Executive summary
Exporting to Vietnam: A guide for Canadian businesses (the Guide) is a Pan-Canadian resource to guide small and medium-sized enterprises (SMEs) in the agri-food sector on how to navigate exporting to Vietnam and how to take advantage of the benefits of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It captures information on where the opportunities lie and provides information on what Canadian companies need to consider before exporting, including the steps they must take before entering the market. The Guide includes a summary checklist for companies to “check off” their market readiness tasks.
The Guide is mainly intended for companies that have prior experience of exporting agricultural and agri-food products from Canada and have already undertaken sufficient market research to determine that Vietnam is a viable export destination.
Vietnam’s rapidly growing market, in conjunction with the enhanced market access under CPTPP, presents exciting opportunities for Canadian agri-food exporters. The country’s population was estimated at 98.5 million as of 2021, with over 45% of them aged between 25 and 54 years. Vietnam’s middle class, which was ranked in 2021 as the seventh-fastest growing in the world, is expected to reach 23.2 million people by 2030. These consumer groups represent an important demographic for the consumption of food and beverage products.
Compared to the west, Vietnamese consumers dine out more frequently, and their diet mainly consists of rice and rice noodles, fresh herbs, fruits and vegetables, tofu, meat and seafood. Local fruits include pineapple, coconuts, bananas, longans, lychees, mangoes, rambutans and other tropical fruit. Animal Sourced Food (ASF) contributes nearly 20% of total protein consumed in Vietnam. The most common animal proteins are pork, poultry and seafood. Though beef consumption is relatively low due to its higher price, it is growing in line with rising affluence. Similarly, milk consumption though relatively low when compared with the average milk consumption in Asia, is growing.
The eating habits of the Vietnamese have changed over the past two decades, driven by the country’s economic growth and greater exposure to Western food. Busy and stressful lifestyles resulted in the increasing sales of confectionery, snacks and junk food items. Having said that, the rising awareness of health risks is driving up the demand for healthy food products, and consumers are willing to spend more on organic and natural food items. Consumers increasingly prefer pesticide-free, organic fruits and vegetables, with rising demand for imported fruits. The Covid-19 pandemic has also intensified the focus on health and wellbeing even further, with demand particularly increasing for items that are safe, hygienic, and are targeted at boosting immunity.
While local companies still dominate the packaged food and beverages market, foreign players have been successful in growing their presence by offering quality products and establishing strong relationships. According to Statista, the total retail sales value of food and beverage products was estimated to be USD 54.9 billion in 2021, contributing to almost 16% of the country’s GDP. Fitch Solutions estimates that an average Vietnamese household would spend 20.8% of their total household budget on food in 2025.
Most consumer-oriented products reach the shelves of retail food channels through importers/distributors. The key sales channels are traditional retail, modern retail, food service, and e-commerce. Traditional trade, which includes wet markets and mom-and-pop stores, represents the largest channel in Vietnam both in terms of the number of outlets and sales value. Modern hypermarket and supermarket chains are steadily increasing their market share. E-commerce platforms are also rapidly emerging in Vietnam, and the pandemic further accelerated the growth of this sector. According to Statista, e-commerce revenue for the food and beverage segment is expected to grow at a CAGR of 34.8% from USD 642 million in 2020 to USD 2.9 billion by 2025.
Vietnam also has one of the most well-developed animal feed industries in the region, and inputs for the sector constitute a large component of agricultural imports.
In line with growing market demand, Vietnam’s total agri-food imports have grown at a CAGR of 7.4% between 2016 and 2020. Imports from Canada have increased at a CAGR of 29.2%, indicating rising penetration of Canadian agri-food products in the market. However, significant growth potential remains to be tapped. Canadian exporters have made the greatest inroads in the meat market in Vietnam, with both pork and beef imports surging by 5.8 times and 4.4 times respectively during 2020. The imports of both products have been boosted by CPTPP. With regards to seafood, crabs and lobsters are the main seafood products exported from Canada. Canada has also become the fourth largest wheat supplier to the country (9% of import value).
The CPTPP, which was signed in 2018, has enhanced market access for Canadian exporters looking to export to Vietnam. Once the agreement is fully implemented, Canada will have duty-free access to Vietnam for 94% of its agriculture and agri-food product exports. This will help Canada level the playing field with regional competitors that already enjoyed privileged access to the Vietnamese market through Free Trade Agreements (FTAs).
Companies are required to comply with Rules of Origin, which specify the amount of production that must be undertaken on a product in Canada or other CPTPP countries, for their products to be eligible for CPTPP’s preferential tariff treatment.
As Canadian exporters seek to benefit from these opportunities, they are advised to conduct a preliminary assessment of the Vietnam market and select a suitable business model (direct sales or through a distribution partner). Exporters can then prepare a detailed market plan, including product positioning, pricing strategy, distribution strategy, promotion plans, logistics considerations and financing requirements.
Subsequently, meetings can be arranged with local partners or customers. Participating in food and beverage trade fairs would also help in developing contacts.
After commercial arrangements have been reached and before starting exports, the Canadian exporters will need to understand the detailed import requirements applicable to their product(s) and complete pre-export processes, such as applying for the addition of establishment to approved list for exporting foodstuffs of animal origin to Vietnam, food product registration and ensuring that labels are compliant with local requirements. Local distribution partners in Vietnam typically assist with certain regulatory requirements, such as food product registration.
General laws and regulatory requirements for selling agriculture and agri-food products in Vietnam include the law on food safety, food inspection, product registration, labelling requirements, and announcement of conformity (to obtain the Certificate of Conformity Declaration). The Vietnamese government requires food products to hold export certificates, such as a certificate of free sale, a certificate of analysis, etc. before they are imported into Vietnam. In addition, there are compliance requirements for certain product categories, such as quarantine of imported plants, terrestrial and aquatic animals and products thereof, besides quarantine and quality inspection of imported animal feed and aquaculture feed originating from animals. All imported processed foods must be registered (self-declared) before they can be circulated in Vietnam, and food additives and supplemental foods must comply with national technical regulations. Lastly, Canadian firms are recommended to consult local legal offices for the complete list of laws and regulations that may apply to agriculture and agri-food products before exporting these products to Vietnam.
After obtaining orders, depending on the business model, exporters can make arrangements for shipping and consider bringing in freight forwarders and customs brokers for assistance, as required. Shipping by sea would be the most common shipment method for sending products that do not require fast delivery, as it is the most economical. If the seller is selling their products through a distributor or importer in Vietnam, then the Incoterms will depend on the agreement between the two parties. For Canadian exporters new to the market, FOB (free on board) is the recommended route, where the buyer (the local distributor in this case) takes care of all subsequent costs and risks once the goods are on board at the country of origin. With regards to making payments, there are several ways for customers to pay an invoice in international trade: cash in advance, letters of credit, documentary credit, documentary collection and open account.
Exporters should also remain up to date on the latest trends in the Vietnamese market and are advised to engage with other Canadian exporters that have successfully penetrated the market. Canadian exporters can seek support from appropriate bodies, such as the Canadian Trade Commissioner Service (TCS), to conduct market research, establish a market entry plan and identify potential distributors and customers.