SECC, Ho Chi Minh City

Big investments poured into various segments of Vietnam’s agri-food sector amid world trade uncertainties

Amid world trade uncertainties, international players have been racing to investment spots that provide hugely potential domestic expenditure, high integration to international markets, advantaged conditions of geography, demographics and economic growth. Considering all factors, Vietnam seems to be among some top choices and in fact, big investments have been made in different segments of Vietnam’s agri-food sector, both in existing facilities and green fields, from research activities to farming, processing, distribution and retailing.

In research and farming areas, African swine fever has been triggering a new wave of investment into Vietnam’s animal protein sector. The US Department of Agriculture sinks $1.7m into swine organization's ASF research in Vietnam and the multi-phase project is intended to establish a series of capacity building training projects and work with swine producers in Vietnam to develop ways to either prevent or manage ASF. Meanwhile, China's top feed producer, New Hope Liuhe completed construction of its first overseas pig farm in Vietnam, seeing potential demand growth in a major market devastated by a severe African swine fever outbreak. The pig farm in Binh Phuoc province, which has an annual production of 300,000 pigs, is expected to start getting pigs in November and has equipped its pig farm in Binh Phuoc with multi-layered sanitisation and disinfection systems and animal waste treatment facilities worth 20 million yuan ($3 million), all part of its upgraded biosecurity efforts.

De Heus, an international organisation with a leading position in the animal feed industry, is both rapidly completing the second chicken hatching factory in Long and widening a pig breeding scheme in the northern province of Son La. “The total investment for those projects is $20 million and we hope with our experiences we can continue contributing to the development of Vietnam’s agriculture,” said De Heus Asia’s general director Gabor Fluit. Beside De Heus, over previous years many foreign private companies have invested in Vietnam’s agriculture like Germany’s Bayer Vietnam, the US’ Cargill, Thailand’s C.P. or Singaporean groups such as Olam and NTUC Fairprice.

Increasing demand for high-quality nutrition products has encouraged foreign players to expand their existing operations in Vietnam. In September, Nestle Vietnam launched the second stage of its Nestle Bong Sen plant in Hung Yen and will double its production capacity. Within only two years, Nestle Vietnam’s total investment in Hung Yen rose to nearly 100 million USD. Meanwhile, small local milk producers have been under significant pressure when Coca Cola announced to enter Vietnam’s dairy sector through partnership with Fonterra to launch new Nutriboost UHT milk products. Foreign companies have great competitiveness in formula powder milk, while Vietnam’s companies have advantages in yoghurt and pasteurized milk products. Moreover, foreign companies have big resources for marketing campaigns, thereby threatening even big domestic companies like Vinamilk. 

The International Franchise Association ranked Vietnam eighth out of the 12 most valuable markets for global expansion, according to Nguyen Phi Van, chairwoman of Retail & Franchise Asia. Food and beverage (F&B), healthcare and nutrition and convenience stores are in the top potential sectors. According to a report by the Korea Agro-Fisheries & Food Trade Corporation, Vietnam is the most popular destination for 43 percent of companies from the Republic of Korea. As for presence, the total number of Korean F&B outlets reached 360 stores in Vietnam. Korean instant noodle firms, Nongshim and Ottogi, have just declared to increase their Vietnam investments with an eye on Southeast Asia as a whole. "Vietnam will be positioned as a base for advancing into Southeast Asia," Korea Times quoted a Nongshim official as saying. Nongshim, a leading Korean instant noodle maker, established its first subsidiary in Vietnam last October.

Paradoxically, when foreign players have been achieving promising business performance in manufacturing, they have been seen to lose big grounds in retail sector. Foreign retailers started coming to Vietnam 20 years ago but many of them have had to leave. Metro Cash & Carry, Auchan, Shop&Go – well-known retail brands – have stepped out of Vietnam’s retail map when Parkson shrank constantly after arriving in 2005. The South Korean Lotte Mart opened in HCM City in 2008 and after 11 years of operation, Lotte has 13 shopping centers throughout the country. On the other hand, local retailers have been conquering well distribution network and retail channels. VinCommerce - the retail arm of Vingroup and the corporation managing VinMart and VinMart+, acquired a ­number of retail chains such as Vinatexmart, Oceanmart, Maximark, Fivimart, and Shop&Go, and after 5 years, the number of Vinmart+ reached 1,465, which is now by far the fastest-growing convenience store in the country.

Posing high competitiveness in manufacturing but shortcomings in retailing, new investments in Vietnam’s agri-food sector would initially target local markets and also exploit strategic advantages of Vietnam’s position in regional markets and international markets that Vietnam signed FTAs with. By July 2019, Vietnam has engaged into 26 FTAs; in which, 12 FTAs signed and took effect, 1 FTA signed but inactivated and 3 FTAs under negotiation. Moreover, Thailand, the top rival of exporting agri-food products of Vietnam in ASEAN, has not reached FTA with EU, currently been non-member of CPTPP, as well as US-China and recently US-EU trade tensions, have made Vietnam more lucrative investment spots and strategic base to export agri-food products to international market.