Consumer goods sector lures investors

Singapore firms are paying more attention to Vietnam’s agriculture,
food processing and consumer goods sectors

As the largest exporter of farm produce in Vietnam, Singapore-backed Olam Vietnam exemplifies how Singaporean firms are coveting more aspects of the Vietnamese market.

Olam Vietnam director Le Tran Anh Dung said: “With a long-term vision in Vietnam, Olam will continue opening more coffee processing projects in northern provinces of Son La and Dien Bien, and central Quang Tri province which are rich in coffee materials.”  

The company already has seven facilities processing export-oriented farm produce in six locations in Gia Lai, Dak Lak, Lam Dong, Dong Nai and Long An provinces and Ho Chi Minh City.

“We are excited about our future prospects here as the country has a huge potential in agriculture. We have just augmented investment capital of a coffee processing project in Long An’s Nhut Chanh Industrial Park from over $45 million to over $80 million in late 2012. This project has been operating well,” Dung said.

This plant, the biggest of the type in Vietnam, was put into operation in April, 2010 and currently has annual capacity of over 8,000 tonnes of instant coffee. At present, Olam Vietnam is recruiting more employees to expand a workforce that already numbers 1,000.

According to the Singapore Businesses Group in Vietnam, many other Singaporean firms wanted to strengthen their positions in Vietnam’s agricultural, consumer goods and foodstuff market. These firms include milk product maker F&N, drink maker Gold Roast and Super Coffeemix, tissue producer New Toyo, furniture maker Serrano Vietnam, foodstuff producer Hock Hin Foodstuffs and foodstuff additive maker ApecChem.

“There are a number of notable Singaporean brands that have become prominent in the Vietnamese market, with the beverage sector, food products, and bakery chains. There is even a greater number of multi-national companies successfully operating where Singapore acts as a supplier to Vietnam,” the group’s president Norman Lim told VIR.

Singaporean enterprises have long been established in Vietnam, with Singaporean investment in Vietnam totalling $24.9 billion, according to the Singaporean embassy in Hanoi.

As many Singaporean enterprises search for the next high-growth market, Lim said, Vietnam was proving to be an exciting destination for retail because of the country’s  rapidly growing young population. Currently, the consumer market made up 65 per cent of the population at 50 million people. It was estimated that within the next ten years, 16 million new consumers would come of age in Vietnam.

Additionally, Lim said, the middle class had doubled over the last five years, with rising disposable incomes leading to increased consumption. “This has led to a growing demand for goods and services, particularly for better quality and premium products. There have been a consumer shift from unbranded to branded goods, an increased demand for packaged/convenience goods, as well as a trend towards healthier products.”

“Topping Bloomberg’s recent list of the 25 Best Frontier Markets, Vietnam is still considered a largely untapped market with great growth potential for Singaporean enterprises,” he added.

According to the Vietnam Food and Drink report for 2013’s first quarter of Business Monitor International, the world-famous market analyst based in London, Singapore-invested mass grocery retail operator NTUC Fairprice and Vietnam’s Saigon Co.op were looking to establish a chain of hypermarkets in Vietnam through their local joint venture.

“NTUC Fairprice also has concrete plans to expand in Vietnam. Given the union’s local expertise and NTUC’s experience in operating hypermarket stores, this is clearly a formidable-looking partnership, and their expansionary activities are likely to place considerable upward pressure on our hypermarket growth forecast for Vietnam.”

Vietnam’s Trade Office in Singapore reported that scores of Singapore firms were exploring investment and business opportunities via projects with investment capital of $5 million to $50 million each in Vietnam. Sectors of interest include the foodstuff and farm produce processing industries, rice millers and exporters, rice noodles and processed rice products, coffee plantations and processors, feedmills, slaughter house, prawn and tra fish processing, and cocoa plantation and processing.

However, Lim said the presence of Singaporean consumer goods and foodstuff enterprises “is still rather limited in Vietnam, as Singapore’s commercial presence tends to focus more on other sectors, such as property, logistics and financial services.”.