23-Sep-2022 Intelesia |
The recovery and growth of the food and beverage (FB) market after COVID-19 is providing opportunities not only for domestic companies but also for those in the United Kingdom (UK), especially the success of the UK-Vietnam Free Trade Agreement After (UKVFTA).
After all COVID-19 restrictions are lifted and life returns to normal, there has been a resurgence in domestic consumption demand, which has become the driving force to help the FB industry grow again.
According to a report on socio-economic performance in August by Vietnam’s Office of General Statistics, total retail sales of consumer goods and services were estimated at VND481.2 trillion (US$20.3 billion), up 0.6 percent month-on-month. and 50.2 percent as compared to the same period last year. The result was much better in scale and growth rate compared to the same period in previous years before the outbreak of COVID-19.
For the first eight months of the year, total retail sales of consumer goods and services were projected to increase 19.3 percent to approximately VND3.7 quadrillion.
In the same period last year, it was 3.5 percent lower, if we exclude the 15.1 percent increase in prices, total retail sales of consumer goods and services decreased by 5.1 percent.
According to Statista, the total value of food and beverage consumption last year was VND816 trillion, an increase of 10.5 percent year-on-year, contributing about 13 percent to GDP. Spending on FB accounts for the highest proportion in the monthly spending structure of consumers, accounting for about 35 percent of total consumption spending, a 2018 survey by Vietnam Report showed.
Experts said that even though inflationary pressures still persist for the rest of the year, prices of household goods are basically under control, which is helping the consumer goods volumes to pick up gradually in future.
Research firm Business Monitor International said that total household spending in Vietnam is set to inch higher during the period from 2022 to 2025. Domestic consumers will retain their strong purchasing power for essential commodities including food and beverages.
A report by market intelligence and advisory firm Mordor Intelligence has revealed that the country’s FB industry will achieve a compound annual growth rate of 8.65 percent during 2021 2026.
In the first half of the year, several enterprises in the FB industry, including dairy producers Vinamilk and Masan Consumer Holdings under the Masan Group, reported excellent business results in terms of revenue and profits in both domestic and international markets.
This opens up a huge opportunity for UK food and beverage products to expand their presence in the Vietnamese market, particularly under the UKFTA.
Under the deal, most food and beverage excise duties will be phased out over 29 years. Some products may use a tariff quota, which brings tariff rates down to 0 percent for approved exporters, as part of a pre-determined quota.
The reduction in tariffs under the UKVFTA ensures a significant market advantage for UK exporters.
The FB products that Vietnam imports the most from the UK are beverages (mostly wine and spirits), fish and crustaceans, products of the milling industry, cereals, flour, starch, or milk and dairy product preparations. Vietnam’s Most Favored Nation (MFN) rates on FB products range between 3-60 per cent.
Economist Vo Tri Thanh said that UK FB companies have two advantages in the Vietnamese market.
“The first advantage is that UK FB products are more likely to reach Vietnamese consumers since the EU-Vietnam Free Trade Agreement (EVFTA) came into force, as it did not leave the bloc at that time,” Thanh said. “
This helps Vietnamese consumers become familiar with the taste and taste of UK FB goods.
In addition, over the past ten years, Vietnam’s drinking culture has boomed, especially in large cities such as Hanoi and HCM City. Therefore, with increased market access, tariff preferences and higher demand, UK FB goods imports will certainly increase, the economist said.
“In fact, there is a traditional alcohol line in the UK that Vietnamese people love, which is whiskey. That is also a positive point,” Thanh said.
Irish whiskey and Scotch whiskey are the two UK Geographical Indications (GIs) protected under the Treaty.
However, Thanh stressed that the Vietnamese FB industry is very competitive.
“Take wine as an example. Many countries in the world can produce wine and become famous because of it. Secondly, the taste of the Vietnamese people is not fully formed according to a standard taste, so it is marketed and There is quite a challenge for advertising,” he said.
Article Source: https://www.intellasia.net/vietnam-fb-an-appealing-industry-for-uk-companies-1094682