Vietnam has experienced strong economic growth and is becoming an important trading partner for Australia. As part of its integration into the global economy, Vietnam has signed agreements to reduce trade barriers and tariffs with countries like Australia. This has opened significant opportunities for Australian food exporters in Vietnam's growing food manufacturing, retail, and food service sectors. However, exporters may face challenges from an unfamiliar business environment and supply chain in Vietnam. Establishing partnerships with local importers can help overcome these challenges to access Vietnam's rising consumer class.

1. FUTURE FARMING
Analysis of the Food Sector in Vietnam -
Opportunities for Victorian Exporters
June 2009

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Published by the Victorian Government, Department of Primary
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Also published on www.dpi.vic.gov.au/agribusiness
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Cover picture: Binh Thanh Market. Ho Chi Minh City
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Produced by: Agribusiness Group
Department of Primary Industries
1 Spring Street
PO Box 4440
Melbourne
Victoria 3001
Author: Bryan Balmer
Manager Market Development Thailand & Indo
China, International Market Development
DPI Agribusiness Group
Editors: Kate Linden, John Naughtin, Fiona Culley,
Clare Balmer

3. Executive Summary
1
The growth in the Vietnamese food sector and the increase in
trade liberalisation provides a significant market opportunity for
Australian food companies.
Vietnam has enjoyed strong growth in its economy, has an Of all the Australian states, Victoria is the largest
increasing demand for imported foods and is a major tourist agrifood exporter to Vietnam and this trade is dominated
destination. In addition, its own food manufacturing sector by commodities to be used in the Vietnamese food-
is growing and becoming a significant user of imported manufacturing sector. Dairy products such as skim milk
food ingredients. There are more affluent consumers with powder is reconstituted into drinking milk, wheat is milled
disposable income and a cultural predisposition to spend it into flour for the bakery industry and malt barley is used
on food in the large urban centers of Ho Chi Minh City, Hanoi, in the brewing industry. There is however, an increasing
Danang, Hai Phong and Can Tho. Such expenditure is made demand for higher value chilled, frozen and grocery products.
either by dining out or by purchasing from supermarkets and For example, the Vietnamese enjoy red meats and hence
other retail outlets. beef meat and offal find a ready market; whilst Australian
wine is well represented in the market there is a significant
In November 2006, Vietnam became a member of the World
opportunity to expand this sector.
Trade Organisation (WTO), which required the country to
reduce its trade and investment barriers including, tariffs, However, like any emerging market, one of the key
subsidies, non-tariff barriers (NTB’s), investment restrictions challenges is managing the supply chain, understanding
and improve recognition of intellectual property rights (IPR). the import requirements and ensuring the product can be
This has established a very strong framework for countries to delivered to the customer and/or consumer. Vietnam is no
trade with Vietnam. different to many other parts of the developing world in having
a fragmented, non-transparent and often corrupt supply
The Vietnamese food retail sector continues to grow
chain, which presents significant risks to exporters. Much of
rapidly. Local companies such as Saigon Co-op, Citimart
this risk can be avoided by the appointment of a reputable
and Maximart have pioneered modern retail, however
importer/agent who becomes a partner in the transactions
the entrance of Metro and Casino have introduced retail
that take place.
expertise that is dramatically modernizing food retailing.
Close neighbor, Thailand, experienced a similar awakening
in 1997 when, during the South East Asian financial crisis,
large European retailers such as Casino, Royal Ahold, Tesco
and Carrefour entered the market and rapidly expanded the
modern retail sector.
There are over 300,000 Vietnamese (Viet kieu) in Australia,
many who moved as refugees or family reunion programs.
There are a sizable number of these people now returning
to the main cities of Vietnam and, using their entrepreneurial
skills, are keen to build businesses that use Australian
products.
The number of tariff reductions and other market reforms in
most of the sectors of importance to Australia have increased
in the last five years. However within the next five years they
will become even more significant and have the potential to
drive strong increases in trade.
Australia has a number of strategic and logistical advantages
over its closest Western competitors; the United States of
America (USA) and Europe. Shipping times are much shorter
from Australia, which reduces transport costs and allows
access to the fresh chilled markets for products such as fruit,
meat and seafood.

4. 2

5. Contents
3
Country Overview 4
Brief recent history 5
Country Details 5
The Vietnamese Business Environment 7
Vietnam’s Significant Trade Agreements 7
Food Trade between Vietnam and Australia 7
Market Access and Regulatory Framework 8
Competition for Australia in the Vietnamese Market 8
Food Retailing 9
Food Retailing Structure 9
Major Food Retailers 9
Food Service 10
Food Manufacturing 10
Australian & Victorian Food Exports to Vietnam 11
Overall Performance 11
Commodity Performance 11
Supply Chain and Logistics 12
Capturing Future Opportunities 14
References 15
Useful Websites 15
Abbreviations 16
List of figures and tables
Figure 1. Map of Vietnam 4
Figure 2. Vietnam’s Retail Market Share –
Grocery Distribution 2008 9
Figure 3. Victorian Food Exports to Vietnam by
Industry, 2004-2008 11
Figure 4. Supply Chain Channels 12

6. Country Overview
4
Vietnam is the most eastern country in the region referred to
as Indo China. Other countries include Thailand, Cambodia,
Laos and Myanmar. Vietnam is an important part of the
Mekong Region. It has a total area of 327,000 sq km, making
Vietnam slightly larger than Italy. Vietnam has 3,000 km of
coastline and 4,000 km of land borders – 2,000 km shared
with Laos, 1,000 km with China and 1,000 km with Cambodia.
The Mekong River that flows from China then through Laos,
Thailand, Cambodia and Vietnam dominates the geography
and the economy of the whole region.
Vietnam’s two significant cities – Hanoi and Ho Chi Minh City
(HCMC), are each located on a major river delta in the north
and south of the country. In the north, the political capital
Hanoi is on the Red River and in the south, the commercial
capital HCMC is on the Mekong River. Both rivers support the
agricultural production of the country.
Between these two cities is the long Vietnamese coastline
where local and international tourists visit to enjoy the
spectacular scenery of the islands and beaches on the South
China Sea. These locations are quickly gaining popularity
and the associated food service industry is experiencing
increased demand.
Vietnam’s population of 83.8 million is the largest in the
region. The people are predominately Buddhist but there is
a significant percentage of Catholics (8% to 10%), which is
unusual in Asia.
Australia is building a strong presence in Vietnam. Over the
past 10 years companies such Telstra, Toll, Royal Melbourne
Institute of Technology (RMIT), ANZ Bank, Bluescope and
Leightons have commenced operations in Vietnam. The
Australian Government contributed AU$90 million to the
construction of the My Thuan Bridge located in the Mekong
Delta, which was opened in 2000.
Many connections between Vietnam and Australia, and
Vietnam and the United States of America (USA), are
based on family history. There are over 300,000 overseas
Vietnamese (Viet kieu) in Australia many who came as
refugees or on family reunion programs. There are a sizable
number of these people now returning to the main cities and
using their entrepreneurial skills to build businesses that use
Australian products.
Figure 1. Map of Vietnam Source: CIA

7. 5
Brief recent history
Vietnam has a very rich and interesting history. This history
has had a profound effect on the Vietnamese way of life and
business practices.
The Vietnam war is well known to most people but for a
thousand years prior to that event the country had been
colonized by the Chinese, the Khmers and the Mongols.
• From 1847 until 1954 Vietnam was a colony of France.
• 1950 and 60s - Civil war between North and South
Vietnam. South Vietnam had significant support from the
USA and Australia.
• 1970s North Vietnam was successful in their aim to
reunify under a communist government. This victory
ended over 120 years of foreign rule. Many South
Vietnamese exited the country as refugees to Australia
and the USA.
• 1980s – The Vietnamese government continued to
maintain strong central marketing controls, however
in December 1986 there was a significant change in
business when the government allowed limited private Country Details
enterprise. This policy was referred to as the “doi moi”
Natural Resources
policy (‘renovation’ – the Vietnamese version of the
Minerals: coal, iron, aluminum, tin and oil.
Russian ‘perestroika’). Family business became popular
and the skilled entrepreneurs of the South began to
transform Vietnam from a central government control Agricultural and forestry products
entity to a free market economy. Rice, maize, sweet potatoes, peanuts, soya beans, rubber,
• 1990s – Vietnam became part of the Asian economic lacquer, coffee, tea, tobacco, cotton, coconut, sugar cane,
boom. The change from an agricultural economy to an jute and tropical and subtropical fruits are all produced, many
industrial economy commenced. Service and tertiary of which are exported.
industries employed more people. Vietnam was affected • Vietnam is the third largest rice exporter in the world and
by the Asian crash of the late 1990s and Vietnam joined most of this production occurs in the Mekong River Delta
the Association of South East Asian Nations (ASEAN) in in the south and some in the Red River Delta in the north.
1995.
• Coffee, rubber and tea plantations occur in the Central
• 2000s – October 2001 Vietnam and the USA signed a Highlands and North East and fruit production occurs in
bilateral trade agreement and gained lower tariffs on the North East and Mekong River Delta.
its goods (average decline of 40% to 4%) and the USA
Agriculture is declining as a percentage of GDP, as in all
gained access to various sectors previously under State
developing economies, but still employs over 80% of the
control. In November 2006, Vietnam became a member
population.
of the World Trade Organisation (WTO) and this required
the country to reduce its trade and investment barriers
including, tariffs, subsidies, non-tariff barriers (NTB’s),
investment restrictions and improve recognition of
intellectual property rights.

8. 6
Climate Economic development
Vietnam is essentially a tropical country with a humid Vietnam’s strong economic growth is attracting a lot of
monsoon climate. The average annual temperature is over attention in the region. In 2004, exports increased by 30%
20°C throughout the country. and imports grew by 25%. Tourism is growing at about
30% per annum. The country’s strengths are its skilled and
Lowland areas receive around 1,500mm of rain per year,
youthful work force (34% of the population is below 15 years
while mountainous areas receive up to 3,000mm with
old) and its entrepreneurial focus.
humidity reaching up to 90% in the rainy season.
Foreign Direct Investment (FDI) increased by 37% in 2006,
South Vietnam has two seasons: cool and dry from November
largest of these investors were from Singapore, Taiwan,
to April and hot and rainy from May to October with seasonal
Japan and Hong Kong. Most of this FDI is in industry
variations in temperature averaging just 3°C. North Vietnam
development and construction, in particular hotels, tourism,
has four distinct seasons similar to that of temperate climates.
offices and apartment buildings.
Population However, economic development has not been equally
shared across the country. HCMC (population 7 million) has
Vietnam’s population in 2007 was 85.6 million, the largest in
growth in excess of 11% delivering a Gross Domestic Product
the South East Asian region. At the end of the Vietnam War
(GDP) per person of US$1,500 against the national average
the population grew so quickly the government issued a
of US$540. The majority of the Vietnamese population is still
two-child-only directive. This stabilised the growth for a
rurally based and in many cases are subsistence farmers.
decade but after the directive was lifted the population grew
by 6% between 2004 and 2005 and the government now
expects the population to reach 100 million by 2024. Literacy
Vietnam has a literacy rate of 94%, which is very high for a
Ethnic groups developing country.
There are 54 ethnic groups living in Vietnam. The Viet or Kinh
people account for 88% of the population and are mostly
concentrated in the lowlands. In contrast, most of the 5.5
million ethnic minority peoples live in the mountainous areas.
Religions
Major spiritual influences in Vietnam include Buddhism,
Confucianism, and Ancestor Worship. Christianity arrived in
the late 18th century and is now the second major religion
following Buddhism. Other religions practiced include Islam
and Cao Dai with concentrations in the South.
Vietnamese languages and scripts
More than 80% of the population speaks Vietnamese or Kinh/
Viet, the national language.
European missionaries in the 17th century developed
Quoc Ngu, the Romanized transcription of the Vietnamese
language. This form is still used.

9. The Vietnamese Business Environment
7
Following the example set by the Union of Soviet Socialist Agreements with Australia:
Republics (USSR) in 1986 the Vietnamese government
• May 2004 - Vietnam agreed to accord Australian wines
moved from a centrally controlled economy to a more outward
and spirits the same tariff and customs treatment that
market focus (‘Doi Moi, economic restructuring or reform)
applies to EU wines and sprits.
and in November 2006 Vietnam became a member of the
WTO. To enable its entry to the WTO, Vietnam was required • December 2004 - Vietnam agreed to extend Most
to reduce its trade and investment barriers including, tariffs, Favoured Nation status to Australia in relation to the
subsidies, non-tariff barriers (NTB’s), investment restrictions reduction in tariffs on grapes, citrus, apples, pears, fruit
and intellectual property rights (IPR). Whilst this improved the juices, cheese and a range of vegetables and oils, cereal
trading environment and increased demand for imports, the flours and meat products.
import procedures remain complex and this inhibits trade. • March 2006 - Australia and Vietnam signed a Bilateral
Vietnam has experienced increasing pressure from its trading Relationship on Economic Trade in Goods and Services.
partners to further ease restrictions and they have signed Food products included in the agreement are dairy
trading agreements with countries including the USA, ASEAN products, sugar, wheat flour, confectionery and fruit.
and Australia, demonstrating their willingness to lift tariffs Services such as banking, education, environment and
and non tariff barriers including quotas, special licensing and mining will provide trade opportunities for Australian
product restrictions. In June 2004 Vietnam agreed to reduce companies.
tariffs on the importation of Australian wine and spirits in • The ASEAN Australia New Zealand FTA (AANZFTA)
line with tariff reductions given to wines and spirits from the signed in April 2009 provides for the progressive
European Union (EU). reduction or elimination of tarrifs for most Australian
In relation to their largest neighbor - China, Vietnam has products exported. Where there are existing bilateral
taken a very cautious approach to trade liberalisation. China agreements (as listed above) AANZFTA provides no
and Vietnam have fought many battles over borders, with direct benefit, however in the remaining sectors long term
China previously occupying parts of Northern Vietnam. On improvements in trade and access conditions will apply.
the other hand, China has won the respect of the Vietnamese
for developing a strong market economy within a country
controlled by the communist government.
Food Trade between Vietnam and
Australia
Vietnamese customer and consumer confidence in Western
Vietnam’s Significant Trade products is very high and Australian products are well
Agreements received in Vietnam. Australia is regarded as a modern,
• In 1992, Vietnam signed a trade agreement with the EU. technologically advanced and friendly country located within
Vietnam’s immediate sphere of interest.
• The Common Effective Preferential Tariff (CEPT) was
signed with ASEAN countries when Vietnam joined in Vietnam has continued to grow as a market for Victorian and
1995. ASEAN countries implemented a sliding scale Australian food products particularly in staple foods such as
of tariffs and have agreed to enact zero tariff rates on milk powders and wheat.
almost all imports by 2015. Vietnams retail and food service infrastructure and
• Vietnam applied for WTO membership in 1995. distribution is growing quickly but is still well behind most of
its South East Asian (SEA) neighbours, so too is the level
• In 1998, Vietnam became a member of the Asia-Pacific
of brand awareness. Therefore different products will face
Economic Co-operation (APEC).
different opportunities and challenges. However, now is
• The US-Vietnam Bilateral Trade Agreement (BTA) came the time for Victorian companies to enter the market while
into force in December 2001. This substantially reduced Vietnam is developing. In five years time it will be much more
Vietnam tariffs on US goods. difficult.
• Vietnam also joined regional integration clubs such as the
ASEAN-China Free Trade Area (2002)
• ASEAN-Japan Comprehensive Economic Partnership
(2003)
• In November 2006, Vietnam became a member of the
WTO.

10. 8
Market Access and Regulatory Competition for Australia in the
Framework Vietnamese Market
Foreign restrictions Australian food companies are increasingly looking to
Vietnam has historically discouraged Foreign Direct Vietnam as a market with significant potential to grow.
Investment (FDI) in the food retail sector to protect its Australia has some natural advantages in supplying agrifood
domestic companies and the traditional sector. Foreign products but other countries are also targeting Vietnam.
companies that were approved by the Vietnamese Competitors to Australia include low cost countries such as
government could only set up joint ventures in the country if China and India and other perceived higher quality product
their holding was less than 50%. Metro Group was allowed to suppliers such as New Zealand (NZ), France, the EU and the
establish a 100%-owned subsidiary because their business USA.
focused on the wholesale sector. However, Metro is still Vietnamese importers perceive Australian products to be
limited by various constraints. For example, whilst Metro high quality; therefore Australian suppliers do not have to
deals with their suppliers directly, they do not have a license compete with goods from China and India on the low-end,
to import products directly and therefore need to contract a low price segment. In addition Australian suppliers have
third party logistics company. In addition, foreign enterprises the potential to be more responsive to market needs than
cannot buy land in Vietnam, but have to obtain land use rights suppliers from France and USA due to the closer transport
from the authorities. These restrictions have hampered the distances for both container trade and bulk trade. This factor
development of a modern retail food sector in Vietnam. Denied is an advantage for commodities such as wheat or dairy
foreign know-how and retail experience, local companies have goods given that many small to medium size Vietnamese
been slow to adopt more modern retail methods. food processing operators prefer to buy in small amounts i.e.
However, under pressure from its attempts to join the WTO by the container load.
as well as other economic agreements, such as the Bilateral In the retail food market, Australian competitors are the USA,
Trade Agreement with the USA, deregulation is now occurring. China, ASEAN countries and the local food industry. Most
From 2004, restrictions began to disappear and joint ventures products from China and South East Asian countries enjoy
between Vietnamese and overseas companies were allowed lower tariffs than Australian and USA products due to market
and in October 2005, the government lifted the cap on foreign liberalization under ASEAN or specific bilateral agreements
share holdings in local companies from 30% to 49%.

11. Food Retailing
9
Modern food retailing in Vietnam is in a very early stage of Saigon Co-op, a local operation also operates a chain of
development. Only 25% of Vietnam’s population is classified superstores. Saigon Co-op is a State owned company with
as urban and there are only two cities with a population around 40 stores. The company was very progressive in
of over one million; Ho Chi Minh City (HCMC) and Hanoi. introducing modern grocery retailing formats into Vietnam,
However, the urban population is expected to increase by and its stores are still amongst the most modern in the
around one million every year for the next 20 years. country.
The grocery retail sector in Vietnam is still in its infancy. Retail
sales indicators are very positive and grew by 19% in 2006, Supermarkets
however the sector is highly fragmented and there are few Citimart is the main supermarket operator, with a 20 outlets.
major retailers. Traditional ‘Mom and Pop’ provision (small Citimart is expanding, but gave management of a number
grocery) stores and wet markets are still the major source of its HCMC stores to the Dairy Farm company in mid-2006.
of food for most Vietnamese. The first modern supermarkets These stores will be rebranded to Dairy Farm’s Wellcome
opened in the 1990s and were generally located in the more banner. Intimex is one of the largest chains in North Vietnam.
urbanised centers of HCMC and Hanoi. Fivimart, with 20 outlets, is focused on HCMC.
Foreign retailers such as the Metro Group and Casino are
leading the change from traditional to modern retailing. Convenience Stores
Although wholly foreign owned subsidiaries are not Given the large numbers and important role small ’Mom
authorised in the retail sector under the Law on Foreign and Pop’ stores play in the market there is huge potential for
Investment significant liberalisation since 2004 has the development of a franchised convenience store chain.
encouraged more international retailers to identify Vietnam as However, there is still a reticence from the Vietnamese
a future location for expansion. consumer to use convenience stores and there are already
a few major chains of note. Those that are present in the
market tend to be located only in the major cities.
Department Stores
Parkson opened its first department store in the Saigon
Tourist Trading Center in downtown HCMC in June 2005, with
nine more to follow by 2010. The stores are intended to target
middle and upper class customers.
Cash & Carry Stores
Germany’s Metro Group is present in the Cash & Carry
sector and has plans to open more stores in Vietnam in
the coming years. Although the Metro Group is one of the
few foreign retailers allowed to currently trade in Vietnam,
under current regulations it is not allowed to directly import
commodities, therefore Metro needs to work with many local,
and usually small, importers.
Food Retailing Structure Major Food Retailers
Hypermarkets and Superstores Traditional trade
Hypermarkets are expected to take some time to become 85%
popular with Vietnamese consumers. Low rates of car
ownership, limited use of refrigerators and freezers,
combined with the emphasis on fresh produce, mean that
the Vietnamese tend to favour the local wet markets and
‘Mom and Pop’ stores which they can visit easily every day.
Assuming Vietnam follows the trend in other Asian countries,
hypermarkets will become more important in the future. The Metro
development will depend on foreign entrants and it is likely Group Saigon Citimart
only to be in the major cities of HCMC and Hanoi. 8% Co-op Casino 1%
4% 1%
Superstores or small hypermarkets operate in HCMC and Maximark
1%
Hanoi. The Casino group operates 20 Cora outlets in the
country under franchise, with the stores owned in joint Figure 2. Vietnam’s Retail Market Share – Grocery
ventures with a local partner. Distribution 2008 Data source: Planet Retail (2008)

12. Food Service Food Manufacturing
10
The food service sector in Vietnam includes hotels,
restaurants, fast food outlets, airline catering and institutional
catering such as hospitals and schools.
Vietnam, like many other Asian countries, has a strong
culture of eating out and consuming food with family and
friends. Most business relationships also have a strong
component of dining out and almost all business negotiations
and meetings would involve hospitality around a meal. The
vast majority of the restaurant sector is based on Vietnamese
cuisine and the ingredients are sourced locally, but as the
economy grows the opportunity for imported goods is also
growing.
The large numbers of Vietnamese war refugees returning
home after extended stays in Canada, USA and Australia
have developed more western style eating habits and are
keen to dine out in western style restaurants. As a result
there are a range of French, Italian, British and US style
restaurants being established.
At present western style fast food outlets are restricted to
Kentucky Fried Chicken (KFC), but as the economy grows
and barriers to entry are lifted it is likely other large multi-
national fast food companies will target Vietnam. Companies
such as McDonalds, Burger King and Starbucks have
extensive experience in building businesses from scratch in
developing counties such as China and India either by direct
ownership, partnerships or franchising. This will introduce
more western foods to the Vietnamese cuisine.
Vietnam is also growing as a tourist destination both from
travelers within Asia but increasingly from the West. Vietnam
attracted 3.1 million foreign tourists in 2007, which is an
increase of 15% from the previous year. This has encouraged
the development of a large number of four and five star hotels
with significant western menus available for travellers. This
sector is expected to continue to grow and this will provide The Vietnamese food-manufacturing sector is growing rapidly
significant opportunities for imported fresh, frozen and albeit off a low base. Unlike its neighbour Thailand, which
grocery items including wine. has developed a large and growing food manufacturing
sector based on domestic and export opportunities, it is very
domestically focused in Vietnam.
Relatively large volumes of dairy commodities (skim
milk powder, whole milk powder, whey) are imported as
ingredients for manufactured foods and/or to recombine for
the production of whole milk. Similarly large volumes of wheat
are imported for the production of flour for bakery and food
production. Vietnam has a large brewing industry and imports
malt barley for beer production.
Like other parts of the food sector, food manufacturing is
expected to grow in Vietnam, not only to take advantage
of the opportunities in the country but also for export to
other countries both within ASEAN, because of the tariff
advantages, and to the rest of the world. As barriers to
foreign ownership decline, multi-national food manufacturing
companies will set up operations in Vietnam to take
advantage of the low cost and skilled labour force and the
access to other Asian markets.

13. Australian & Victorian Food Exports to Vietnam
11
Overall Performance
In 2008 Australia’s food exports to Vietnam were valued at
$370 million, an increase of 54% or $126 million from 2007.
Vietnam is Australia’s 19th most valuable market for food,
with the major exports in the grains and dairy sectors.
Victoria is Australia’s largest State exporter of food products
to Vietnam accounting for 31% of all food exports from
Australia.
Commodity Performance
Grain exports accounted for 47% (or $53 million) of Victoria’s
total food exports to Vietnam in 2008. Exports of un-roasted
malt accounted for 72% of grain exports, valued at $23
million. Other high-value exports included ‘wheat (excluding
durum) and meslin, in containers (excluding bagged)’ valued
at $9 million.
Dairy exports were the second most valuable category of
Victorian exports to Vietnam, representing 35% of total
sector exports (or $39 million) - a 49% increase from 2007.
The most valuable dairy products exported from Victoria to
Vietnam were skim milk powder, unsweetened powdered full
cream milk, whey products and cheese.
Beef, beef offal and sheep meat exports worth $7 million
were shipped to Vietnam in 2008, an increase of 45% from
the previous year.
Fresh grapes were the only significant horticultural exports
from Victoria to Vietnam in 2008 with a value of $5 million.
$AU million
35
30
25
20
15
10
5
0
2004 2005 2006 2007 2008
Powdered milk and cream Malt Wheat Fresh or dried fruit
Beef Other prepared meat products Whey products Sheep meat
Figure 3. Victorian Food Exports to Vietnam by Industry, 2004-2008 ($AUD million) Source: GTIS (2008)

14. Supply Chain and Logistics
12
A simplified view of the supply chain for products from These are all elements of the supply chain but the roles and
Australia would include some or all of the following elements activities are not necessarily executed by different business
or links, listed in order of progression from Victoria to entities i.e. one company may undertake a variety of roles.
Vietnam; Typically, the supply chain has fewer business links than the
nine steps listed above.
• Grower - fruit grower, dairy farmer, beef or lamb producer
There are advantages for different business combinations of
• Packer/Manufacturer - abattoir, dairy factory, food
the supply chain elements, depending on the variation of the
manufacturer
supply chain:
• Exporter - fruit exporter, meat exporter, consolidator of
• For instance, in the fruit industry it is common to have
mixed loads
companies that fulfill the roles of grower/packer/exporter
• Freight forwarder and who arrange their own freight. In other cases, the
• Shipping company - air or sea freight freight forwarding and shipping is combined in one
company. Some companies have export operations
• Importer - trading company, food manufacturer, airline in the supplying country and import operations in the
caterer destination country. Often, the importing company, as well
• Wholesaler - supplier to retail, food service, wet market, as sourcing the product from around the world, will also
food carts act as a wholesaler.
• Retailer - supermarket, hypermarket, wet market, food
cart, mom-and-pop stores
• Consumer - supermarket or fresh market shopper, hotel
restaurant customer
Supply Chain Channels Manufacturer
Processor
Grower
Consolidator Exporter
Importer Wholesaler Agent
Modern Food Traditional Food
retailer service retail manufacture
Figure 4. Supply Chain Channels Source: DPI (2009)

15. 13
• Modern retailing (‘Modern Trade’) is growing in Vietnam, creates additional opportunities. Wholesalers supply
driven by emerging supermarket chains. There is the Traditional Trade, including wet markets and mom-
increasing demand for imported products and traditionally and-pop shops, which continue to supply 70 to 80% of
these were sourced from wholesalers and importers. In Vietnam’s fresh food market. Wholesalers have a much
the last few years, however, there has been an emerging broader range of customers who are sometimes less
trend for these modern trade retailers to source directly particular about consistency and they have more options
from the foreign-source exporters and, in some cases, for the placement of a broad range of product.
growers. In buying directly from Australian growers
• For the Vietnamese supermarket, the local Importer/
and exporters, they feel they get better prices, more
Wholesaler combination provides the advantage of
consistent quality, increased shelf life, and increased food
sourcing from all over the world and therefore being able
security because they are more closely in touch with the
to supply for the entire year. They have a wide range of
source of supply. This also makes it easier for them to
customers, including traditional trade, wet markets, mom-
pre-order and commit to buying programs of major items
and-pop stores, small restaurants, and street vendors
such as grapes, pears, cherries, and beef.
and therefore are able to source and sell a wider range
• Although dealing directly with retailers may be an of qualities. Most supply is ‘just in time’ as many claim the
advantage for both exporter and retailer, the importer/ process is easier to manage. Finally, these operations
wholesaler route provides a different range of often do pre-packing and minor processing for their
benefits. For the Australian grower/packer/exporter/ customers.
manufacturer, using a Vietnamese importer/wholesaler

16. Capturing Future Opportunities
14
Vietnam is an important export market for Australia and
continues to grow in importance as the Vietnamese economy
grows. Like its neighbours in South East Asia, Vietnam has
seen the emergence of a local middle class with increased
disposable income who are keen to try western cuisine.
This, coupled with a large increase in tourist arrivals from
within Asia and Western countries, has lead to a substantial
increase in the demand for food ingredients and consumer
goods.
Currently, imported food products range from bulk commodity
items (such as wheat, barley, skim milk powder and butter),
to consumer products (such as meat products, fruit and
grocery products), to high value-added products such as
confectionary and wine.
The demand for commodity items is expected to increase
as the Vietnamese food-manufacturing sector continues to
expand. Australia is well placed to be able to supply products
not produced in the country such as milk powder and cereal Horticulture
grains. Fruit is an important part of the Vietnamese diet and
consumption of fresh fruits is high. Products such as apples,
Specific opportunities exist for:
pears, table grapes and cherries have become increasingly
Grains popular in recent years. However cool chain issues hinder
The export of cereals (wheat and wheat flour, malt and malt greater sales and most of the consumption takes place in
flour, and cereal preparations for instant noodles, bakeries HCMC. Notwithstanding intense competition from Chile and
and confectionery manufacturers) is the largest sector for South Africa, there is significant opportunity to expand this
trade between Vietnam and Victoria. Given the demise of market for table grapes, citrus and cherries as cool chain
the single desk in Australia and the consequent increased systems develop.
competition in the market there is an increased focus on
Meat and seafood
Australia as a source of supply. Bakery products such as
Meat consumption is rising in Vietnam and although the
bread, cakes and pastries are an established part of urban
main products are pork and poultry, beef consumption is also
Vietnamese diets and as the economy develops their
growing. Given the local beef industry is small and declining
consumption is expected to increase further.
this provides opportunities for imported product. Imports
Dairy from Victoria have risen over 100% over the last four years.
Vietnam is already an important market for dairy ingredients. To date the sales of these products have been to high-end
The development of supermarkets and hypermarkets will outlets such as hotels and restaurants aimed at expatriates
present opportunities for dairy consumer goods such as ice and wealthy locals, but supermarkets are now also retailing
cream and cheese. Given the French influence in Vietnam’s high-end imported cuts.
history, dairy products are well received and are associated
Small amounts of abalone and crustaceans are exported to
with healthy diets and longevity. Cool chain management is
Vietnam, again to high-end food service outlets.
still a major challenge but the situation is improving.
Dairy cattle
Beverages
Vietnam has a small dairy industry for the supply of fresh
Alcoholic beverage sales are a very fast growing sector
milk. There is a ready market for dairy heifers and semen to
in the Vietnam food market. Beer leads this growth due
improve the genetic merit of the local cattle and to increase
to local brewing capability (and hence the demand for
numbers. There are a number of access issues that need
Victoria’s malt barley) but whiskey is also very popular.
to be resolved but if this can be achieved Vietnam could
Wine is seen primarily as a luxury good but also a healthy
become a significant market for Victorian dairy genetics. A
product and sales are increasing. Victoria and Australia are
number of Victorian exporters currently have orders for the
well represented in the wine category but high import tariffs
supply of cattle and semen but are unable to fulfill them due
impede greater growth.
these issues.

17. References Useful Websites
15
• US-ASEAN Business Council 2006, The ASEAN Free • American Chamber of Commerce in Vietnam:
Trade Area and other Areas of ASEAN Economic http://www.amchamhanoi.com/
Cooperation accessed November 14 2006 from http://
• Australian Chamber of Commerce in Vietnam:
www.us-asean.org/afta.asp
http://www.auschamvn.org/index.asp
• Department of Primary Industries, Victorian Food and
• APEC Tariff Database:
Fibre report, 2008.
http://www.apectariff.org/
• United States Department of Agriculture (USDA), Foreign
• Association of South East Asian Nations:
Agricultural Service (2005) Vietnam Retail Food Sector
http://www.aseansec.org/
2005, GAIN Report VM5076
• Australian Quarantine and Inspection Service:
• Vaile, M (Deputy Prime Minister for Australia, Australian
www.aqis.gov.au
Minister for Trade, Leader of the Nationals) 2006, Exports
boost as Australia Signs WTO Deal with Vietnam, • Australian Trade Commission:
media release MVT12/2006, 2 March 2006. http://www. www.austrade.gov.au
trademinister.gov.au/releases/2006/mvt012_06.html • Australian Trade Commission Vietnam:
• Travel to Vietnam 2006, My Thuan Bridge, accessed http://www.austrade.com.vn/english/home.asp
November 2006 from http://www.traveltovietnam.com/ • Business Victoria:
Guide/Cantho/attractions/MyThuan%20Bridge/default.asp www.export.vic.gov.au
• Australian Government – Department of Foreign • Department of Foreign Affairs and Trade:
Affairs and Trade 2006, Vietnam Economic and Trade www.dfat.gov.au
information, accessed November 2006 from http://www.
dfat.gov.au/geo/vietnam/index.html • Food Victoria:
www.food.vic.gov.au
• Australian Trade Commission Vietnam 2006, accessed
November 2006 from http://www.austrade.com.vn/ • Travel to Vietnam:
english/home.asp http://www.traveltovietnam.com/Guide/Cantho/attractions/
MyThuan%20Bridge/default.asp
• Ashwill, M and Thai Ngoc Diep (2006), Vietnam Today
A guide to a Nation at a Crossroads, Intercultural Press • United States Department of Agriculture:
USA. 2005 www.usda.gov
• Ray, N and Yanagihara, W (2006) Vietnam Lonely Planet • US Vietnam Trade Council:
- 8th edition, accessed November 2006 from http://www. http://www.usvtc.org/
lonelyplanet.com/worldguide/destinations/asia/vietnam • Vietnam Business Forum:
• ASEAN Economic Bulletin 2005, Vietnam’s trade http://www.vietnambusinessforum.org/overview.asp
liberalization and international economic integration: • Victorian Department of Primary Industries:
evolution, problems, and challenges accessed 13 August www.dpi.vic.gov.au/agribusiness
2006 from http://www.allbusiness.com/3471137-1.html
• Vietnam News:
• Planet Retail (2008) http://www.planetretail.net http://vietnamnews.vnagency.com.vn/

18. Abbreviations
16
APEC Asia-Pacific Economic Co-operation HCMC Ho Chi Minh City, formally Saigon.
ASEAN Association of South East Asian Nations IPR Intellectual Property Rights
BTA The US-Vietnam Bilateral Trade Agreement MFN Most Favoured Nation
CEPT Common Effective Preferential Tariff NTB Non Tariff Barrier
EU European Union SEA South East Asia
FDI Foreign Direct Investment WTO World Trade Organisation