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Dec 28, 2019 / 13:21

Vietnam’s Food & Beverage industry regains positive momentum in 2019

In the first 11 months of 2019, rural areas achieved a 9.3% value growth, while urban areas grew by 6.1% over the same period last year, mainly driven by the increase in sales volume.

After a period of deceleration in 2018, Vietnam’s fast-moving consumer goods (FMCG) market regained its positive momentum in 2019, according to Viet Dragon Securities Company (VDSC).

 

According to Kantar Worldpanel, rural areas recorded higher growth faster than urban four key cities, including Hanoi, Da Nang, Ho Chi Minh City and Can Tho, in the past two years. Specifically, in the first 11 months of 2019, rural areas achieved a 9.3% value growth, while urban areas grew by 6.1% over the same period last year, mainly driven by the increase in sales volume.

VDSC’s report stated personal care led the growth in the urban four key cities, while dairy and related products recorded a higher growth than the same period last year. In rural areas, dairy and related products achieved the highest growth, followed by personal care. Beverage, while recording double-digit growth in rural areas, just showed signs of recovery in the urban four key cities.

 

Dairy and its related products are forecast to reach VND83.5 trillion (US$3.61 billion) in 2019, up 11% year-on-year, according to Euromonitor. Particularly, fresh milk achieved the highest growth in value, estimated at VND2.2 trillion (US$95.19 million), up 13%, while the average price of dairy products increased by 1-2%. Consumer demand continues to shift to fresh milk and nutritious organic milk products with more stringent quality requirements. Favorable demographic factors and growing middle-class income will continue to bolster the long-term growth.

 

Beer sector recorded a compound annual growth rate (CAGR) of 10% during the period of 2014-2018. However, according to Euromonitor, the growth rate is forecast to gradually decline to 6% year-on-year in the next 5 years, due to concerns about (1) the government has raised the education and consumer awareness about the harmful effects of alcohol, (2) the special consumption tax may continue to grow in the coming years, leading to a decline in consumer demand.

In 2018, Saigon Alcohol Beer and Beverage Corporation (Sabeco) and Heineken continued to expand its market proportion in volume, but other firms such as Hanoi Alcohol Beer and Beverage Corporation (Habeco), Bia Hue, and Carlsberg were under pressure to reduce their market shares. When the “pie” cannot expand, the battle for gaining market shares will become fiercer.