residue Levels).
Despite our efforts to update all reports, some of the information will quickly become dated. Please contact the Hanoi and HCMC Offices for the most up-to-date information.

Section II. Exporter Business Tips:
Below are some of the most important points to understand about doing business in Vietnam, from a
U.S. agricultural exporter’s point of view. Please see the list of resources at the end of this report for additional sources that can enhance your understanding of Vietnam’s business and food policy practices.

(1) Local Business Customs and Market Entry Strategy
Most local businesses are small or medium-sized companies that rely on bank loans to run their business, with loan sizes varying according to collateral. The following local customs and habits are
important to take into account. Vietnamese business-people:
• Prefer face-to-face meetings in the initial stages, with additional follow-up visits, phone calls, emails, and faxes. Initial face-to-face meetings without follow-up visits rarely result in sales. Sending offers and quotations without first establishing a relationship (cold calls) is highly unlikely to result in sales.
• Can be very slow to respond to emails.
• Sometimes complain that U.S. suppliers do not make enough of an effort to understand their particular needs and constraints.
• May exhibit strong interest at the outset of business discussions and then start to lose interest when faced with difficulties in implementing the details.
• Tend to be more sensitive about price than quality, but this is beginning to change in some sectors.
• Tend not to pay close enough attention to trade policies and import regulations. When import regulations change, they often do not have accurate information about the changes, which results in misinterpretation of those changes. For more accurate information, always refer to FAS trade reports and/or check with the local FAS Office.
• Quite often seek exclusive import and distribution rights, deferred payment terms (always risky), and large marketing budgets on new deals and new-to-market products.
• Companies that specialize in food import and distribution may have investments in other types of businesses (e.g. real estate, car dealerships, etc.). In certain cases, the food business may receive less attention, particularly in areas such as checking and responding to emails in a timely manner. Given this divided focus, such firms may be less engaged or focus more on the business with the better return and could discontinue areas of their enterprise that are not doing well without notice or explanation.
U.S. exporters should note that Vietnam’s legal and regulatory environment is undergoing constant change. Ongoing efforts to implement WTO mandates are stimulating change in public sector transparency and trade liberalization, even though import procedures remain inconsistent and still quite bureaucratic.

On January 1, 2009, as part of commitments made upon joining WTO, Vietnam officially opened up trading rights and distribution rights to foreign players. Since that date, foreign players are able to operate in their trading and distribution business including the retail business sector as 100 percent foreign-owned entities. However, FAS-Vietnam has not seen a flood of new market entrants. This could be a result of the fact that the Government of Vietnam still gets to determine whether there is “the economic need” for additional outlets beyond the one that is initially opened by the 100 percent foreign- owned entity. Local importers continue to play a major role in distributing and promoting imported products in Vietnam. Typically, local importers have their own sales agents and distribution fleet and are in direct contact with supermarkets, wholesalers, and in many cases, also with thousands of small-scale grocery stores. Some importers import a wide range of products with no particular loyalty to a specific product, brand or origin. Others are working exclusively to develop markets for specific labels. The latter tend to promote their products more heavily and may require more involvement from the exporter in order to penetrate the market.

It is critical for U.S. exporters to study the market potential for their products before initiating sales. They should also visit Vietnam to gain a first-hand feel of the market, preferably around the time of the bi-annual Food & Hotel Show in Ho Chi Minh City (next show in April 21 – 23, 2015). U.S. exporters are encouraged to review the FAS-Vietnam Exporter Guide as well as trade policy reports before visiting. Exporters may also contact the FAS Offices in Hanoi or Ho Chi Minh City for assistance in setting up initial meetings with potential importers and major retailers.

Results (Vietnamese) 1:

Vietnam‘s retail food sector is growing rapidly, fueled by a combination of strong economic growth, rising income levels (particularly disposable income), a large young population, a growing middleclass, and increasing exposure to a Western lifestyle. More and more urban consumers are opting for an international shopping experience, shifting from the traditional “Wet” markets to supermarkets and shopping malls. This trend has been a driving force in increasing imports of Western food products. See Section III: Market Sector Structure and Trends for more information on the retail, food processing, and food service sectors.Still, there are obstacles to increasing the U.S. market share. It often seems that U.S. suppliers are either unfamiliar with the market or are unable to evaluate a potential importer. In addition, for some products, the small order size (typically case-lots, not container loads or consolidated container loads) is a disincentive to target this market; thus, many U.S. products are transshipped through Hong Kong or Singapore, which adds handling costs and increases delivery times. However, current marketing efforts have the potential to pay large dividends down the road as Vietnam‘s economy continues to grow.Vietnam’s best consumer years are still ahead and prospects are very promising for faster expansion of the retail, food processing, and food service sectors in the next five years. The Agricultural Affairs Offices in Hanoi and Ho Chi Minh City (HCMC) are ready to assist you in fine-tuning your export activities for Vietnam.Bảng 1: Ưu điểm và những thách thức cho Hoa Kỳ xuất khẩuLợi thế của xuất khẩu đến Việt Nam những thách thức cho Hoa Kỳ xuất khẩuTăng thu nhập và một phát triển nhanh chóng cở say mê với văn hóa Hoa Kỳ (thực phẩm, âm nhạc, phim ảnh, thời trang). Mạnh ưu tiên cho Châu Âu (đặc biệt là Pháp) và New Zealand/Australia thực phẩm do 20 năm US vắng mặt từ thị trường.Thực phẩm Hoa Kỳ được công nhận là sản phẩm chất lượng cao và đáng giá. Người tiêu dùng là rất nhạy cảm với giá. Cư dân đô thị Việt Nam được làm chậm để thử các món phương Tây mới.Thấp mức độ cạnh tranh từ các nhà cung cấp Mỹ trên thị trường. Đáng kể cao hơn vận chuyển chi phí và thời gian vận chuyển hơn Asia và Châu Đại Dương.Việt Nam gia nhập WTO vào năm 2007 đã giúp giảm thuế quan trên một số mặt hàng thực phẩm và tạo ra một môi trường kinh doanh tốt hơn với triều thương mại và dịch vụ thực tiễn. Cao thuế, Hải quan cồng kềnh và quá nhiều yêu cầu và phòng không-khoa học-dựa vệ sinh và phytosanitary yêu cầu về sản phẩm động vật và thực vật vẫn tồn tại, và các quy định được làm chậm để thay đổi.Giảm thuế quan tự nguyện trên sản phẩm từ sữa, bắp, đậu nành và đậu nành bữa ăn, thậm chí ngoài cuối cùng ràng buộc tỷ giá. Thấp giá cước áp dụng trên các sản phẩm thực phẩm nhập khẩu từ các quốc gia Nam đông á (ASEAN); Trung Quốc, New Zealand và Australia theo Hiệp định thương mại tự do.Số ngày càng tăng của chuỗi nhà hàng thức ăn nhanh kiểu phương Tây, bánh mì và cà phê. Doanh nghiệp xuất khẩu Hoa Kỳ thường không phải là đủ linh hoạt hoặc đáp ứng với nhu cầu nhập khẩu hoặc doanh nghiệp địa phương Franchising has been introduced and the retail food sector is transitioning to a more modern structure. environment.Growing rural-to-urban migration. Limited infrastructure and distribution for perishable products.USDA Guarantee Export Credit Program (GSM 102) has been available for use in Vietnam since 2008. So far, eight Vietnamese commercial banks have been eligible under the program. Limited/restricted supply of bank loans and foreign exchange as well as weaker ties between the U.S. dollar and the Vietnamese dong, resulting in more risk for non L/C payment terms for sales of U.S. foods.Trade ShowsWe encourage you to assess market prospects first-hand. Face-to-face contact is very important to the Vietnamese, particularly in the initial stages of business relationships. The FAS-HCMC Office organizes a U.S. Pavilion at Vietnam’s international food show, Food & Hotel Vietnam (FHV) (www.foodnhotelvietnam.com), held bi-annually in HCMC. The next FHV is April 21 – 23, 2015.Regional shows are held in Hong Kong (HOFEX, often held in May) and Singapore (Food and Hotel Asia (FHA)), approximately every two years. Many leading Vietnamese firms attend all three of these trade shows.Reports on Food and Agricultural Import Regulation and Standards (FAIRS)The Exporter Guide should be used in conjunction with our other trade regulatory reporting, especially the Food and Agricultural Import Regulations and Standards (FAIRS) reports: (to be updated soon), series of Food and Agricultural Import Regulations and Standards narrative reports (FAIRS narrative); VM1052 (FAIRS Export Certificate); VM3057, VM3070, VM3071 (Maximum Residue Levels).Despite our efforts to update all reports, some of the information will quickly become dated. Please contact the Hanoi and HCMC Offices for the most up-to-date information.Section II. Exporter Business Tips:Below are some of the most important points to understand about doing business in Vietnam, from aU.S. agricultural exporter’s point of view. Please see the list of resources at the end of this report for additional sources that can enhance your understanding of Vietnam’s business and food policy practices.(1) Local Business Customs and Market Entry StrategyMost local businesses are small or medium-sized companies that rely on bank loans to run their business, with loan sizes varying according to collateral. The following local customs and habits areimportant to take into account. Vietnamese business-people:• Prefer face-to-face meetings in the initial stages, with additional follow-up visits, phone calls, emails, and faxes. Initial face-to-face meetings without follow-up visits rarely result in sales. Sending offers and quotations without first establishing a relationship (cold calls) is highly unlikely to result in sales.• Can be very slow to respond to emails.• Sometimes complain that U.S. suppliers do not make enough of an effort to understand their particular needs and constraints.• May exhibit strong interest at the outset of business discussions and then start to lose interest when faced with difficulties in implementing the details.• Tend to be more sensitive about price than quality, but this is beginning to change in some sectors.• Tend not to pay close enough attention to trade policies and import regulations. When import regulations change, they often do not have accurate information about the changes, which results in misinterpretation of those changes. For more accurate information, always refer to FAS trade reports and/or check with the local FAS Office.• Quite often seek exclusive import and distribution rights, deferred payment terms (always risky), and large marketing budgets on new deals and new-to-market products.• Companies that specialize in food import and distribution may have investments in other types of businesses (e.g. real estate, car dealerships, etc.). In certain cases, the food business may receive less attention, particularly in areas such as checking and responding to emails in a timely manner. Given this divided focus, such firms may be less engaged or focus more on the business with the better return and could discontinue areas of their enterprise that are not doing well without notice or explanation.U.S. exporters should note that Vietnam’s legal and regulatory environment is undergoing constant change. Ongoing efforts to implement WTO mandates are stimulating change in public sector transparency and trade liberalization, even though import procedures remain inconsistent and still quite bureaucratic.

On January 1, 2009, as part of commitments made upon joining WTO, Vietnam officially opened up trading rights and distribution rights to foreign players. Since that date, foreign players are able to operate in their trading and distribution business including the retail business sector as 100 percent foreign-owned entities. However, FAS-Vietnam has not seen a flood of new market entrants. This could be a result of the fact that the Government of Vietnam still gets to determine whether there is “the economic need” for additional outlets beyond the one that is initially opened by the 100 percent foreign- owned entity. Local importers continue to play a major role in distributing and promoting imported products in Vietnam. Typically, local importers have their own sales agents and distribution fleet and are in direct contact with supermarkets, wholesalers, and in many cases, also with thousands of small-scale grocery stores. Some importers import a wide range of products with no particular loyalty to a specific product, brand or origin. Others are working exclusively to develop markets for specific labels. The latter tend to promote their products more heavily and may require more involvement from the exporter in order to penetrate the market.

It is critical for U.S. exporters to study the market potential for their products before initiating sales. They should also visit Vietnam to gain a first-hand feel of the market, preferably around the time of the bi-annual Food & Hotel Show in Ho Chi Minh City (next show in April 21 – 23, 2015). U.S. exporters are encouraged to review the FAS-Vietnam Exporter Guide as well as trade policy reports before visiting. Exporters may also contact the FAS Offices in Hanoi or Ho Chi Minh City for assistance in setting up initial meetings with potential importers and major retailers.