F&B market taking on fresh appeal

As the food and beverage (F&B) industry is on track to develop, a slew of foreign companies have announced investments to bolster their capacity in Vietnam, especially in the beverage sector.

At the beginning of May, processing and packaging solutions company Tetra Pak announced that it would pour an additional $105 million into its packaging material production facility in Binh Duong.

Eliseo Barcas, managing director and president of Tetra Pak Vietnam said, “Tetra Pak’s investment in and expansion of the Binh Duong manufacturing facility is a testament to its continuing commitment to the Vietnam market. The additional funding forms part of the company’s longstanding strategy to enhance its production capabilities at the site.”

“This expansion initiative aims to not only accommodate the escalating domestic and regional demand, but also to uphold our unparalleled service to customers. It will bolster our capacity and product range, enabling us to better serve evolving consumer needs. We look forward to leading the growth with all industry leaders, brands, and customers, underscoring our commitment to long-term success and innovation.”

This is not the first time Tetra Pak has injected capital into the facility. In 2021, the Swedish company also made an additional $5.4 million investment in this facility.

Phong Quach, head of consulting at Ipsos Strategy3 Vietnam said, “Amid the challenge in economic growth, there is still a bright spot in the growth of the Vietnam beverage market and dairy market. Tetra Pak’s continuing expansion following its 2021 announcement is certainly a strong vote of confidence.”

At the beginning of April, Suntory PepsiCo Vietnam kicked off construction of its biggest factory in the Asia-Pacific region. Covering an area of nearly 20 ha in Long An province, the project has an estimated investment of more than $300 million. When completed, it is expected to have an annual output of 800 million litres, meeting the demand of consumers and solidifying Suntory PepsiCo’s leading position in Vietnam’s beverage market.

In early January, Nestlé Vietnam announced a $100 million investment to increase the production capacity of its Tri An coffee factory, located in Dong Nai. This will help it meet growing local and international consumer demand for high-quality coffee.

Robust dealmaking

Commenting on the growing investments in Vietnam’s F&B market, Ralf Matthaes, managing director of IFM Research said, Vietnam will reach a population of 100 million in 2025, placing it 16th globally and sixth in greater Asia.

“Add to that, Vietnam’s emerging middle-income class now comprises 30 per cent of the urban population, and the F&B sector is the second fastest-growing sector in Vietnam, save for education, with a 9 per cent potential growth for 2024, companies are gearing up for future demand,” he said.

In addition to greenfield investments, funding and dealmaking activities also become more robust in the Vietnamese F&B market.

In mid-May, VNDirect announced its plan to acquire Goldsun Food JSC, the owner of the King BBQ and ThaiExpress restaurant brands in Vietnam. Upon completion of the acquisition, Goldsun Food JSC will become an affiliated company of VNDirect.

Goldsun Food is deep in Vietnam’s F&B industry, with 13 brands such as Tasaki BBQ, ThaiExpress, Hotpot Story, and more. Goldsun Food operates over 170 restaurants, serving 2.4 million guests per year.

In April, Lotus Group received an undisclosed debt investment of millions of US dollars from Beacon Fund to expand the scale of their operations.

The investment from the Beacon Fund will support Lotus Group to expand its F&B activities, which include opening 10 new Japanese restaurants under different brands in 2024. Some well-known restaurant brands of Lotus Group in the Vietnamese market include Marukame Udon, Coco Ichibanya, and Chiyoda Sushi.

Elsewhere, Vietnamese food chain Homefarm raised $1.8 million from Mitsubishi Foods in April, while Thailand’s ThaiNamthip Co., Ltd. acquired 30 per cent of Coca-Cola Beverages Vietnam for $221.1 million in February.

Chinese popularity

According to Euromonitor, the value of Vietnam’s F&B market in 2024 is expected to increase by 10.92 per cent. One of the nations that is keen on Vietnam from the low- to high-end segments is China and their various brands.

Mixue is a frontrunner in a growing pool of Chinese food brands expanding in Vietnam. Since its debut in 2018, Mixue grew its wallet-friendly soft-serve ice cream and bubble tea chain to 1,000 store outlets across Vietnam by last year.

Meanwhile, Chinese coffee chain Cotti Coffee has entered Vietnam as part of its global expansion. Since its inception in December, Cotti Coffee has opened eight outlets in Hanoi and Ho Chi Minh City. Vietnam is the brand’s sixth foreign market, joining South Korea, Indonesia, Japan, Canada, and Hong Kong.

In the segment of full-service restaurants, big Chinese brands have also secured a strong footprint, such as Haidilao, San Fu Lou, Hutong, and Crystal Jade. According to a recent report by iPOS.vn, Chinese restaurants account for 10 per cent of international full-service restaurants in downtown Hanoi.

Ipsos Strategy3’s Quach noted that Chinese players have been looking at the Southeast Asia F&B market for a long time, with specific interest in dairy and perhaps tea. “Tea is a fast-growing market in Vietnam, so Chinese players won’t miss the opportunity to make a market entry,” Quach said.

Matthaes added that some Chinese companies can have success in Vietnam if they can assure quality and affordable price points.

“This is especially so in rural Vietnam, where price is always a major driver of brand selection,” he said. “In urban Vietnam and for higher income groups, these brands may face challenges due to historic Chinese-Vietnamese relations and the fact that most Chinese goods are not seen as high quality.”

Outside milk tea and snacks, Chinese cultural delicacies have strong potential in Vietnam’s F&B sector as they have similar taste profiles and reasonable price points to what the Vietnamese want, according to Matthaes.

In addition, South Korean brands are becoming popular in Vietnam. Lotte GRS, which operates the Lotteria fast-food chain, saw its Vietnamese sales nearly double to $80 million in 2023 from $45 million in 2021. After tapping into the Vietnamese market in 1998, Lotteria now has over 250 locations and leads the fast-food franchise sector. The company is aiming for $117 million in sales by 2027 via franchise expansion.

South Korean confectionery firm Orion reported that its Vietnamese subsidiary’s sales reached $86.5 million in the first quarter of 2024, an increase of 12.3 per cent from a year earlier. Orion continues to increase its market share with new product categories such as rice snacks alongside its flagship Choco Pie.

Seizing opportunities in F&B With an average annual growth rate of over 10 per cent, the food and beverages (F&B) market in Vietnam is a dynamic sector. Director of Consumer and Marketing Insights at NielsenIQ Dang Thuy Ha discussed with VIR’s Oanh Do the latest consumer trends helping businesses achieve success in the market.