opportunities and trends vietnam's meat sector
TRANSCRIPT
Vietnam’s Meat Sector
OPPORTUNITIES AND TRENDS
Contents• Overview of the Meat Sector…………………………………………………………………..• Case study ……………………………………………………………………………• Market Drivers and Barriers…………………………………………………………………….• Future Trends………………………………………………………………………………………….• About Ipsos BC………………………………………………………………………………………..
0411131523
US$210.2Billion in GDP
10' 11' 12' 13' 14' 15'
US$2,251GDP per capita
ASEAN’s 6th largest
$
90+ Million people
World’s 14th largest population
Golden Demographic70% of population are of
working age
Male Female
46%of the population work in agriculture,
forestry, and fishery sectors
42%of total expenditure is spent on
food, beverages & tobacco
US$58.2bn
Ho Chi Minh City
Hanoi
5
• Livestock consumption in Vietnam is forecasted to reach over 4.5 million tonnes in 2019.
• Despite the relatively stable growing trend over the past few years, meat output has not managed to keep up withthe consumption demand. Whilst domestic pork production is relatively sufficient for the domestic consumptiondemand, there is a significant shortage in the supply of beef and chicken.
Consumption and production of meat, 2013-19fThe demand for meat consumption is increasing dramatically yet local production has not been able to keep
up, leading to a significant shortage in the supply of beef and chicken
745
775
814
858
910
969
1,027
2,350
2,421
2,493
2,549
2,605
2,664
2,723
375
375
378
387
397
407
417
754
775
790
822
863
919
985
2,240
2,275
2,315
2,384
2,432
2,517
2,815
410
416
433
450
468
487
507
5,000 4,000 3,000 2,000 1,000 0 1,000 2,000 3,000 4,000 5,000
2013
2014
2015e
2016f
2017f
2018f
2019f
('000 tonnes)
Poultry
Pork
Beef
Consumption Production
Consumption and production of meat from 2013 to 2019f
Source: BMI, Ipsos Business Consulting analysis
6
37.1
15.54.4 6.7 3.3 3.7
2.0
27.0
41.1
41.3
11.6 22.2 14.02.5
43.1
18.5
10.7
14.2 7.89.1
6.60.0
20.0
40.0
60.0
80.0
100.0
US EU China Thailand Vietnam Philippines IndonesiaMea
t co
nsu
med
per
cap
ita
(kg)
Meat consumption per capita in selected countries in 2015
Beef and Veal Pork Broiler
Meat consumption per capita
Source: FAPRI; Ipsos Business Consulting analysis
• Vietnam’s meat consumption per capita in 2015 was 33.2kg, which is considered to be low – just one-third of that in the US (107kg) and onlyhalf compared with the EU (76kg).
• Comparing with regional peers, the meat consumption per capita in Vietnam was also lower than in China (56.4) and on par with Thailand.However, beef consumption in Thailand was twice as much as in Vietnam.
• The underlying reasons for these differences are because pigs are part of the household recycling system for small-scale farms (a systemwhich accounts for 86% of swine farms in Vietnam)as they consume inedible waste. This practice therefore reduces production costs whileincreasing the number of suppliers for this type of meat. In addition, this cultural endorsement for pork was influenced by the Chinese,who felt that eating meat (especially pork) was a symbol of triumph over hardship.
• Though pork remains the largest proportion of meat consumed in Vietnam, the present growth trend of around 3-5% per annum for beefand poultry creates a positive outlook for consumption of beef and poultry in upcoming years.
Consumption of beef in Vietnam is expected to increase in the coming years as the current volume is low and only half of Thailand’s, which shares the same consumption habits
7
Vietnam’s meat import structure, 2010-14
Source: UN Comtrade, Ipsos Business Consulting analysis
• In 2014, the country’s imported meat value is estimated tohave reached US$205.6 million, an increase of 113%compared to 2010.
• Although the import value of poultry increased by US$34.8million during 2010-14, its contribution to Vietnam’s meatimports decreased from 72% to 51% whereas the share ofbovine meat rose sharply during the same period.
• Bovine meat’s import value saw a four-fold increase fromUS$25 million to US$92.5 million.
• Whilst there was a significant surge in thetotal value of imported frozen bovine meat,the fresh/chilled bovine meat valueexperienced a slower increase of about 1.2%per annum. In 2014, the import value offrozen meat was eleven times higher thanthe fresh/chilled category.
72.2%
5.2%
20.8%
1.8%
Vietnam’s meat import structurein 2010
Poultry
Meat of bovine animals,fresh or chilled.
Meat of bovine animals,frozen.
Pork
50.8%
3.9%
41.1%
4.3%
Vietnam’s meat import structure in 2014
Poultry
Meat of bovineanimals, fresh orchilled.
Meat of bovineanimals, frozen.
Pork
US$
96.4mn
US$
205.6mn
Vietnam’s meat imports have seen an increase of 113% during the five-year period, with the bovine sector exhibiting a four-fold increase
8
• The pork sector saw a growth in the variety of importers during 2010-14. In 2010, pork was imported into Vietnam from mainly fourcountries: United States, Canada, Australia and Denmark. In 2014, the import value increased to US$8.8 million with EU countries suchas Denmark, the Netherlands, Germany and Spain getting a significant market share. The US saw the biggest loss in market share, withonly 10% in 2014. Spain has emerged as the largest exporter of swine meat to Vietnam, reaching over US$2.7million, followed byCanada (US$1.6 million) and Denmark (US$1.4 million).
• Domestic production was in surplus and allowed Vietnam to generate a total pork export value of US$46.6million in 2014. However,subsidy programs to support pork exports were gradually withdrawn after Vietnam joined the World Trade Organisation. As aconsequence, business opportunities are not significant for the export sector, and are instead limited to fulfilling domestic needs.
Vietnam’s pork import value by country, 2010-14
Pork meat import value by country, 2010-14
Source: Ipsos Business Consulting analysis; UN Comtrade
73%
19%
4% 4%
2010
USA
Canada
Australia
Denmark
US$1.7mn
10%
19%
1%
16%
8%6%
31%
9%
2014
USA
Canada
Australia
Denmark
Netherlands
Germany
Spain
Others
US$8.8mn
Vietnam’s imports of pork meat involved various new foreign exporters, contributing to the significant surge in import value during the five-year period
9• In 2014, the total import value of poultry meat in Vietnam was US$104.5 million, an increase of 50% compared to 2010.
During this period, the US, Brazil, and Korea remained the three biggest providers of foreign broiler meat to Vietnam,constituting more than 90% of the import market share. As with pork, the poultry meat market has welcomed new playersfrom the EU, including Poland and France which respectively exported US$1.3 million and US$0.9 million into the country in2014.
• The expected 5% y-o-y growth presents favourable business opportunities for manufacturers in this segment. For localproducers to be competitive in the future, they will need to address the price of domestic broiler meat, which is currently30% higher than meat that is imported.
Source: UN Comtrade
82%
8%
7%
2% 1%
2010
USA
Brazil
Rep. of Korea
Argentina
Others
US$69.6mn
57%
23%
11%
1%1%
7%
2014
USA
Brazil
Rep. of Korea
Poland
France
Others
US$104.5mn
Poultry meat import value by country, 2010-14
Vietnam’s poultry import value by country, 2010-14Vietnam’s poultry meat import saw a 50% increase with the US, Brazil, and Korea remaining the
leading suppliers
10• Bovine meat’s import value quadrupled during 2010-14, from US$25 million to US$92.5 million (equivalent to 45% of total meat imported to Vietnam in 2014).
• Falling oil prices, a decrease in local cattle heads during 2007-12, and growing demand gave edges to the importation of bovine meat in recent years.
• Trade agreements with Australia and New Zealand also facilitated the wave of imported beef in Vietnam. Instead of importing meat from bovine animals (whichhas a tariff rate of 18%), businesses import live bovine animals (at 2% import duty) and slaughter them in Vietnam. With the Trans-Pacific Partnership (TPP)coming into effect in 2016, competition is expected to be more intense, with import tariffs eliminated for TPP members including Australia, the US, Japan, andNew Zealand.
• Beef imported to Vietnam mainly originates from Australia (fresh/chilled segment), New Zealand, India (frozen segment), and the US (frozen segment). It isexpected that the import of bovine meat from most of the current exporting countries will maintain an upward trend and become more competitive in thefuture.
• The ongoing increase in demands and the local supply shortage present vast business opportunities for both local and foreign players to profit from theirpresence in this sector.
Source: UN Comtrade, Vietnam Customs, Ipsos Business Consulting analysis
2010 2011 2012 2013 2014
Others 0.5 0.5 0.2 0.4 0.6
India 13.7 20.6 26.2 29.9 54.9
USA 2.6 4.1 7.4 12.0 16.3
New Zealand 0.4 0.5 0.7 1.0 1.4
Australia 2.9 4.6 9.3 8.6 11.5
0
10
20
30
40
50
60
70
80
90
US$
mn
Frozen bovine meat
2010 2011 2012 2013 2014
Others 1.0 0.1 0.1 0.0 0.2
USA 0.1 0.2 0.3 0.5 0.8
New Zealand 0.8 0.9 1.0 1.2 0.9
Australia 3.2 3.5 3.8 5.0 6.0
0123456789
US$
mn
Fresh/chilled bovine meat
Vietnam’s bovine imports from 2010 to 2014Bovine imports increased steadily during the five-year period, with its four-fold increase in value contributing
the largest proportion of Vietnam’s meat import structure
12
Case Study of Dabaco Group
53%
8%
24%
10%
2% 3%
3Q15
Feed
Livestock breeds
Husbandry and foodprocessingCommercial goodsand supermarketCarton packaging
Others
62%5%
19%
11%
2% 1%
3Q14
Profile
Dabaco Group was founded in 1996.With over 20 years of development,Dabaco has become a multi-disciplinarygroup operating in several segmentsincluding livestock feed production,livestock breeds production, husbandry(pigs and poultries), slaughter, foodprocessing, real estate, construction, andother business segments.
Dabaco aims to develop a strong group inthe agriculture industry, using moderntechnology and a closed 3F value chain –farming (breeding and farms), feed(producing livestock feed) and food (meatprocessing) – in combination withDabaco’s supermarkets and fresh foodshops.
Feed Mill Breeding FarmAdded
ValueProcessing Trademark &
Market
Feed BreederContracted
FarmingFresh Food
Processed
Food
Farm Foodstuff
Source: Dabaco
Objective
Revenue
Value chain
14
Drivers Barriers
• Favourable demographics, with over 103 million people in 2030 (70% of population aged 15-64).
• An ongoing trend of urbanisation, with 43% of the population living in urban areas in 2030. This is a result of rapid growth of urban cities and the fast-growing urban-based industrial and services sectors.
• An increase of 24% in consumer spending to reach US$169 billion in 2017. In particular, spending on food, beverages, and tobacco accounts for 42% of total consumption expenditures in 2015 and is forecasted to increase by 31% to US$76.2 billion in 2018.
• A rising demand for beef consumption which accelerates at around 3-4% per annum. The meat output, however, has not been able to meet the demand.
• Foreign producers mainly rely on economies of scale and access to cheap feed which enable them to enter the market with low prices. At the same time, the dominance of small-scale farms hampers productivity gains of local producers, preventing them from competing successfully in the market. For example, domestic beef is priced at around US$2.53/kg whilst Australian beef is priced at US$1.77/kg.
• Vietnamese consumers are extremely fond of foreign products as they perceive foreign beef to have better quality as well as superior safety and hygiene standards.
• The trade agreements such as the EU-VN Free Trade Agreement (FTA) or the Trans-Pacific Partnership will waive the custom duties for imported beef (in accordance with the EU-VN FTA, beef will be fully liberalised in 3 years), leading to a more competitive market for domestic manufacturers.
Market Drivers and Barriers Favourable demographics and higher demand may drive the market positively, but the competition has
become more intense due to economies of scale and trade agreements
R A W M A T E R I A L
Cleaner& Safer
Food
P R O D U C T I O N & P R O C E S S I N G
S H O P P I N G P L A C E S
Switching to New Trade Channels
N E W L I F E S T Y L E
New Applied Science
in farming
Preference for
Certified Products
VIETNAM FUTURE OF
FOOD
Changing Competitive
LandscapeNew Positioning Strategy
Caution about
Food Hygiene
Food for
Dynamic
Lifestyle
The Quest for
Being Healthier
& Prettier
Food for Busy
Worklife
New demographics and eater behaviors
17
Typical Combination in Vietnamese Meal
Salty DishRice
Stir-fried
Vegetable
Soup
Plus Cà pháo
in summer Fish Sauce
Sour soup
(Canh chua)
Day vegetable with
crab soup
(Canh cua rau đay)
Meat or fish
stewed
in fish sauce
/Thịt hoặc cá kho/
To Vietnamese, having a meal at home is not merely a place to stay connected with all family
members, it is considered as a family tradition and an unique culture
Source:
The philosophy of Vietnamese meal is about family, reunion and collectivism.
18
Time-pressure mothers: A desire to save time on cooking!
• Consumers become more pressure for time and have more spending power in hand, they are opting for convenient alternative.
• New time constraints lead to a new definition of the food offer
– Using packaged food
– Using other cooking equipment
– Using Instant Products (Granules, etc)
Willing to pay for products that make their life simpler
Like to prepare food that doesn’t require much time
Need something that do not require their presence during cooking time
“When we have no time, we will buy instant product to use. It saves more time for us. Otherwise, it’d taste much better if
we cooked them home” – moms, HCMC
“I have to take an eye on my children. If they go forward or backward, I have to follow them. I
can’t be at one place” – moms, HCMC
Source:
As more time is dedicated to working life (working women), taking care of kids (moms) and enjoying leisure time with family or friends, there is little time left for cooking.
Home to Green
Households grow vegetables in a convenient way
according to guidance and equipment by
supplier companies.
Green to Home
Supplier companies supply seeds,
methods, guidance, equipment and
products to home for green growth
and green consumption.
Cleaner & Safer FoodHome-grown food is on the way to become a safe and quick for home consumption in the future.
Organic MaterialHome-grown
Material
Certification of food will exist in more than one wayPreference for Certified Food
1. Traditional wet markets are preferred because of the freshness of the product and the diversified range of choices.Disadvantages:High risk of faked products or low qualityDo not offer discounts to consumers, as supermarkets often doDon’t have many kinds of products as supermarkets
2. The majority of Vietnamese prefer supermarket as they do not have to worry about product quality
A well-organized place with aircon is a guarantee against bad quality!
1. Modern trade channel will dominate the market
2. New “evidence” of quality will be sought after to be made preference of
• The brand name of the modern trade channel, the vision and the mission of a store. For instance: fresh food retail chain
• Feedback on forum, word of mouth about quality of food in a branded store
• People will actively look for foods that they believe are higher in quality however not necessary have certificate. For example: branded shrimp as export shrimp from Vietnam
• Foods and material with different certification will be sold with different price/ package
Source:
Today of the “Certifications & Standards” that Vietnamese consumers are looking for
Tomorrow of the Certifications & Standards
Those who are able to address the struggling of customers can create a new playground for competition.
Switching to New Trade Channels
Traditional Trade vs Modern Trade
New Shopping Methods
Convenient/ Not far away from homeOr Quality and Safety Fresh products
everydayOr Buy one time and then store it?
THE STRUGGLE IS REAL
Lower price with risksOr higher price with guarantee?
Save sometimes for a daily habitOr Spend longer time for a new experience?
Healthier and more deliciousOr An acceptable but faster meal?
A look into the future
• 3D Virtual shopping on website of reputation store to save time with electronic payment.
• Both modern and traditional trades offer branded material with clear origin of supplier.
• With new branded offerings that can designate healthy and safety factors, mobile and online orders become widely spread.
• Modern trade will no longer take the perception of safety and high quality for granted.
STREET FOOD IS AVAILABLE ALL TIME
Vietnamese love it because of…
• A source of food with special and familiar flavor
• Variety in choices and convenient in
purchasing
• Competitive price
• A satisfaction for typical local demand of
cuisine culture for each region or each city
However….
• Sellers often have little basic knowledge about
food safety
• Their limited economic conditions, their easily
denatured foods worry the consumer
• The characteristics of this category is diverse ,
temporary and seasonal.
• Threats to public health ( food poisoning and
food-borne diseases ), affecting the landscape
and urban civilization are major concerns
Food for Dynamic LifestyleStreet food is an important part of Vietnamese food culture and irreplaceable in daily
dynamic life.
Street Food Fast Food
“We used to eat a lot of fruit before, but now we don’t
dare to eat and buy strange fruits. I
have to think about the origin of those
fruits before buying.” – all group responses in an UU
research
STREET FOOD VILLAGE“Street food alley”, “Tricyclo community”…are successful group models of traditional businesses. In the future, street food kiosks will be gathered together to form a “food village” which operates under standards of hygiene and management. This focus model will attract more visitors, especially tourists.
A Look into the future• Branded street food becomes a tendency.• Street vendors upgrade their facility and management system gradually. More vendors will look for
certification either government’s or third parties’• New types of street food is widely sold at modern trade channel, mostly at convenience store
• For example: fertilized duck egg (hot vit lon)
Food for Dynamic Lifestyle
Street food village is a future model to have better management of hygienic matters.
New demographics and eating behaviors
New wave of new foods will continue to be delivered to Vietnam
Vietnam as a rapid changing country…
• A look into the future• The wave of foods for a dynamic and busy generation will come first in next 5 year, following by another
wave of foods for an aging population in next 20 years.• Incoming tide of foreign foods continue to be introduced in Vietnam; the Vietnamese consumers shall
enjoy new taste, new experiences and new services from new players. Each year more and more renowned full service restaurants gradually access to Vietnam.
