Dietary supplements draw foreign backers

The so-called “functional food” industry is growing fast and attracting foreign investors

Functional food is a food where ingredients have been added to a food and the new product has an additional function which is often related to health promotion or disease prevention.

Li Lin, general director of Chinese-invested TIENS Company, the biggest maker of functional foods in Vietnam, told VIR that TIENS reaped total revenue of $60 million last year in Vietnam and the figure would be “strikingly up 30 per cent” this year . 

TIENS’s existing $25 million factory in northern Hai Duong province’s Dai An Industrial Park is expected to bring the company an annual average turnover of $150 million in the future. “We will continue expanding production by investing more, and opening more branches nationwide, in addition to our existing branches in Hanoi, Danang and Ho Chi Minh City,” Lin said.

TIENS, which is operating in 190 nations and territories, currently has 30 agents in Vietnam with over 40,000 distributors. The firm markets 12 functional food products in the country.

“Vietnam’s functional food market boasts great potential and it has over the past few years surged, due to the ever-increasing demand for this type of food. TIENS has fetched big growth since it began operation in Vietnam in 2009,” Lin said.

According to the Vietnam Association for Dietary Supplements, functional food appeared in Vietnam about 10 years ago with about 10 products. But the country is now home to 1,554 local and foreign firms producing and importing nearly 2,000 products. Some 52 per cent of their products are foreign made. The association’s chairman Tran Dang said this rate would likely rise to 65-70 per cent over the next few years because many local enterprises with poor technology would continue stopping operations due to economic woes.

“Foreign firms are gradually controlling the market due to their modern technology. Many big firms include the US-backed Herbalife, Unicity, Amway and Synergy,” Dang said.

For example, in mid-December 2012, Unicity Vietnam officially began operation with 11 functional food products in Vietnam, which is the company’s 35th market in the world. At present, Unicity has over 3,000 distributors in the country.

In another case, after joining the Vietnamese functional food market in 2009, Herbalife has annually reaped a revenue growth rate of 50 per cent. Vietnam has become Hebalife’s 20th largest market in the world and third largest market in Asia. The number of this firm’s distributors quickly climbed from about 22,000 in 2011 to over 45,000 now.

Also, Amway which studied Vietnam’s market 20 years ago entered the market in 2006. In between 2008-2011, Amway Vietnam’s revenue growth rate was 100 per cent annually. In 2011, its revenue totalled about $53 million, with a network of over 260,000 distributors nationwide.

“One of the reasons behind foreign firms’ big growth is that their products can be used within 10 years, while products made by local firms might be used within two years only,” Dang said.

“Vietnam’s functional food market has been annually growing about 25 per cent. Though the average import tax for functional food is 30 per cent, far higher than that of 10 per cent for drugs, this type of product sells well,” Dang said. “For instance, under our survey recently conducted in Hanoi and Ho Chi Minh City, 50 per cent of adults have used functional food.”

However, Dang also pointed out that many firms had pushed up prices of products too high to make big profit. For example, many products to strengthen health and beauty had their price raised 10 times against the import prices.