Market entry considerations

Canadian exporters are advised to follow the following steps for launching agricultural and agri-food products in Vietnam.

1. Conduct a preliminary assessment of the Vietnam market, looking at import volumes, market size, retail dynamics, sales pathways, etc., and checking tariff and non-tariff barriers and market potential to evaluate the suitability of the market.
2. Select a suitable business model, such as direct sales to retailers or food processors, or via a local distribution partner in Vietnam.
3. Prepare a detailed market entry plan, including product positioning, pricing strategy, distribution strategy, promotion plans, logistics considerations and financing requirements. Strategize the best way to position the product (e.g. packaging, value proposition) and determine the most effective marketing and communication channels for presenting the product to potential consumers.
4. Find, contact and arrange meetings with local importers/distributors/customers. This can be done with assistance from the Canadian Trade Commissioner Service and specialized market entry consultants. Participating in leading food and beverage trade fairs can also help in developing contacts.
5. Check CPTPP’s Rules of Origin requirements and make preparations to meet them.
6. At this stage, the exporter would also need to obtain relevant Export Certificates required by the Vietnamese government, complete pre-export processes, such as applying with the Canadian Food Inspection Agency for addition of establishment to approved list for export of foodstuffs of animal origin to Vietnam, food product registration, etc. and ensure labels are compliant with local requirements.
7. At this stage, the exporter would also need to obtain relevant Export Certificates required by the Vietnamese government and complete pre-export processes, such as applying with the Canadian Food Inspection Agency for addition of establishment to approved list for export of foodstuffs of animal origin to Vietnam, food product registration etc. and ensure labels are compliant with local requirements.
8. After obtaining orders, make arrangements for shipping, bringing in freight forwarders and customs brokers for assistance, as required. If trade finance support is required, contact the organizations mentioned in Section 4.6.

Once initial orders have been fulfilled, and a foothold has been achieved in Vietnam, Canadian exporters should stay in regular touch with local partners, including face-to-face interactions where possible. Virtual meetings have become more accepted as an interaction mode during the past two years, due to international travel restrictions during the pandemic, but in-person meetings can still add value to relationship development with partners and customers in the market. Market visits should ideally be once every 6 months, especially in the initial stages of relationship building and market development. The Canadian exporter and the local distributor might do joint calls or meetings with key potential customers. Communications should be maintained on a quarterly basis at the minimum. The exporter can also consider organising a regional distributor meeting once a year at its headquarters, and get distributors to visit their factories or facilities. This would enable distributors from different markets to meet and learn from each other and help the exporter to get updates on market developments and challenges.

Exporters should also remain up to date on the latest trends in the Vietnamese market and consider engaging with other Canadian exporters that have successfully penetrated the market. It is also important to ensure availability of stock to meet the local market demand.

Canadian exporters can engage with appropriate bodies such as the Canadian Trade Commissioner Service (TCS) to conduct market research, establish a market entry plan and at a later stage, seek support on identifying potential distributors and customers. The Canadian Trade Commissioner Service is Canada’s largest network of trade experts on the ground in more than 160 cities around the world, including in the two key cities in Vietnam, Hanoi and Ho Chi Minh City. The TCS offers its services free of charge for qualifying businesses, including market potential assessment, preparation for international markets, problem-solving (advice and assistance) and introductions to qualified business contacts (buyers, partners, investors). The Embassy of Canada to Vietnam in Hanoi, the Consulate General of Canada to Vietnam in Ho Chi Minh City, and chambers of commerce, including the Canadian Chamber of Commerce in Vietnam, can help in gathering necessary market information.

Pre-export

Market accessibility

Market accessibility is determined by tariff and non-tariff barriers.

Prevailing tariffs applicable on goods imported from Canada to Vietnam can be checked at the following two links:

• The Canada Tariff Finder: This tool provides tariff information for countries with which Canada has a Free Trade Agreement. For import tariffs in Vietnam, users should select “Exporting” and “Vietnam (CPTPP)” and then search for the product, using either the HS code or a product description, such as poultry, apple, juice, confectionary etc. The system is intuitive and can guide users to the correct applicable tariff even if they do not have the HS code.
• Tariff search tool from Vietnam Customs: Users should enter a 4-digit or longer HS code and select “CPTPP – Other country”.

Applicable HS codes for products imported to Vietnam can be checked from the document accessible through the link provided in Appendix 3.

The Tariff elimination sub-section (3.2) under Overview of CPTPP sections of this report provides information on future tariff movements under CPTPP arrangements which can help a company check when tariffs will be reduced/eliminated and make appropriate preparations to access the market. In the agri‑food sector, once fully implemented, the CPTPP will afford duty‑free access to 94% of Canadian exports to Vietnam.

Vietnam has specific import requirements for any given food product. It is critical for Canadian exporters to work with their importer(s) in foreign markets to confirm the official and detailed import requirements applicable to their product(s) and the necessary steps and documentation required. The Government of Canada strongly encourages exporting companies to contact their regional Canadian Food Inspection Agency (CFIA) office to confirm any certification requirements before exporting to Vietnam. Please refer to the following link to find the nearest CFIA office.

To understand non-tariff barriers, which include inspection requirements, testing and certification requirements, labelling and packaging requirements, sanitary and phytosanitary (SPS) measures and import quotas, please refer to Section 6.0 (Regulatory Environment) and Appendix 2 (Information on Market Access) of this report. Usually, local importers and distributors in Vietnam will take care of these legal requirements, with support from the Canadian firm. Though the Vietnamese government has been taking steps to simplify regulatory requirements and registration procedures and remove inconsistencies in inspection regime applications, onerous requirements might mean that significant time and effort might be required to access the market.

Market potential

To obtain a preliminary understanding of the market potential for a product category, exporters can refer to free resources such as:

• Trade Data Online: This source provides trade data from Canada to all countries, including Vietnam, and can provide a sense of which product categories Canada has developed a presence in Vietnam and where exports to Vietnam have been on a rising trend.
• Trade Map: This database from the International Trade Centre (ITC) provides import and export volumes and values between countries and regions for up to 8-digit HS code level (a free account has to be created to access data at 6- and 8-digit level). This can help determine the trade dynamics between Canada and Vietnam for products of interest. By comparing Vietnam’s global import volumes for the product category of interest over the years, one can gauge the potential demand for the product in Vietnam. Growth in Vietnam’s imports from the world can be compared to movement in Vietnam’s imports from Canada to gauge areas where Canadian products are gaining strength. Looking at other key supplying countries can provide indications of where the competition is coming from.

There are other online sources (both free and paid) that can also be referred to for gathering market-specific information and related statistics, such as the General Statistics Office of Vietnam that provides Vietnam’s national statistics (World Bank Open Data is another resource for macroeconomic statistics), and Food and Agriculture Organization of United Nations (Statistics Division), which is a knowledge source on agriculture, forestry and fishery.

Agriculture and Agri-Food Canada also publishes market intelligence reports: . The website has sections dedicated to intelligence on Asian markets and on CPTPP.

Visiting Vietnam personally at the early assessment stage can help in identifying competing products. Visiting supermarkets and retailers can be useful as it allows exporters to get a sense of products and packaging in Vietnam and assess the price range and market approach used by potential competitors. A scan of the authorized brand owner/distributor section of popular e-commerce websites such as Lazada and Shopee can be useful to gain an impression of the competitive landscape and retail market pricing in the absence of data from physical store visits.  

Business model selection

For food and beverage products that are intended to be sold in the retail market, it is recommended that the exporter partners with an established local distributor, having experience with imported F&B products and access to appropriate sales channels.

When choosing food and beverage distributors in Vietnam, a range of factors should be considered, starting from the distributor’s margins, product specialization, presence in different online and offline retail channels and geographic coverage, to their marketing capabilities, warehousing capacity, and network of contacts, among others. Distributors holding the relevant import licence and having experience in arranging the required product permits must be engaged to address the food registration and other legal requirements before products are officially sold in the local market. Distributors often leverage their existing relationships with critical touchpoints in the retail supply chain and assume the responsibility to sell the products to suitable retailers. As these local distributors have a strong and developed network in the market, selling via these partners can help speed up market entry and minimize risks.

With regards to food and feed ingredients, distributors could be both local and international players. While large food processors and feed mill operators might be able to buy meat and other related food and feed ingredients directly from the exporters, smaller food processors continue to remain dependent on distributors to procure food and feed ingredients. According to current Vietnamese regulations, unless an exporter (foreign company) has an investment licence that permits it to directly distribute goods in Vietnam, which includes invoicing in local currency, the exporter must appoint an authorized agent or distributor.

Other key considerations for pre-screening a potential distributor include:

• For food and beverage products, it is essential to know what facilities a distributor has and where their specialization lies. Some questions to ask include: Can a distributor handle a temperature-controlled product? And if yes, what temperature-controlled products can they handle (e.g., meat, seafood, fruits and vegetables, or frozen desserts)? What particular freezing method do they use (e.g., individual quick freezing or IQF for some vegetables)? Do they have refrigerated vans?
• What is the distributor’s strength – foodservice, retail, or food processing? And which segment – high-end or mass market? Such questions will help exporters in identifying potential distributors as per their product requirements.
• Probe how knowledgeable and experienced a distributor is about the product and the market. Do they have experience in handling similar or complementary products? How deep is their knowledge of local trends impacting the exporter’s products?
• How does the distributor plan to market the product in Vietnam? Have they handled big brands? How sophisticated is their marketing? How is their e-commerce and social media presence? These factors are particularly important for exporters trying to understand a distributor’s capabilities and their ability to introduce a new product or brand in a market like Vietnam, where promotional activities are essential. Considering that Vietnam is a price-sensitive market, it is important to have distributors who can support below-the-line marketing activities, such as targeted online marketing and in-store promotions, as consumers are more likely to purchase if they spot discounts or through product demonstrations in stores.
• For exporters looking to private label or white label their products (both involve supplying products to companies such as retailers, which sell the products under their own brands, but under private label arrangements the product is supplied exclusively to one company, while in white label, a generic product is sold to multiple companies who then sell them to consumers under their own brands), check if a distributor has its own brands as an indicator of prior experience in dealing with contract manufacturers and in building and managing its own brands.
• In general, it is advisable to work with larger distributors because this typically means they will have nationwide coverage and can access and manage a network of agents or sub-distributors spread across the country. It is recommended to choose a distributor who has separate networks in the north, south and the central regions of the country and has established supply chain relationships appropriate for the exporter’s product(s). But in come cases, an established and large distributor with many brands in its portfolio may have less flexibility with an exporter’s terms and conditions than a smaller distributor that can be flexible, innovative and willing to collaborate.
• In a market such as Vietnam that is highly relationship-based, consider working relationship potential. To do this, exporters should get to know potential distributors via regular communications or meeting them in-person in their own market. Virtual meetings have been normal practice during the pandemic, but if travel is allowed, it is advisable to visit the potential partner’s office and facilities before entering into a commercial relationship.
• Exporters with premium products targeted at less price-sensitive consumers should focus on major urban areas in Ho Chi Minh City and Hanoi, where income levels are higher and premium retailers such as Annam Gourmet are present. Hence, distributors who are specialized in premium channels within urban areas may be more desirable.
• It is necessary to do due diligence by checking trade references and by consulting a professional agency for more information about the distributor. Information that should be reviewed includes the company’s overall credibility in the market, the validity of the distributor’s business licence, previous track record, the level of marketing activities, the scope of distribution coverage, particularly if the distributor is being considered for exclusivity.
• Engaging an agency for credit checks is also highly recommended; however, obtaining financial statements from small and medium companies may be challenging. In lieu of this, exporters can ask for a bank guarantee whenever they have to extend credit. Distributors with good financial standing should not have difficulty arranging a bank guarantee. An irrevocable confirmed letter of credit is recommended initially, and credit terms may be considered at a later point.

It must be noted that employing a distributor will result in an additional cost for the exporter due to margins for the distributor, and they may lose some control and visibility over sales and/or marketing.

It should also be noted that the retail market in Vietnam is complex. For exporters who are considering selling products directly to the end-users in Vietnam, it is advised exporters have a clear understanding of the retail market dynamics in Vietnam in order to choose the right distribution channels for selling their products.

Market entry plan

Once exporters have a clear understanding of the market accessibility, potential, and key import considerations and have decided on the appropriate business model, the next step is to prepare a market entry plan, including the information acquired during the first two steps described above. A detailed market entry plan can include the following:

• Internal assessment
  • Short- and medium-term objectives for exporting
  • Experience and expertise in exporting
  • Relationship between exporting and domestic operations
  • Internal availability of resources for managing export operations to Vietnam
• Market overview
  • Market trends, drivers and outlook
  • Market size
  • Purchase drivers
  • Competitive landscape
  • Market share held by imports
• Market-entry strategy
  • Products to be exported (immediate and in the future)
  • Key target market segments
  • Competitive advantage and Unique Selling Points (USPs) of products
  • Product positioning
  • Pricing strategy
  • Terms of sale
  • Distribution strategy
  • Promotion strategy and development of sales leads
  • Intermediaries/partners
• Regulatory and logistical issues
  • Tariff and non-tariff barriers
  • Modes of transportation and cargo insurance
• Risk factors
  • Market Risks
  • Credit and currency risks
  • Political and other risks
• Implementation plan
  • Key activities
  • Evaluation criteria and process
• Financial plan
  • Sources of funding
  • Operating budget
  • Cost of sales
  • Marketing and promotion costs
  • Other expenses or expenditures

Product launch and marketing

Developing an appropriate pricing strategy is a key component of a marketing plan, and it will depend on the existing competitive landscape in the target market, USPs of the exporter’s products and short/medium/long terms export objectives. Pricing can be static (charging the same price to all customers) or flexible (adjusting prices for different types of customers). Pricing strategies could include:

• Full cost-based pricing: Covering both fixed and variable costs of the export sale, with the addition of a profit margin (this can be useful for testing the receptivity of the market to the product)
• Marginal cost: Covering only the variable costs of production and exporting, while the exporter pays overhead and other fixed costs out of domestic sales
• Penetration pricing: Keeping your price low to attract more customers, discourage competitors and gain quick market share (this can be useful in early stages for competitive but fast-growing segments, to increase awareness of the brand among customers and encourage them to try the products)
• Price skimming: Pricing the product high to make optimum profit among high-end consumers while there is little competition (this is useful for innovative/new-to-market products targeted at a premium segment where there is limited direct competition at the moment)

To increase sales and raise brand awareness, exporters must have an effective market promotion strategy. It is recommended that exporters maintain a separate marketing budget for promoting retail products (consumer goods), as effective marketing could potentially attract new customers and improve market share. Marketing costs, promotion campaigns, and other related aspects should be negotiated between parties before entering into an agreement.

Through product demonstrations, in-store promotions, and by educating consumers, exporters can add value to existing marketing initiatives. Depending on the target audience and the product type, the advertising channel is determined. Some of the popular advertising channels to market and promote retail products are television, the internet, outdoor advertising, and trade fairs. Amongst these, television is one of the leading and the most powerful, effective forms of mass media communication in Vietnam.

With rising internet penetration and social media usage, digital marketing is assuming greater importance in the market. Along with steady improvement in internet penetration which reached 73.2% in early 2022, the speed of internet connections in Vietnam has also been increasing, with the average speed of fixed internet connection increasing by more than 40% between 2020 and 2021, to around 61 MBPS, as per digital insights provider DataReportal.

As of January 2021, there were 154.4 million mobile connections in Vietnam, an increase of 1.3 million (+0.9%) from January 2020. The number of mobile connections in Vietnam in January 2021 was equivalent to 157.9% of the total population.

According to DataReportal IT device ownership in Vietnam, as of 2021, was as follows:

• Smartphone: 97%
• Desktop/laptop: 66%
• Tablet device: 32%
• Streaming device: 12%

There were 72 million social media users in Vietnam in January 2021, equivalent to 73.7% of the total population. The number of social media users increased by 7 million (+11%) compared to the previous year. This is regarded as one of the highest increases registered in Southeast Asia. A typical Vietnamese internet user aged between 16 and 64 spends around 2 hours and 21 minutes every day on social media and 6 hours and 47 minutes on the internet.

In line with these trends, it is increasingly common for young Vietnamese consumers to conduct online research and search for product information and promotions before making purchase decisions. Customers also share reviews and experiences through online forums and social media platforms. It is interesting to note that around a third of the audience deemed to be reachable via advertisements on social media belong in the 25 to 34 year age group.

Participation in trade fairs listed in the table below would let traders display and sell their products directly in the local market and help demonstrate product quality, variants, and associated health benefits in the local market. In trade fairs, product exhibitors can sell goods on the spot to offset the cost of participating in the fair. Regular participation in trade fairs will also help cement relationships with stakeholders.

Food and Beverage trade events for Vietnam

Key Food and Beverage trade events in Vietnam

Vietfood & Beverage

11 to 13 August 2022

Saigon Exhibition and Convention Centre (SECC)

Ho Chi Minh, Vietnam

Food Ingredients (Fi) Vietnam

12 to 14 October 2022

SECC, Ho Chi Minh, Vietnam

Food & Hotel Vietnam

7 to 9 December 2022

SECC, Ho Chi Minh, Vietnam

Key regional Food and Beverage trade event

Food & Hotel Asia (FHA)

5 to 8 September 2022

Singapore Expo

Sources: Vietfood & Beverage, Fi Vietnam, FHV, FHA

Exporters can consider organizing webinars and workshops targeted towards large local food processors, manufacturers, and foodservice players. Such activities can be used to improve awareness of the merits of Canadian products and the high standards of production methods, by highlighting features such as food safety, traceability, health aspects, respect for the environment and sustainability, and the quality of agricultural and food products.

To increase brand visibility, exporters should also disseminate such information through social media campaigns in Vietnamese, on platforms such as TikTok, Facebook and Instagram, to better engage consumers directly.

Brand visibility can also be increased through advertising channels and by increasing shelf space for Canadian food and beverage products amongst grocery retailers. Canadian exporters can also consider participating in events, such as:

• Food events in collaboration with colleges, universities, sports clubs, where various Canadian confectionery and snacks can be gifted or showcased to create brand awareness
• Bakery masterclasses which incorporate the use of high-quality food ingredients from Canada
• Cooking demonstrations by well-known chefs to demonstrate meal assembly using Canadian ingredients, and how Canadian food and beverages can be used in various local dishes.

Logistics

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. But air freight might be used for goods where fast shipping is required.

To provide a common terminology for international shipping and minimize misunderstandings, the International Chamber of Commerce has developed a set of international commerce terms known as Incoterms.

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. Usually, the Canadian exporter will be responsible for the goods until it reaches the port of origin or the designated destination. Subsequently, the Vietnamese importer will be responsible for clearing the goods at Vietnamese customs. However, in reality, the parties’ responsibility is not restricted.

Two common options are CIF (cost, insurance and freight) and FOB (free on board). Under CIF, the seller takes responsibility for the costs and risks associated with the shipment and pays freight charges, cargo insurance, and any additional fees. For Canadian exporters new to the market, FOB 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.

However, if Canadian exporters are selling their products directly to local food processors/manufacturers, then the terms and conditions for logistics and distribution must be agreed upon between the parties in advance. If the manufacturer is unwilling to manage the logistics, then the exporter is advised to appoint a local agent who can manage product logistics and distribution.

A large volume of documentation is required when shipping goods internationally. This can include but is not limited to commercial invoices, packing list, certificate of origin, certificate of insurance, certificate of inspection and bill of lading/air waybill (a bill of lading is used for land and ocean freight, while an air waybill is used for air freight).

Freight forwarders and customs brokers can help with the process. A freight forwarder organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution. These agencies can negotiate rates with shipping lines, airlines, trucking companies, customs brokers and insurance firms. They can handle all of the exporters’ logistical requirements or handle just some part of the process, such as negotiating shipping rates.

International trade finance

There can be concerns regarding cash flows and payment terms for Canadian exporters when selling to distant markets such as Vietnam. Sellers may need to invest in equipment and/or labour to fill an order, and long payment terms can pose challenges.

In this section, the various payment methods and programs offering trade finance support for Canadian exporters are described.

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. These are described below in order of increasing risk to exporters:

• Cash in advance: Cash in advance is the most secure option because it eliminates all risks of non-payment and adds to your working capital. However, few foreign buyers would be willing to pay cash in advance, although some will pay a portion when goods are specially ordered.
• Letter of credit / Documentary credit: Letters of credit (L/C) outline the terms and conditions for a shipment and name a bank to receive and check shipping documents, as well as guarantee the exporter that they will be paid even if the buyer becomes unable to do so. L/Cs can be ‘confirmed’ or ‘unconfirmed’. For example, a Canadian bank can confirman L/C issued by a foreign bank, thus guaranteeing that the Canadian bank will pay the exporter even if the foreign bank doesn't. L/Cs can also be ‘irrevocable’, which means they cannot be cancelled or amended without approval. Confirmed and irrevocable L/Cs are the most secure. Payment terms for L/Cs can be ‘sight payment’, where the exporter is entitled to receive payment on sight, i.e., upon presentation of the draft to the bank, or ‘term payment’, where payments can be made over 30, 60 or 90 days, or at some other specified future date.

  The step-by-step process for how an L/C works is shown below:

  • The importer arranges an L/C with his/her bank.
  • The importer's bank prepares an irrevocable L/C which includes specifications as to how the exporter delivers the goods.
  • The L/C is sent to the Canadian bank to be confirmed; it is then forwarded to the exporter with an issued letter of guarantee.
  • The exporter arranges the shipping with its freight forwarder, who will provide the exporter with the necessary shipping documents once the goods are loaded. These documents are used to prove that the exporter has fully complied with the terms of the contract.
  • The exporter can take these documents to their bank, which sends them to the importer's bank for review. The importer's bank sends them to the importer, who obtains the documents that will allow them to claim the goods.
  • The importer’s bank pays the exporter’s bank, who then pays the exporter.
• Documentary collection: In a collection, the exporter ships goods to the importer (the customer) and forwards the shipping documents to a collecting bank. Next, the customer pays the collecting bank in exchange for the documents. The exporter then obtains the money from the bank. With a collection, there is no guarantee from any bank that the exporter will get paid, and the exporter is required to finance the shipment until the customer receives the goods and pays through a sight or term draft.
• Open account: Open accounts require an exporter to ship goods and pass the title to the customer before payment is made. The exporter is fully exposed to any credit risk associated with the customer until payment is received. In addition, because open account terms usually allow 30, 60 or 90 days (or even longer) before payment is due, the exporter is in effect financing the transaction for its buyer.

The following programs are dedicated to increasing exports by assisting Canadian companies with financing:

• Business Development Bank of Canada (BDC): The Business Development Bank of Canada specializes in small and medium-sized companies and is dedicated to Canadian entrepreneurs. Details on BDC’s food and beverage sector financing services can be seen here.
• Export Development Canada (EDC): This is Canada’s export credit agency, and it offers financial services to Canadian exporters and their international buyers. EDC offers several financing products for Canadian companies to support their international transactions.