Vietnam is considered as a potential and attractive market for the development of logistics services. The cold supply chain is one of the logistics segments with the most potential for exploitation and development in Vietnam.
Demand of cold chain development in Viet Nam
- Viet Nam’s agricultural trade growth
Nowaday, Vietnam’s agricultural sector has developed and achieved important achievements in restructuring towards the direction of large-scale commodity production, productivity and high quality. Production and business capacity in the field of agriculture has also been increasingly enhanced. Vietnam’s agricultural products have gradually affirmed their position in the global market, present in the market in 185 countries and territories, including many high-quality markets such as the US, Japan, and the EU. , South Korea … Vietnam’s agricultural exports are now ranked 2nd in Southeast Asia and 15th in the world, providing an important source of foreign exchange for the country.
According to GSO statistics a compound average growth rate (CAGR) of export value of agriculture, forestry and fishery exports (2015-2019) was 7% / year on average and that of import value in the same period of 11%/ year. Wooden Furniture, shrimp, cashew nuts, fruits and vegetables, coffee, rice, rubber and pangasius are the leading agricultural exports, of which fruits and vegetables have increased by 105%, from over US $ 1, 8 billion in 2015 to more than US $ 3,75 billion in 2019.
The growth of agricultural economy has led to a high demand for logistics for agricultural products.
For export sector, the demand for cold storage is mainly seafood export. The production of raw materials and processing for seafood exports is concentrated in in Central and South Central and the Mekong River Delta. According to Stoxplus (2016), the storage market is 14 times larger in the South compared to the North of Viet Nam.
Although the seafood export turnover grows every year, the shortage of domestic raw materials (including exploitation and aquaculture) is due to the exhaustion of marine resources and the narrowing of farming areas. Additionally, the priority policy of urban and industrial development in many provinces, the impact of natural disasters and epidemics also influence on seafood productivity. An emerging phenomenon is that seafood producers with good processing capacity import intermediate aquatic raw materials, process and re export them to international markets.
According to VASEP, up to 65-70% of export value of tuna and other marine fish come from imported raw materials. In addition to importing raw materials and then re-exporting, the company combines domestic consumption. Ms. Nguyen Thi Thu Sac, Chairman of the Seafood Committee, under the Vietnam Association of Seafood Exporters and Producers (Vasep) said that Vietnam is now not only a major seafood exporter, but also a potential seafood consumption market of other countries. Vietnam’s seafood consumption market is considered to be very potential due to many factors: the rapid development of the restaurant and hotel system serving international and domestic tourists; The population in the age of high consumption, the average income of the people (especially in urban areas) increased sharply, accompanied by the tendency to choose meals outside the family of the young … All created a market. A diversified and multi-segment seafood consumption market is an opportunity for businesses to increase imports to meet the needs of the people.
From 2009 to 2019, the total import value of frozen fish accelerated from around US$148 million to US$828 million, growth rate as of 459%, and import value of frozen Shrimps and prawns accelerated from around US$ 72 million to US$705 million, growth rate as of 882% which brought Viet Nam to become a potential outsourcing hub for seafood processing in the world. The current United States–China trade conflict is expected to accelerate the movement of intermediate seafood flows from China to Vietnam.
Import value of Seafood period 2009-2020 (Unit: US$ million )
Meat imports are another important demand for the development of cold chains in Viet Nam. Urbanization, higher incomes and awareness of food safety also accelerate the import of Vietnamese meat for domestic consumption. After 10 years, meat imports achieved a staggering growth, with a growth rate of import value from 2009–2019 of 2470%. Meat of bovine animals, frozen and Frozen cuts and edible offal of fowls are the top imported products, for which Meat of bovine animals, frozen enjoyed the most significant increases from US$30 million in 2009 to over US$ 2.1 billion in 2019.
Source : ITC Trademap (2020)
Imports of fruit and vegetables also increase demand for cold storage and
transportation. During 2009–2019, the CAGR of import values of Fresh Cherries, Fresh Kiwies, Fresh strawberries, Fresh Grape, Fresh Pears, Fresh Apple in Viet Nam reached noteworthy amounts of 68%,38%,99%,40%,76% and 45% respectively. In 2019, the total import value of these five fruits in Viet Nam reached US$ 914.36 million.
- The development of modern retail and food chains
Rapid urbanization, higher incomes, and increasing awareness of food safety and Consumer’s psychology ” Xenophile ” promote the development of modern retail and fast-food services in Viet Nam. Although the retail market system is still dominated by traditional markets and department stores, the modern retail and fast-food services still has rapid growth rate.
According to HVLCLC, Modern channel has been continuing the main conquest of “rural” area. In particular, the largest retailer in Vietnam in the FMCG sector, Saigon Co.op (SGC) , which has opened a series of supermarkets and mini marts, many of which are located in small provinces, and towns by the end of 2019. Perseverance and strong attack of SGC, leading to the move of other retailers, a series of plans to open supermarkets and mini supermarkets in the provincial areas.
This indicates that the demand for cold services at provincial and rural area has great potential for development. According data of Qandme, minimarts and Convenience store sharply expand from 1334 stores in 2017 to 5228 stores in March 2020.
Moreover, in big cities, the presence of big centers, like AEON, LOTTE, Big C, Metro etc. and modern apartment buildings, like Royal City, Times City, Vinhome…. etc. With food courts, the steady development of fast food chains and the growing popularity of fast-service restaurants also contribute to expanding the demand for cold services.
- Higher productivity of high-value agricultural products
According to Directive No. 25 / CT-TTg,The goal of Vietnam’s agriculture is to 2030, Vietnam’s agriculture ranks among the 15 most developed countries in the world, of which, agricultural processing industry ranks among the top 10 countries in the world and is a central Center for deep processing and logistics of global agricultural trade.
So, Commercialization in agriculture production, particularly development of agricultural restructuring in the direction of organizing large commodity production in association with processing and consumption markets; promoting the development of large fields with synchronized mechanization in all stages of the value chain of agricultural products have formed a stable base for cold-chain demand in the long-term.
From 2000 to 2016, the total production of most agricultural products doubled, tripled, or increased even more. The production of beef (cow live weight) increased from 278.9 thousand tons in 2010 to 334.5 tons in 2019 with an average annual growth rate of 2 %. The poultry sector has witnessed average annual growth rate of 8 %. Over the whole period, pork is still the dominant type of meat for Vietnamese households. The production of pork in 2019 was over 3.8 million tons, which was nearly eleven times higher than the production of cow and three times higher than production of poultry.
Source: Kotra ,GSO, Emergent Cold and local media and newspapers.