Required Report - public distribution

**Date:** 11/15/2008

**GAIN Report Number:** VM8083

VM8090

**Vietnam**

**Retail Food Sector**

**2008**

**2008**

**Approved by:**

![](media/image1.wmf)Michael Riedel - Ag Attache

US Consulate in HCMC

**Prepared by:**

Truong Minh Dao

**Report Highlights:**

This is an update of Vietnam's Retail Food Sector report. Vietnam\'s
food retail sector is still dominated by small traditional trade. The
modern retail sector, supported by foreign and local retailers, is still
relatively small, but growing substantially to keep pace with overall
economic growth, the increase in disposable income, a sizeable young
population, and changes in consumption patterns. Imports of
consumer-oriented food and beverages continue to increase, with total
imports for 2007 reaching \$660 million and U.S. exports accounting for
over 30 percent of that total.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Ho Chi Minh City \[VM2\]

\[VM\]

Table of Contents

[ECONOMIC OUTLOOK: 3](#economic-outlook)

[SECTION I. MARKET SUMMARY 4](#section-i.-market-summary)

[I.1. Status of Retail Sector 4](#i.1.-status-of-retail-sector)

[Table 1: Estimated Value of Overall Retail Food Sales
4](#table-1-estimated-value-of-overall-retail-food-sales)

[Chart 1: 2007's Vietnam Retail Food Trade Structure
5](#chart-1-2007s-vietnam-retail-food-trade-structure)

[Table 2: Number of modern retail outlets and traditional outlets
6](#table-2-number-of-modern-retail-outlets-and-traditional-outlets)

[Table 3: Estimated value of modern retail trade food sales (\$ Billion)
7](#table-3-estimated-value-of-modern-retail-trade-food-sales-billion)

[I.2. Consumer Purchasing Behavior
7](#i.2.-consumer-purchasing-behavior)

[I.3. Trend in distribution channels
7](#i.3.-trend-in-distribution-channels)

[I.4. Trend in services offered by retailers
9](#i.4.-trend-in-services-offered-by-retailers)

[I.5. Import market 9](#i.5.-import-market)

[I.6. Advantages and Challenges Facing US Products in Vietnam
10](#i.6.-advantages-and-challenges-facing-us-products-in-vietnam)

[SECTION II. ROAD MAP FOR MARKET ENTRY
11](#section-ii.-road-map-for-market-entry)

[II.1. Entry Strategy 11](#ii.1.-entry-strategy)

[II.2. Market Structure 13](#ii.2.-market-structure)

[II.3 Trends in Distribution 14](#ii.3-trends-in-distribution)

[A: Modern retail trade sector: Super Markets/Hypermarkets/Convenience
Store Chains
14](#a-modern-retail-trade-sector-super-marketshypermarketsconvenience-store-chains)

[Table 4: List of major Supermarkets/Hypermarkets/Wholesale Stores
14](#table-4-list-of-major-supermarketshypermarketswholesale-stores)

[Convenient stores and minimarts: 18](#convenient-stores-and-minimarts)

[B. Traditional Retail Trade: Wet Market & Private Small Shops
19](#b.-traditional-retail-trade-wet-market-private-small-shops)

[SECTION III. COMPETITION 19](#section-iii.-competition)

[SECTION IV. BEST PRODUCT PROSPECTS
19](#section-iv.-best-product-prospects)

[SECTION V. POST CONTACT AND FURTHER INFORMATION
21](#section-v.-post-contact-and-further-information)

[USDA/FAS Offices in Vietnam 21](#usdafas-offices-in-vietnam)

[Key Government Contacts 22](#key-government-contacts)

[Vietnamese Websites: 23](#vietnamese-websites)

# ECONOMIC OUTLOOK:

-   Vietnam's economy has consistently averaged around 7 percent growth
    over the last decade. In 2006 and 2007, the growth rate exceeded 8
    percent per year, making Vietnam the second fastest growing economy
    in Asia. Given the current economic difficulties worldwide, Vietnam
    has adjusted its 2008's target economy growth from over 8 percent to
    6.6 percent.

-   The government continues to work on to market liberalization and
    further reforms to the legal, financial, and institutional systems.

-   Vietnam's population is 86 million people, which is the second
    largest population in South East Asia and the 6th largest in Asia,
    benefits from a young, educated population of which over half are
    under 25 years of age. Vietnam also has one of the largest female
    working populations, making the female consumer ever more important.

-   Vietnam's per capita GDP has doubled in 7 years, reaching \$835 in
    2007, a sevenfold increase from 15 years ago. Vietnam continues to
    pursue its ambition of becoming a middle-income developing country
    by 2010.

-   The Vietnamese urban middle- and upper-classes are emerging, and
    drive consumerism. Urban per capita income has been increasing at a
    rate of 8-10 percent per annum, and living standards have been
    improving. In the two largest urban areas (Hanoi and Ho Chi Minh
    City), over one third of urban households now earn more than \$500
    per month, and their retails sales of goods and services accounted
    for over 30% of total national sales. The size of the upper and
    middle classes in the two areas has almost doubled over the last
    five years. Five key urban areas (Hanoi, Ho Chi Minh City, Hai
    Phong, Danang and Cantho) play a vital role in Vietnam's economy,
    accounting for about 30 percent of GDP and 11 percent of total
    population.

-   Vietnam, with the smallest urban population in Asia, has started
    seeing a significant rural to urban migration as the economy becomes
    more industrialized.

-   The volume and value of Vietnam's exports continue to rise. In 2007,
    total exports were valued at \$48.4 billion and continue to grow at
    about 30 percent per year in 2008. Imports were valued at \$60.8
    billion, an increase of 36 percent over 2006.

-   Tourism and foreign remittance incomes are vital sources of foreign
    exchange for Vietnam. The tourist industry also continues to see an
    increasing number of foreign tourists, at an annual average growth
    rate of 10 percent; the total number of tourists in 2007 reached
    4.25 million, up 18 percent from the previous year, and the number
    for 2008 should be higher. Vietnam also gains up to \$5 billion per
    year in foreign remittance income from Vietnamese living abroad.

-   The creation of 160,000 private firms over the past five years, in
    great part due to considerable foreign direct investment (FDI)
    activities, is a testament to Vietnam's improved environment for
    investors. FDI reportedly accounted for \$20.0 billion in
    investments in 2007 and this figure is expected to increase
    exponentially over the next few years.

-   With its accession to the World Trade Organization on January 11,
    2007, Vietnam became a member of the largest "modern" trade
    organization, which requires signatories not just to lower import
    tariffs and eliminate quotas, but also to increase market access for
    goods and services, strengthen Intellectual property right
    protection, help develop infrastructure, and enhance legislative and
    regulatory transparency as well as commercial dispute settlement and
    business facilitation. According to Vietnam's WTO accession
    agreement, Vietnam must liberalize the wholesale, retail, and
    franchise sectors. As of January 2007, foreign service providers
    were allowed to establish joint ventures with Vietnamese partners,
    and as of January 1 2009, totally foreign-owned retail outlets and
    franchises may be established. The government reserves the right,
    however to determine the "economic need" for additional outlets
    beyond the initial one.

-   Relatively high inflation in 2007 (over 12 percent) and in 2008
    (estimated to be 20 percent) may negatively affect consumer's
    disposable income and consumer spending.

-   Given its sizable and young consumer base, improving consumer
    disposable income, and strong economic growth, Vietnam's best
    consumer years seem yet to come, with the prospects for continued
    rapid expansion in the retail sector over the next five years
    looking very promising.

# SECTION I. MARKET SUMMARY

## I.1. Status of Retail Sector

Consistently strong economic growth and higher disposable income have
contributed to the robust expansion of Vietnam's retail trade.
Nationwide retail sales of goods, estimated at \$27 billion in 2007,
have enjoyed a high growth rate of over 13 percent per year for the last
five years.

Food sales as a proportion of total retail sales account for less than
50 percent (11.5 billion in 2007), food retailing in Vietnam is
estimated to be growing at an average rate of 13.7 percent a year.

"Modern trade" (hypermarkets, supermarkets etc.) is still small but
growing fast. While it currently has a relatively small share of only 14
percent of total retail food sales, modern trade should continue
expanding at the high rate of 20 percent per year -- the rate of growth
over the last five years (2003-2007).

Table 1 below offers a view of estimated Vietnam's retail food sales
over the past five years.

## Table 1: Estimated Value of Overall Retail Food Sales

  ---------------- ---------- ------- --------- ---------- ---------- -------------
                   2003       2004    2005      2006       2007       5-year
                                                                      average
                                                                      growth (%)

  Value in \$      **6.95**   **8**   **9.2**   **10.4**   **11.7**   
  billion                                                             

  \% growth        15.1       15.0    12.0      13.0       12.5       13.7
  compared with                                                       
  previous year                                                       
  ---------------- ---------- ------- --------- ---------- ---------- -------------

Source: estimates derived from various trade sources.

The retail food sector in Vietnam is still dominated by traditional wet
markets and small household-owned "mom and pop" shops. The modern
retailers represent only a small share of the market, but their numbers
are growing. The traditional retail trade is being challenged by the
current upsurge in modern trade, with the number of supermarkets,
convenience stores, mini-marts, hypermarkets, large wholesale stores,
and department stores on the rise.

A combination of strong economic growth, rising income levels
(particularly disposable income), a growing middle class, a sizeable
young population, and an increasing exposure to a Western lifestyle are
fueling the rapid growth of modern trade in Vietnam's retailing. Over
the last five years (2003-2007), modern trade in Vietnam achieved an
average growth of 20 percent per year and is expected to continue to
grow at this rate for the next five years. More consumers in urban areas
are demanding an international shopping experience and increasing
numbers are shifting from the 'traditional' to the 'modern' trade (see
table 3 for details).

The chart below offers a general overview of Vietnam's food retailing
sector, including traditional channels and modern channels:

## 

## Chart 1: 2007's Vietnam Retail Food Trade Structure 

Vietnam's booming modern retail trade sector is still limited to major
urban areas (Ho Chi Minh City, Hanoi, Hai Phong, Danang and Can Tho) and
accounts for only about 14 percent of total food retailing in 2007.

Food products are currently sold at over 126 modern supermarkets, 6 "Big
C" hypermarkets, 8 "Metro Cash & Carry" wholesale centers, over 150
mini-marts and convenience stores, 27 shopping centers and hundreds of
thousands of traditional wet markets and small private shops.

## Table 2: Number of modern retail outlets and traditional outlets

  ------------------------- --------- --------- --------- --------- ---------
  Type of Retail Outlet     2003      2004      2005      2006      2007

  **Supermarkets,           **78**    **95**    **105**   **115**   **140**
  hypermarkets & Wholesale                                          
  centers**                                                         

  Department Stores         16        18        21        25        27

  Grocery shops and wet     611,200   619,038   623.028   625,766   626,000
  markets                                                           
  ------------------------- --------- --------- --------- --------- ---------

Source: Various trade sources, including the Vietnam Retail Association
and Euromonitor

Results of independent market surveys point to Vietnam's retail market
as a very promising and attractive destination for foreign investment in
Vietnam. Vietnam has ended India\'s three-year reign as the most
attractive emerging market destination for retail investment, according
to the seventh annual Global Retail Development Index™ (GRDI), a study
of retail investment attractiveness among 30 emerging markets conducted
by management consulting firm A.T. Kearney.

Vietnam\'s leap from fourth in the 2007 GRDI to first place in 2008 was
driven by strong GDP growth, changes to the country\'s regulatory
structure to favor foreign investors, and increasing consumer demand for
modern retail concepts. 

Almost all existing large retailers in Vietnam have committed to further
expansion, not only in larger cities like Hanoi and Ho Chi Minh City
(HCMC), but also in Can Tho, Da Nang, Hai Phong, Long Xuyen and Phan
Thiet.

Growth in the modern food retail sector has been slowed by existing
government policy, which seeks to protect domestically-owned
supermarkets by not permitting 100 percent foreign-owned investment in
the retail sector. However, in accordance with Vietnam's WTO accession
agreement, as of January 1, 2009, retail enterprises may be 100 percent
foreign-owned. Currently, foreign companies may form joint ventures with
local partners on the condition that their control is less than 50
percent. This model has worked well for the Big C hypermarket chain
(France) and Parkson (Malaysia). Metro Cash & Carry of Germany was able
to enter the market as a 100 percent foreign invested "cash & carry"
operation, requiring, nominally at least, that customers be wholesale
purchasers.

While waiting for the full opening of FDI in retailing, several foreign
retailers are exploring the option of 100 percent FDI. Foreign retail
chains such as Lotte Mart of Korea are reportedly poised to open their
first retail outlet or supermarket in early 2009. Dairy Farm has been
collaborating with Citimart, a Vietnamese retailer, to start their first
three stores named Wellcome in end of 2007. As of January 1, 2008, the
financial contribution was dropped, but it is necessary for
foreign-owned retailers to have a Vietnamese partner until January 2009.

The key constraints to the development of a modern retail sector in
Vietnam are low consumer income (despite recent gains), a very high cost
of land rental in urban areas, expensive electricity and growing
inflation (7 percent for 2006 and 12 percent for 2007 and over 20
percent for 2008).

Official data on food sales in the modern retail sector are not
available and most store owners are reluctant to disclose such data.
Thus, Table 3 is Post's best estimate of the total value of Vietnam's
modern retail trade.

## 

## Table 3: Estimated value of modern retail trade food sales (\$ Billion)

  ---------------- ---------- ---------- ---------- ---------- ---------- -------------
                   2003       2004       2005       2006       2007       5-year
                                                                          average
                                                                          growth (%)

  Value            **0.62**   **0.75**   **1.00**   **1.23**   **1.64**   

  \% growth        14.5       17.3       25.0       18.7       24.9       20
  compared with                                                           
  previous year                                                           
  ---------------- ---------- ---------- ---------- ---------- ---------- -------------

Source: Post estimates derived from various trade sources.

## I.2. Consumer Purchasing Behavior

Vietnamese consumers, with a large share of young people, are still very
price-conscious but tend to do more spending than saving due to their
optimism about Vietnamese future. A survey in major urban areas (Hanoi
and Ho Chi Minh City) by the consulting firm TNS showed that savings as
a share of total expenditure in 2006 and 2008 were 12 percent and 9
percent, respectively.

Vietnamese consumers spend a great portion of their disposable income on
food items. About 42-45 percent of total consumption expenditures are
for food, mostly staples and basic food items like rice, animal protein
sources, salt, sugar, vegetable oils, and sauces. Very little is spent
on high value processed food products. Nevertheless, recent consumer
surveys indicate an increase in spending on high-value products such as
dairy products (UHT milk, fresh milk, yogurt, cheese etc.), meat, eggs,
fresh fruits, vegetables, confectionary items, snack foods, and
sophisticated food items.

Vietnamese consumer's habits:

-   Shop daily for food items.

-   Prefer fresh products.

-   Low percentage has refrigerators and microwaves (only 13 percent of
    urban households have microwave ovens).

Consumer trends in urban areas:

-   Low average income but improved disposable income.

-   More concern about nutrition, quality, hygiene and food safety.

-   Accept to pay more for better products.

-   More sophisticated tastes for wider assortment of products.

-   Busier lives, prefer convenience, and tend to go to one place to buy
    most of their groceries.

-   Shop more frequently in modern retail outlets.

-   Go to modern retailers not only to shop but also to entertain
    themselves.

-   Brand loyalty, but still receptive to new products.

-   Western life style is welcomed.

-   More dining-out than before.

-   Influenced by advertisements and promotion; especially children. One
    market researcher noted that 18 percent of sales occurring in modern
    trade are as a result of advertisements and promotions.

## I.3. Trend in distribution channels

While HCMC, Hanoi, Haiphong, Cantho and Danang have a growing number of
modern retail outlets, the rest of the country still relies heavily on
traditional marketing channels. Although small "mom and pop" shops and
wet markets continue to play a major role in food distribution, the
number of supermarkets, hypermarkets and wholesale supermarkets
continues to increase in urban areas, due to:

-   A growing number of western-minded consumers, especially large
    numbers of young consumers in urban areas.

-   A growing middle class, where both parents are working and less time
    is available for food shopping.

-   Aggressive promotions, appealing prices and discounts, plus a wide
    range of products offered by large supermarkets, attracting even
    lower-income consumers.

-   Increasing consumer acceptance of processed and packaged products.
    Many products traditionally sold in bulk are now readily available
    pre-packaged.

-   More and more consumers are inclined to shop frequently in modern
    retailers and supermarkets because they are cleaner than wet
    markets, more convenient, and often offer better quality products.

The five-day work week coupled with increasing disposable income of the
urban family has accelerated the trend of purchasing ready-to-eat snacks
and high-value food items. Local food producers have begun to supply
shoppers with ready-to-eat and semi-prepared food items. Prepared food
items include a variety of food ingredients, chopped or sliced, wrapped
and packaged for immediate use. This new trend is expected to trigger a
demand for even more varieties of ready-to-eat and semi-prepared dishes,
and has contributed greatly to the increase Western food product
imports. The opportunities for U.S. food products in this market are
significant. Best growth products in recent years have included dairy
products (i.e. powdered-milk, infant formula, UHT milk, cheese and
butter); red meat (beef and pork), poultry meat, fresh fruits, dried
fruits, snack foods, processed fruits, fruit juices, breakfast cereal,
confectionary, wine and baby foods.

With a dynamic, well-educated population of 86 million consumers,
Vietnam is both an opportunity and a challenge for American high-value
foods and beverages. Vietnam is evolving and becoming more integrated
with its Association of South East Asian Nations (ASEAN) neighbors,
which often enjoy favorable tariff and trading advantages. Conversely,
Vietnam became a WTO member in January 2007, thus opening up more
opportunities for trade with the United States and other members through
much lower tariffs and improved market access, as well as commitments to
adhere to international standards on sanitary and phytosanitary (SPS)
and technical barriers to trade (TBT) measures.

Vietnamese consumers in big cities have become accustomed to
higher-quality consumer-ready products. U.S. products are appreciated
for their higher quality, but price continues to be the main factor for
purchasing consumer-ready products. Increasing numbers of urban
consumers are shopping daily in supermarkets and are buying U.S. fresh
fruits, canned goods, condiments, sauces, snack foods, nuts, soups,
wine, and a variety of other products. While local products continue to
be strong sellers because of price, the quality of most locally-made
products has not yet reached international standards. At some point in
the near future, local consumers will begin to demand higher quality
levels which should lead to stronger demand for US high-value food
products.

As foreign companies' access to local trading and distribution rights
are still limited, local importers continue to play a major role in
distributing and promoting imported products in Vietnam. Typically,
local importers have their own sales agents and distribution fleets, and
are in direct contact with supermarkets, wholesalers, and in many cases,
also with thousand of grocery stores. Some importers are involved in
imports of a wide range of products with no particular loyalty to a
specific product, brand or origin. Other importers are working
exclusively to develop markets for specific labels. As these importers
tend to promote their products more heavily, they may require more
involvement from the exporter in order to penetrate this market.

## I.4. Trend in services offered by retailers

Supermarkets in Vietnam tend to be located in store complexes that
include a number of fast food restaurants, entertainment venues (mainly
video games), and specialty shops. The number of adjacent shops varies
from 18 to 25, and is meant primarily to attract a large number of
visitors. Department stores usually devote a relatively large space for
ready-to-eat food and entertainment.

In many cities, the lack of adequate entertainment and amusement sites
draws many families to visit department stores and big supermarkets to
roam around, and they often end-up buying, or at least being exposed to,
new-to-market products.

Major retail stores have recently invested more resources in developing
fresh, chilled, and frozen sections, as well as ready-to-cook and
ready-to-eat food sections. They also provide additional in-store
services (i.e. acceptance of credit/debit cards, ATM services, food
courts, bakery corners, home delivery, and gift wrapping services), in
order to attract more customers and to compete effectively with open-air
wet markets. Interest in nutritional characteristics of food will
continue to grow.

A current survey from a market researcher showed over 50 percent of
shoppers still think that supermarkets offer higher prices than other
markets and that they are also far from home. To support evolving
consumer preferences, retailers have focused more on customer services
and marketing practices. Promotional and advertisement campaigns are
more aggressive, with in-store promotions, store flyers, seasonal
discounts, and loyalty programs for frequent shoppers. Packaging sizes
have been reduced to lower the prices, and more generic brands
(especially for staple foods such as rice, salt, wheat flour, and sugar)
have been introduced. The leading supermarket chain, COOPMART, has
offered home delivery to customers who are able to place orders over
\$7.

Internet sales of food products and direct selling to consumers have
just been introduced recently and should see increased sales in coming
years.

The "multi-level marketing" concept has recently been introduced to
Vietnam and has done well. It has been watched closely by government
authorities who doubt the value of products marketed under this concept,
and worry about over-stated or false advertisements in addition to a
suspicion that this system will evade taxes.

Franchising is likely to flourish in Vietnam. It would offer an
excellent route for multinational firms to enter Vietnam and for
domestic enterprises to expand overseas. Last year, the franchising
market surged 20 percent in number of stores, with more than a hundred
new franchisees and the transfer of a hundred brands into Vietnam.
According to global franchisers, Vietnam has all the hallmarks of a
franchise haven: a young market, high economic growth, and stable
political system. The Vietnamese government passed the Franchising
Decree in 2006, which is expected to help bolster the business in the
country.

## I.5. Import market

The GOVN continues to discourage high value food imports through
relatively high tariff and non-tariff barriers. Import tariffs range
from 20 percent - 40 percent for processed foods, and 62 percent for
wine and alcoholic beverages. However, in an effort to combat high
inflation, Vietnam has reduced tariffs on key food commodities such as
meat, dairy products, and dried peas and in some cases, lowered them
even beyond the bound rates of Vietnam commitments under WTO. Elect
tariffs for meat and poultry products rose again in October 2008.

The Department of Animal Health's SPS requirements for animal products
and the Food Administration's food registration requirements for
imported foods are cumbersome. They require excessive documentation and
are sometimes not based on sound science. Moreover, the valuation of
imported foods has sometimes not been based on the invoiced transaction
value, despite Vietnam's commitment under the bi-lateral trade agreement
with the United States. Vietnam has also committed to honoring the
invoiced values in its WTO agreement, and it is left to be seen whether
the country will now more consistently adhere to this.

Overseas relatives of the Vietnamese consumers also contribute to
promoting the spread of Western goods and lifestyles through the parcels
of consumer goods that they send back to Vietnam. This has introduced
and promoted several new-to-market food products to consumers in
Vietnam. Unofficial trade data for 2007 indicated that Vietnam imported
about \$660 million in consumer-oriented agricultural products and \$200
million in edible fishery products as part of the estimated \$4.2
billion in agricultural, fish and forestry products. The actual level of
consumer-ready imports is likely even higher, given Vietnam's porous
borders and under-invoicing practices.

U.S. food products are favored by consumers because of their high
quality, safety and innovativeness. Exports of high value and
consumer-oriented U.S. food and beverages to Vietnam have experienced
rapid growth in recent years. After hovering around the \$20 million
mark for several years, these exports grew to over \$51 million in 2004
and a record \$210 million in 2007, a year-on-year increase of 90
percent, representing 32 percent of Vietnam's total consumer-oriented
imports. U.S. market share for these products should increase even more
in the coming years as Vietnam has lowered import duty on several of
these products.

Key consumer items include dairy products (including for manufacture),
chilled & frozen meat (beef and pork), frozen poultry, fresh fruits,
snack foods, packaged foods (canned fruit & vegetables, canned meat),
juices, condiments, sauces, dried fruits & tree nuts, wines, and
confectionary items.

## I.6. Advantages and Challenges Facing US Products in Vietnam

  ----------------------------------- -----------------------------------
  U.S. Advantages                     Challenges for U.S. Exporters

  Increasing incomes and a            Price-sensitive consumers.
  rapidly-growing middle class        Significantly higher shipping costs
  enamored with American culture      and transportation time than from
  (music, movie, fashion) which       Asia and Oceania.
  carries over to American food.      

  U.S. foods are recognized as high   Twenty-year absence from this
  quality items and a great value for market limits knowledge of U.S.
  the price.                          foodstuff suppliers, with the
                                      general preference being for
                                      European (especially French) food
                                      items.

  Low level of competition from other A part of Vietnamese urban
  U.S suppliers in the market.        residents are slow to try new types
                                      of Western food.

  Vietnam's accession to WTO in 2007  High tariffs, cumbersome and
  has reduced tariffs on several food excessive customs requirements;
  items and created a better business non-science based sanitary and
  environment with more liberalized   phytosanitary requirements on
  trading and service practices.      animal and plant products persist,
                                      and the regulations are slow to
                                      change.

  Voluntary tariff reductions on      Low tariffs applied to food
  beef, poultry, corn, SBM, soybeans  products imported from ASEAN
  and dairy products, among others,   countries under the Asian Free
  even beyond final bound rates.      Trade Agreement (AFTA).

  Growing number of western-style     U.S. exporters often perceived as
  fast-food restaurant chains,        not flexible or responsive enough
  bakeries and coffee shops, as       to importers' needs or the local
  franchising and has been introduced business environment.
  and the retail food sector now      
  transitions to a more modern        
  structure.                          

  Growing rural to urban migration.   Limited infrastructure and
                                      distribution for perishable
                                      products (cold chain etc.).

                                      Limited/restricted supply of bank
                                      loans and foreign exchange as well
                                      as weaker tie between the U.S.
                                      dollar and the Vietnamese dong,
                                      resulting in more risk for non-L/C
                                      payment terms for sales of US foods
  ----------------------------------- -----------------------------------

## 

# SECTION II. ROAD MAP FOR MARKET ENTRY

## 

## II.1. Entry Strategy

According to Vietnam's WTO accession agreement, as of January 1, 2009,
foreign-owned retailers and franchises may be established without the
need for a Vietnamese partner or Vietnamese investment, as is currently
the case. As of January 1, 2008, the Vietnamese capital investment was
rescinded, but the Vietnamese partner is still required until 2009. The
government also reserves the right to determine the "economic need" for
additional outlets beyond the initial one. Notwithstanding this, the
best way to enter this market is to appoint a local partner to directly
import the products, or to act as an agent to arrange for importing,
distributing, and marketing. The appointed local partner should be
responsible for the widest distribution of your products, as well as
perform the marketing efforts needed to create awareness for your
products among consumers. Business relationships are very important for
success, and therefore regular visits with local partners as well as
with key retailers should be a priority.

It is critical for U.S. exporters to spend time and resources to study
potential markets for the products before initiating sales. They should
also visit Vietnam to gain a first-hand feel of the market, preferably
around the bi-annual Food & Hotel Vietnam Show organized in Ho Chi Minh
City (next show in October 2009), a USDA-endorsed trade show with a
sizable U.S. pavilion. U.S. exporters are encouraged to review the FAS
Exporter Guide VM8069 as well as our other trade policy reports
beforehand. Exporters are encouraged to contact FAS-Hanoi or FAS-Ho Chi
Minh City to assist them with conducting market briefings and in setting
up initial meetings with potential importers and major retailers.

Successfully introducing your product in this market depends to a large
part on having a good local representative and an effective pricing
strategy. The local partner should preferably be an importer and
distributor who is capable of maneuvering in both traditional and modern
retail channels. A food supplier wishing to reach all Vietnamese
consumers must work with the modern retailers as well as the open-air
wet markets and small shops. While HCMC, Hanoi, Haiphong, Danang, and
Cantho have a growing number of modern outlets, much of the country
still relies heavily on traditional marketing channels. According to two
major importers of branded food items from the USA and European
countries, sales to supermarkets are currently about 40 percent of their
total sales in term of volume.

U.S. exporters should consider the following before selecting an agent:

\- Must have a good relationship with retailers and an ability to deal
with local regulators.

\- Must have expertise in setting up distribution networking.

\- Those with fewer clients and smaller set-ups may be easier to work
with, as they may be more adaptable and committed than those with a
large infrastructure.

\- U.S. firms should evaluate all distributor prospects, and thoroughly
research the more promising ones. Check the potential agent's reputation
through local industry/trade associations, potential clients, bankers,
and other foreign companies.

\- FAS-Vietnam maintains extensive lists of potential importers, which
U.S. exporters are welcome to review.

Most importers who are interested in dealing with US food suppliers
prefer to:

\* Purchase consolidated containers of a variety of food items in small
quantities so as to avoid extra inventory costs.

\* Seek exclusive agreements from exporters.

\* Ask for advertisement and promotion support from exporters.

\* Ask for payment under some credit terms.

The key to success for exporters is to focus on 'reasonable' entry
pricing for their products, which should be specifically targeted at the
desired consumer base.

## II.2. Market Structure

![](media/image1.wmf)

**Distribution of imported foods:**

Distribution of imported foods follows one of the four basic models as
follows:

**1) Exporters -Importers/Distributors \-- Big Modern Retailers**

**2) Exporters - Importers/Distributors \-- Wholesalers \--
Retailers**

**3) Exporters - Local Agent- Importers/Distributors  Wholesalers
\-- - Retailers**

**4) Exporters\-- Big Modern Retailers** (Metro, Saigon Coop, Big C,
Maximart, Citimart, Fivimart)

Models No.1 and No.2 are the most common practice in Vietnam.

In Vietnam, most food importers are also distributors. They often
directly move their imported products to big retailers in urban areas,
and let wholesalers and their agents help move their products to the
thousands of small retailers in both urban and rural areas. Due to
relatively low purchasing power, most modern retailers source their
imported foods through importers/distributors. Only a few big chains
like Metro, Big C, Saigon Coopmart, Maximart and Citimart have tried
buying directly from foreign suppliers.

Vietnam's limited distribution infrastructure and facilities for
perishable products is a significant constraint to importing products.
The distribution systems are often equipped with out-of-date technology,
and transport products using inadequate or fragmented cold chains and
with improper handling.

## II.3 Trends in Distribution

The modern retail sector is expanding rapidly, but the traditional
sector will continue to dominate the distribution system for some years
to come. Utilizing state-of-the-art technology and equipment, and taking
advantage of strong financing, large retailers put in place central
warehousing and distribution systems in the big cities, and increasingly
import directly (particularly perishable products i.e. fresh produce,
frozen meat, and vegetable) from foreign suppliers. They will open more
outlets not only in the big cities but also in other regions to maximize
their capacity and geographic reach.

With firm commitments from the government to liberalize markets, Vietnam
is very likely to receive more foreign investments in distribution.

## A: Modern retail trade sector: Super Markets/Hypermarkets/Convenience Store Chains

-   The modern retail trade is expected to continue to expand at a very
    fast pace of over 20 percent per year over the next five years.
    Large Vietnamese corporations such as SATRA, HAPRO, and PHU THAI are
    entering into retailing. Several global retailers are exploring
    opportunities in Vietnam, in addition to those already here.

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-   Over 20 percent of imported high value food items are sold through
    modern outlets.

-   Most supermarkets, hypermarkets, and wholesale stores buy most of
    their imported products from importers/distributors or agents.

-   A few are importing directly from foreign suppliers, particularly
    perishable products and specialty products.

## 

## Table 4: List of major Supermarkets/Hypermarkets/Wholesale Stores

+-----------+---------+----------+------+------------+--------------+
| *         | **Owne  | **No. of | #    | ##         | **Imported   |
| *Retailer | rship** | O        | #### | ####### ** | Food         |
| Name/**   |         | utlets** | #### | Locations  | Purchasing   |
|           |         |          |  **E | and expans | Agent**      |
| **Outlet  |         |          | stim | ion plan** |              |
| Type**    |         |          | ated |            |              |
|           |         |          |  Sal |            |              |
|           |         |          | es T |            |              |
|           |         |          | urno |            |              |
|           |         |          | ver  |            |              |
|           |         |          | (US\ |            |              |
|           |         |          | $ mi |            |              |
|           |         |          | l)** |            |              |
+-----------+---------+----------+------+------------+--------------+
| COOPMART/ | Local   | 29       | 400  | \- Mainly  | \- Mainly    |
|           | company | supe     |      | in HCMC    | from         |
| Su        | o       | rmarkets |      | (16        | importers/   |
| permarket | perated |          |      | stores).   | distributors |
| &         | under   | 67       |      |            | and          |
| Co        | co-op   |          |      | \- Just    | wholesalers. |
| nvenience | erative | co       |      | expanded   |              |
| Stores    | law     | nvenient |      | to Cantho, | \- Small     |
|           |         | stores   |      | Long       | portion of   |
|           |         |          |      | Xuyen,     | food         |
|           |         |          |      | Phan       | imported     |
|           |         |          |      | Thiet, Gia | directly     |
|           |         |          |      | Lai, Ben   |              |
|           |         |          |      | Tre,       |              |
|           |         |          |      | Daklak     |              |
|           |         |          |      |            |              |
|           |         |          |      | \- Plan: 3 |              |
|           |         |          |      | in HCMC    |              |
|           |         |          |      | and other  |              |
|           |         |          |      | cities     |              |
|           |         |          |      | (Binh      |              |
|           |         |          |      | Duong,     |              |
|           |         |          |      | Danang)    |              |
+-----------+---------+----------+------+------------+--------------+
| Metro     | 100%    | 8        | NA   | \- HCMC,   | \- Mainly    |
| Cash &    | Foreign |          |      | Hanoi, Hai | from         |
| Carry     | I       |          |      | Phong,     | importers    |
| wholesale | nvested |          |      | Cantho,    | and          |
| stores    | Company |          |      | Danang.    | d            |
|           | (G      |          |      |            | istributors. |
|           | ermany) |          |      | \- Plan:   |              |
|           |         |          |      | open 4     | \- Direct    |
|           |         |          |      | more       | imports for  |
|           |         |          |      | stores in  | fresh and    |
|           |         |          |      | HCMC,      | frozen       |
|           |         |          |      | Hanoi,     | products.    |
|           |         |          |      | Dong Nai   |              |
+-----------+---------+----------+------+------------+--------------+
| BIG C /   | Local   | 6        | NA,  | \- HCMC,   | \- Mainly    |
| Hyp       | Joint   |          | sh   | Dong Nai,  | from         |
| ermarkets | Venture | Hype     | ould | Hanoi,     | importers/   |
| and       | with    | rmarkets | be   | Haiphong,  | distributors |
| Sup       | Casino  |          | over | Danang.    | and          |
| ermarkets | Group   | 1        | 70   |            | wholesalers. |
|           | of      |          |      | \- Plan:   |              |
|           | France  | Sup      |      | open 4     | \- Small     |
|           |         | ermarket |      | more       | portion of   |
|           |         |          |      | stores.    | food         |
|           |         |          |      |            | imported     |
|           |         |          |      |            | directly     |
+-----------+---------+----------+------+------------+--------------+
| Maximart  | An      | 4        | 50   | \- HCMC,   | \- Mainly    |
| Sup       | Phong   |          |      | Nha Trang, | from         |
| ermarkets | Privat  |          |      | Cantho     | importers/   |
| and       | e-Owned |          |      |            | distributors |
| D         | Company |          |      | \- Plan: 2 | and          |
| epartment |         |          |      | more in    | wholesalers. |
| Stores    |         |          |      | Binh Duong |              |
|           |         |          |      | & Nha      |              |
|           |         |          |      | Trang      |              |
+-----------+---------+----------+------+------------+--------------+
| Citimart  | Privat  | 13       | NA,  | \- HCMC,   | \- Mainly    |
|           | e-Owned |          | sh   | Hanoi,     | from         |
| Sup       | Company | Supe     | ould | Cantho,    | importers    |
| ermarkets |         | rmarkets | be   | Dong Thap, | and          |
| and       |         |          | over | Binh Duong | distributors |
| C         |         | 4        | 40   |            |              |
| onvenient |         | m        |      |            |              |
| Stores    |         | inimarts |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| Intimex   | Join    | 12       | 30   | Hanoi,     | \- Mainly    |
| Sup       | t-Stock |          |      | Haiphong,  | from         |
| ermarkets | Company |          |      | Hai Duong, | importers    |
| and       |         |          |      | Nghe An,   | and          |
| D         |         |          |      | Danang     | distributors |
| epartment |         |          |      |            |              |
| Stores    |         |          |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| FIVIMART  | Privat  | 15       | 40   | \- Hanoi,  | \- Mainly    |
|           | e-Owned |          |      | HCMC, Binh | from         |
|           | Company |          |      | Duong      | importers    |
|           |         |          |      |            | and          |
|           |         |          |      |            | distributors |
+-----------+---------+----------+------+------------+--------------+
| Binh Dan  | Privat  | 2        | NA   | -HCMC      | \- Mainly    |
| Sup       | e-Owned |          |      |            | from         |
| ermarkets | Company |          |      |            | importers    |
|           |         |          |      |            | and          |
|           |         |          |      |            | distributors |
+-----------+---------+----------+------+------------+--------------+
| SATRA     | Stat    | 2        | NA   | \- HCMC    | \- Mainly    |
|           | e-owned |          |      |            | from         |
| Sup       |         |          |      |            | importers    |
| ermarkets | Company |          |      |            | and          |
|           |         |          |      |            | distributors |
+-----------+---------+----------+------+------------+--------------+
| Select    | Privat  | 5        | NA   | -HCMC      | \- Mainly    |
| S         | e-Owned | supe     |      |            | from         |
| upermarts | Company | rmarkets |      |            | importers    |
|           |         |          |      |            | and          |
|           |         | 5        |      |            | distributors |
|           |         | m        |      |            |              |
|           |         | inimarts |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| SEYU      | Local   | 1        | NA   | \- Hanoi   | \- Mainly    |
|           | Joint-  |          |      |            | from         |
| Su        | Venture |          |      |            | importers    |
| permarket | with    |          |      |            | and          |
|           | Seyu of |          |      |            | d            |
|           | Japan   |          |      |            | istributors. |
+-----------+---------+----------+------+------------+--------------+
| PARKSON   | Local   | 4        | NA   | \- HCMC,   | \- Mainly    |
|           | Joint-  |          |      | Hai phong  | from         |
| Deparment | Venture |          |      | and Hanoi  | importers    |
| Store     | with    |          |      |            | and          |
|           | Parkson |          |      | \- Plan:   | d            |
|           | of      |          |      | open a     | istributors. |
|           | M       |          |      | total of   |              |
|           | alaysia |          |      | 10 stores. |              |
+-----------+---------+----------+------+------------+--------------+
| VIN       | Stat    | 20       | NA,  | HCMC, Dong | \- Mainly    |
| ATEX-MART | e-owned | supe     | sh   | Nai and    | from         |
|           | company | rmarkets | ould | other      | importers    |
|           |         |          | be   | provinces  | and          |
|           |         | And 12   | over |            | d            |
|           |         | m        | 40   |            | istributors. |
|           |         | inimarts |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| HAPRO     | Stat    | 7        | 7    | Hanoi and  | \- Mainly    |
|           | e-owned | supe     |      | northern   | from         |
|           | company | rmarkets |      | provinces  | importers    |
|           |         | and 18   |      |            | and          |
|           |         | co       |      |            | distributors |
|           |         | nvenient |      |            |              |
|           |         | stores   |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| Wellcome  | B       | 3        | NA   | \- HCMC,   | \- Mainly    |
| S         | usiness |          |      | Cantho,    | from         |
| upermaket | Coop    |          |      | Kien Giang | importers    |
|           | eration |          |      |            | and          |
| (Dairy    | C       |          |      | \- Plan:   | distributors |
| Farm)     | ontract |          |      | open a     |              |
|           | with    |          |      | total of 6 |              |
|           | C       |          |      | stores in  |              |
|           | itimart |          |      | Vietnam    |              |
|           |         |          |      | for the    |              |
|           |         |          |      | first      |              |
|           |         |          |      | phase.     |              |
+-----------+---------+----------+------+------------+--------------+
| Duty-Free | Super   | 4        | NA   | Tay Ninh   | \- Directly  |
| Sup       | markets |          |      |            | import from  |
| ermarkets | o       |          |      |            | overseas.    |
|           | perated |          |      |            |              |
|           | in the  |          |      |            |              |
|           | Moc Bai |          |      |            |              |
|           | Du      |          |      |            |              |
|           | ty-Free |          |      |            |              |
|           | E       |          |      |            |              |
|           | conomic |          |      |            |              |
|           | Zone    |          |      |            |              |
+-----------+---------+----------+------+------------+--------------+
| Note: The |         |          |      |            |              |
| sales     |         |          |      |            |              |
| turnovers |         |          |      |            |              |
| are       |         |          |      |            |              |
| estimated |         |          |      |            |              |
| via       |         |          |      |            |              |
| i         |         |          |      |            |              |
| nterviews |         |          |      |            |              |
| with      |         |          |      |            |              |
| trade     |         |          |      |            |              |
| sources,  |         |          |      |            |              |
| and are   |         |          |      |            |              |
| furnished |         |          |      |            |              |
| as        |         |          |      |            |              |
| in        |         |          |      |            |              |
| formation |         |          |      |            |              |
| with the  |         |          |      |            |              |
| unde      |         |          |      |            |              |
| rstanding |         |          |      |            |              |
| that no   |         |          |      |            |              |
| discr     |         |          |      |            |              |
| imination |         |          |      |            |              |
| is        |         |          |      |            |              |
| intended  |         |          |      |            |              |
| and no    |         |          |      |            |              |
| guarantee |         |          |      |            |              |
| of        |         |          |      |            |              |
| re        |         |          |      |            |              |
| liability |         |          |      |            |              |
| is        |         |          |      |            |              |
| implied.  |         |          |      |            |              |
+-----------+---------+----------+------+------------+--------------+

In Vietnam, the modern retail trade concept (supermarkets, hypermarkets,
cash and carry wholesale center, minimarts) has grown tremendously in
recent years, going from only 2 supermarkets in the early stage (1998)
to more than 140 in 2007. Before 1999, open-air wet markets and
non-staple food small private shops were the norm, yet in the most
recent eight years, Vietnam's urban economy has begun a steady
transition away from the traditional trade to modern trade. More than
two third of supermarkets and department stores are based in HCMC and
Hanoi. Today, Hanoi has more than 33 stores, while HCMC has more than 58
modern stores.

Local chains still dominate the market but foreign-invested retailers
are also very quickly in expanding, creating a competitive environment
in the modern Vietnamese retail sector. The key domestically-owned
supermarket chains are Saigon Coopmart, Intimex, Maximark, Citimart,
Fivimart, Vinatex-mart and Hapro-mart. The four foreign-owned chains are
Big C (French-invested Casino group), Metro Cash & Carry
(German-invested Metro Cash & Carry), Parkson (Malaysian-invested
Parkson) and Wellcome (Singaporean-invested company under Dairy Farm
Group).

As a result of Vietnam\'s WTO commitments, retail business sector will
be fully opened to foreigner entities by January 2009. Local retailers
will face significant challenges to competing with experienced
multi-national retail groups. Being well-aware of the challenges, many
Vietnamese retail and distribution companies have expanded their
retailing and distribution, and have actively worked together to build a
more vibrant distribution network.

Since 2005, the Viet Nam Garment and Textile Group (Vinatex) has
established a chain of 20 supermarkets and 12 minimarts in almost all
big cities in the country. The group hopes to double the numbers by 2010
and it is on track to meet this target.

Since 2006, the Hanoi Trading Corporation (Hapro) has invested big
resources in new retail outlets and has upgraded the existing Hapro's
convenience store network. By end of 2007, the corporation has got 7
hapromarts in Hanoi, Thai Nguyen, Bac Can, Hai Duong, Thanh Hoa and Ninh
Binh and about 18 convenient stores in Hanoi. The corporation's retail
business was estimated at VND 100 billion in 2007. The corporation's
strategy is to have 5 commercial centers, 5 hypermarkets, 70
supermarkets and about 800 convenience stores in Hanoi and neighboring
provinces by 2010.

In May 2007, the establishment of the Viet Nam Distribution Association
Network Development Investment Joint Stock Co. (VDA), the joint-effort
of 4 leading companies in this field including Saigon Coop, Hanoi
Trading Corporation (Hapro), Saigon Trading Corporation (SATRA) and Phu
Thai Corporation, was seen as the start of an industry trend geared
towards greater cooperation between local retailers and distributors. By
utilizing the retail and trading expertise and the financial strength of
the 4 leading corporations, VDA focuses on building and developing a
chain of trading centers and hypermarkets to establish a commercial
infrastructure facilities network, thus creating conditions for the
re-organization of the retail, distribution and wholesale networks. VDA
hopes to be in better position in competing with foreign giant retailers
and to be one of the major players in goods distributing and retail
business in Vietnam. However, Post has not seen much activity from the
VDA so far, as none of the 4 leading companies seem eager to take the
lead in VDA.

In October 2007, Vietnam also established the Vietnam Retail Association
(VRA) comprised of most local retailers with its aim to strengthen the
development of Vietnamese distribution services through linking of
Vietnamese retailers.

Supermarkets in Vietnam carry a wide range of goods, including food,
clothing, shoes, and durable products. Most supermarkets devote about
40-60 percent of the physical space to food, and the rest is divided
among all the other commodities. The shop-owners are quite willing to
rearrange the physical space to boost the floor allocation for whichever
goods are doing best that month. Large hypermarket and wholesale stores
provide more space for food. More large supermarket and wholesale stores
and shops within multi-store shopping malls (e.g. Maximark, Big C,
Coopmart, Diamond Plaza, Parkson) have been built in Vietnam. Most of
the shops have made some provision for parking \-- more for motorcycles
than cars. In the Vietnamese supermarket business, it is estimated that
approximately 50 percent of total supermarket sales are from food, of
which imported food accounts for a small percentage ranging from 15
percent to 25 percent of total food sales.

The largest hypermarket (in terms of checkout lanes and parking spaces)
is still the French invested Big-C Hypermarket (opened in 1998) in Dong
Nai Province, 45 minutes outside of HCMC. Big-C boasts 37 checkout lanes
and carries a wide assortment of foreign and domestically produced foods
and consumer goods. Big C currently has two hypermarkets and one
supermarket in HCMC, one hypermarket in Dong Nai, one hypermarket in
Hanoi (opened in 2004), one in Hai Phong, and one in Da Nang. The Casino
Group of France, who owns the Big-C chain, has announced an investment
plan to build 4 more stores in Vietnam. They also say they will become
completely foreign owned in the coming year and unlike other fully
foreign-owned companies until this point in time retain the right to
import directly.

Ho Chi Minh City has an estimated population of 8 million people, and is
considered the economic and commercial center of Vietnam. The city has
the largest concentration of upper and middle class consumers in
Vietnam, and thus investors in retail distribution are particularly
interested in this city. Hanoi Vietnam's Capital has about 3.2 million
people, with a large number of employees of the government, foreign
missions, and international organizations that can be targeted with
modern distribution chains. Hai Phong City -- the commercial port area
in the north; Can Tho City, the commercial hub for the Mekong Delta
region, and Danang City -- the commercial hub for the central region,
are also strategic locations for setting modern retail distribution.

With the highest annual GDP growth rate (over 10 percent in the period
of 2001-2007) in Vietnam, HCMC has attracted the most foreign and
domestic investment for a wide range of projects. Although the national
average GDP per capita is just over \$800 per year, in HCMC it is
estimated at over \$1,800. In conjunction with strong economic growth,
the supermarket sector in HCMC has grown tremendously in recent years.
HCMC is now home to 58 supermarkets, 3 wholesale centers, and 2
hypermakets. Until early 1999, the only Western-style shopping center
(multiple stores and a parking lot) in Vietnam was the joint venture
(Singaporean investors and the Vietnamese Army) Superbowl Shopping
Center. Since 1999, there have been at least 18 new shopping centers
launched in HCMC. This retail revolution seems certain to continue as
all the domestic and foreign-owned chains plan to develop additional
shopping centers in HCMC suburbs and surrounding regional cities.
According to trade sources, HCMC supermarkets are averaging 100,000
walk-thru customers a day, which is good, but still a very small
percentage of a city population of nearly 8 million.

Four new upscale shopping centers, 3 from Parkson and 1 from Diamond
Plaza, opened in HCMC recently. Pakson Shopping Centers in HCMC are with
the goal of creating an attractive shopping space for both foreign
tourists and local people. Many additional projects (both large and
middle-sized) are due to open in HCMC, Hanoi and the surrounding
regions. Saigon Coopmart (a supermarket chain operated under cooperative
law), currently owning 16 stores in HCMC and 13 in other provinces,
takes about 40% share of supermarket sales in Vietnam. It will open 2
new stores in Ben Tre and Buon Me Thuoc in December 2008. Saigon
COOPMART is planning to have a total of 50 supermarkets by 2010.

Metro first entered Vietnam by setting up two large (each roughly 15,000
square meters) wholesale centers in HCMC in 2002. Those stores are
operating as a cash and carry operation nominally for wholesale
customers. It offers additional services such as delivery. Recently,
Metro opened 6 more stores in Hanoi, Can Tho, Haiphong, Danang, and Ho
Chi Minh City. These stores have currently attracted more than half a
million member customers. Metro has asked the Government of Vietnam's
approval to build 4 more stores in Vietnam. Metro has just got new
license for opening one more store in Dong Nai. It hopes to open the new
outlet in Dong Nai by 2009.

Metro has already had an impact on the grocery sector, but it is
important to note that Metro is not directly importing commodities.
Given Vietnam's current restrictions on distribution and importing
rights and until the laws are changed by 2009, Metro needs to work with
many local (and usually small) importers to source most of the imported
goods that it needs. For big product volumes, Metro negotiates directly
with foreign suppliers in product quantity and prices and assigns local
importers to import the goods.

Hanoi's modern retail trade sector has always lagged behind HCMC, but it
is now rapidly catching up. From 2002-2007, 10 large supermarkets opened
in Hanoi and four opened in Hai Phong. Intimex has been a big player in
the modern supermarket trade in the North of Vietnam, with 5
supermarkets in Hanoi and 2 in Hai Phong. Fivimart has also expanded to
have 11 stores in Hanoi, and 3 in HCMC. Hapro has developed its retail
system including 2 supermarkets in Hanoi, 5 in other nothern provinces,
and 18 convenience stores. Recently, the Big C chain has opened its
first store in Hanoi. The Big C store has 6,500 square meters of space
for a wide range of goods and an additional 6,000 square meters for
restaurants. Metro has just opened the second center in Hanoi. Parkson
has just opened its first department store in Hanoi in early of 2008. As
of September 2008, Hanoi has roughly 34 modern stores. Several of the
large domestically owned chains from HCMC, especially Saigon COOPMART
chain are looking to open outlets in Hanoi in the near future after land
and supply chain issues are resolved.

## Convenient stores and minimarts:

Given the busier working environment and congested traffic in urban
areas, convenience store and the minimart business should see strong
growth in the future.

Saigon Coop is the leading company in this convenient store business,
with 67 coop stores in Ho Chi Minh City.

Vissan, the leading meat processing company in Vietnam, has more than 50
convenience stores offering various kinds of meat cuts, fresh vegetables
and fruits as well as packaged foods and drinks. Vissan's convenience
store business earns about \$25 million a year.

Recently, Trung Nguyen Coffee Corporation has also expanded to this
convenience store business by contracting with selected existing "mom
and pop" shops to upgrade them to more convenient and modern stores.
This company has successfully contracted with over 400 stores
nation-wide, mainly in HCMC and Hanoi.

"Shop & Go" minimarts have been in Ho Chi Minh City since early 2007 and
have expanded to about 30 stores in Ho Chi Minh City. These
air-conditioned stores are quite modern in term of product display and
cleanliness, and offer a good range of imported packaged food and drink
products.

Alimentation Couche-Tard Inc. (Circle K) has engaged in the operation of
convenience stores with its ambitious plan of setting up a few hundred
stores by 2010. The company is still working on its business license.

## B. Traditional Retail Trade: Wet Market & Private Small Shops

According to the Ministry of Trade, there are about 8,000 traditional
wet markets in Vietnam, and hundreds of thousands of small private shops
spread all over the country. Household-owned shops and wet markets are
still the most popular destinations for consumers in Vietnam. Most of
these outlets offer only the basics with limited selection, lack of
refrigeration, fixed prices, no modern technology, and little or no
ambience. Floor space normally ranges from 100 to 300 square feet.
Outside of HCMC and Hanoi, food distribution heavily relies on these
traditional channels. It is estimated that 80 percent of imported foods
are distributed through this traditional trade.

# SECTION III. COMPETITION

The biggest competitors for US foods in the retail food market are
Australia, China, other ASEAN countries and the local food industry.
Potential US exporters should understand that Vietnam's diverse
agro-industrial base already offers many products at competitive prices.
Leading multinationals from other countries have just started
establishing food processing operations in Vietnam, and are able to
offer a range of western-style products at reasonable prices, though the
quality may be inferior to imported products due to the poor quality of
the raw material supplies. Most products from China and other ASEAN
countries also enjoy lower tariffs than U.S. products do. While many
consumers are aware of quality differences and insist on world
standards, most will sacrifice quality for affordable prices.

Products from Australia, New Zealand, the European Union (EU) and other
Asian countries (China, Thailand) directly compete with like items from
the United States. In addition to the freight cost advantages, market
sources report that suppliers from these countries are more responsive
to importers' demands for smaller shipment sizes, and are more willing
to modify product specifications to meet Vietnamese food laws, in
contrast to many US suppliers. Australia and New Zealand aggressively
promote their products in the Vietnamese market. Recently, countries
like Thailand have also organized successful trade promotion series in
Vietnam. Market promotions by these countries are mainly through trade
missions, trade servicing, in-store promotions, and participation in
food shows.

There are no reliable data on imports of consumer food products for
retail sale in Vietnam. See table 5 below for trends in Vietnam's
imports of consumer ready food products and U.S. market share based on
Post estimates.

# SECTION IV. BEST PRODUCT PROSPECTS

The below table shows U.S. food products present in the Vietnamese
market that have good sales potential and the market share of some
selected U.S food products as part of total imports. The 2007 import
data by commodities is Post's estimation, as there are no published
official statistics on imports of consumer food products for Vietnam.

Table 5: U.S. export share of the Vietnamese market for 2007 (selected
agricultural products) in million dollars

+--------------+-----+------+-------+----+-----+----+------+--------+
| Commodities  | Imp | 2007 | 2007  | Ja | Ja  | \% | U.S. | Main   |
|              | ort |      |       | n- | n-J | Gr | Ma   | Comp   |
|              |     | Vie  | Vi    | Ju | uly | ow | rket | etitor |
|              | D   | tnam | etnam | ly | 2   | th | s    |        |
|              | uty | t    | im    |    | 007 |    | hare | C      |
|              |     | otal | ports | 20 |     |    |      | ountry |
|              |     | imp  | from  | 08 |     |    | (%)  |        |
|              |     | orts | USA   |    |     |    | 1/   |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
|              |     |      |       | U. | U   |    |      |        |
|              |     |      |       | S. | .S. |    |      |        |
|              |     |      |       | E  | E   |    |      |        |
|              |     |      |       | xp | xpo |    |      |        |
|              |     |      |       | or | rts |    |      |        |
|              |     |      |       | ts |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Fruit Juice  | 32  | 6    | 1,032 | 1  | 433 | 1  | 16.8 | Aus    |
| (HS 2009)    | -   | ,154 |       | ,1 |     | 72 |      | tralia |
|              | 35% |      |       | 77 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Raisin (HS   | 22% | 1    | 1,773 | 2  | 216 | 13 | 94.8 | China  |
| 080620)      |     | ,870 |       | 45 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Vegetable    | 31% | 1    | 733   | 5  | 392 | 44 | 73.3 | B      |
| Preparation  |     | ,000 |       | 66 |     |    |      | elgium |
| (mainly      |     |      |       |    |     |    |      |        |
| potatoes -HS |     |      |       |    |     |    |      |        |
| 2004)        |     |      |       |    |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Wine (HS     | 62% | 7    | 724   | 4  | 243 | 1  | 9.7  | France |
| 2204)        |     | ,500 |       | 86 |     | 00 |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Beef (HS     | 20% | 13   | 2     | 56 | 5,  | 8  | n/a  | Aus    |
| 020220-30)   |     | ,200 | 7,030 | ,3 | 956 | 47 |      | tralia |
|              |     |      |       | 99 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Table Grapes | 22% | 13   | 5,140 | 2  | 2,  | 13 | 37.3 | China  |
| (HS 080620)  |     | ,800 |       | ,3 | 040 |    |      |        |
|              |     |      |       | 10 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Poultry meat | 20% | 40   | 2     | 57 | 7   | 6  | 66.8 | Brazil |
| (HS 020714)  |     | ,000 | 6,725 | ,0 | 826 | 29 |      |        |
|              |     |      |       | 41 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Apple (HS    | 20% | 17   | 5,406 | 2  | 1,  | 30 | 31.8 | China  |
| 080810)      |     | ,000 |       | ,4 | 846 |    |      |        |
|              |     |      |       | 06 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Seafood (HS  | 25- | 200  | 9,619 | 6  | 4,  | 52 | 4.8  | Norway |
| 0302-0307)   | 26% | ,000 |       | ,1 | 053 |    |      |        |
|              |     |      |       | 67 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Dairy        | 3%  | 290  | 4     | 46 | 24, | 90 | 14.3 | New    |
| products (HS | -7% | ,000 | 1,441 | ,7 | 523 |    |      | Z      |
| 0401; 0402 & |     |      |       | 13 |     |    |      | ealand |
| 0404)        |     |      |       |    |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Condiments   | 35% | n/a  | 1,974 | 1  | 1,  | 31 | n/a  | n/a    |
|              |     |      |       | ,6 | 255 |    |      |        |
|              |     |      |       | 44 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| Snack Foods  | 35% | n/a  | 2,566 | 1  | 1,  | 49 | n/a  | n/a    |
|              |     |      |       | ,6 | 137 |    |      |        |
|              |     |      |       | 91 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| TOTAL        |     | 660  | 21    | 2  | 72, | 2  | 31.8 |        |
| CONSU        |     | ,000 | 0,457 | 47 | 663 | 41 |      |        |
| MER-ORIENTED |     |      |       | ,6 |     |    |      |        |
| FOOD IMPORTS |     |      |       | 96 |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+
| TOTAL        |     | 860  | 21    | 2  | 73, | 2  | 24.8 |        |
| CONSUMER     |     | ,000 | 4,290 | 49 | 862 | 38 |      |        |
| ORIENTED &   |     |      |       | ,6 |     |    |      |        |
| EDIBLE       |     |      |       | 40 |     |    |      |        |
| FISHERY      |     |      |       |    |     |    |      |        |
| IMPORTS      |     |      |       |    |     |    |      |        |
+--------------+-----+------+-------+----+-----+----+------+--------+

Source: U.S. Department of Commerce & Various Trade Sources

1/ Occasionally, U.S. market share may appear to be above 100 percent.
This anomaly may be explained by Vietnam discounting some U.S. imports
that they believe will be transshipped to another destination.

#### A. Products Present in the Market which have Good Sales Potential

Of U.S. products that are already present in the Vietnamese market,
dairy products, red meat (beef and pork), poultry meat, fresh fruit, and
dried fruits continue to have the best sales prospects. The next most
important U.S. sales items in the retail sector are prepared vegetable,
canned foods (canned vegetable, mixed cocktail and canned meat) are also
common. Some of the best selling processed foods include frozen french
fries, snack food (potato chips); biscuit/crackers, popcorn, baby foods,
condiments (dressing, sauces) and wine.

## 

#### B. Products Not Present in Substantial Quantities but which have Good Sales Potential

There are good opportunities for sales of other U.S. high value items.
Many of these are not yet in the market in significant quantities. These
include pears, cherries, other-than-potato-chip snack foods,
other-than-raisin dried fruits and nuts (mainly almond and pistachios),
fruit juices, and chocolates.

#### C. Products Not Present because they Face Significant Barriers 

American products that have not sold well in Vietnam include edible
offals (pork, beef, and chicken) and bourbon whiskey. For whiskey in
general, due to its high import duty and Government disapproval of
public advertisement on whiskey, retailers that serve the middle and
lower income segment also reported difficulties in selling American
whiskey due to its high prices and limited consumer awareness of its
quality. Imports of offals, which have great potential demand in
Vietnam, have just been facing difficulties in obtaining import permits
from Vietnam's Department of Animal Health.

# SECTION V. POST CONTACT AND FURTHER INFORMATION

U.S. Department of Agriculture / Foreign Agricultural Service (USDA/FAS)

First point of contact for updated reports and trade data is the
USDA/FAS Web Page:

[http://www.fas.usda.gov](http://www.fas.usda.gov/)

## USDA/FAS Offices in Vietnam 

The physical addresses of the FAS Offices are shown below. Contact the
FAS Offices for the U.S. and Vietnamese Mailing Addresses:

**Foreign Agricultural Service / Agricultural Affairs Office (Ag
Hanoi)**

U.S. Embassy -- Annex Building

Rose Garden Building, 3^rd^ Floor

170 Ngoc Khanh, Ba Dinh District, Hanoi, Vietnam

Tel: 84-4-3850- 5000 Fax: 84-4-3831- 4573

Email: <AgHanoi@fas.usda.gov>

Contacts:

Mr. John Wade -- Agricultural Counselor

Ms. Valerie Ralph -- Agricultural Attache

Ms. Bui Thi Huong - Agricultural Specialist

Ms. Nguyen Thi Huong -- Agricultural Assistant

Ms. Phan Thi Thu Huong - Administrative Assistant

**Foreign Agricultural Service / Agricultural Affairs Office (ATO -
HCMC)**

U.S. Consultant General -- Annex Building

Saigon Center Building, 9^th^ Floor

65 Le Loi Street, District 1, Ho Chi Minh City, Vietnam

Tel: 84-8-3825-0502 Fax: 84-8-3825-0503

Email: <AtoHoChiMinh@fas.usda.gov>

Contacts:

Mr. Michael Riedel, Agricultural Attache

Mr. Truong Minh Dao - Senior Marketing Specialist

Mr. Tran Quoc Quan - Agricultural Specialist

Ms. Nguyen Mai Van - Administrative Assistant & Trade Show Coordinator

**American Chamber of Commerce---Hanoi and Ho Chi Minh City**

**American Chamber of Commerce (AmCham)**

Hanoi Chapter

Press Club, 5^th^ Floor

59A Ly Thai To Street, Hanoi, Vietnam

Tel: 84-4-934-2790; Fax: 84-4-934-2787

Email: <adam@amchamhanoi.com>

Website: [www.amchamhanoi.com](http://www.amchamhanoi.com/)

Contact: Mr. Adam Sitkoff, Executive Director

**American Chamber of Commerce (AmCham)**

**Ho Chi Minh City Chapter**

76 Le Lai Street, District 1, Ho Chi Minh City, Vietnam

Tel: 84-8-824-3562; Fax: 84-8-824-3572

Email: <amcham@hcm.vnn.vn>

Website: [www.amcham.org.vn](http://www.amcham.org.vn/)

Contact: Mr. Herb Cochran, Executive Director

## Key Government Contacts 

**Ministry of Trade and Industry (MOTI)**

21 Ngo Quyen Street, Hanoi, Vietnam

Tel: 844-826 2552 Fax: 844-826-4696

Website: [www.moti.gov.vn](http://www.moti.gov.vn/)

Contact: Mr. Vu Huy Hoang, Minister

Mr. Nguyen Cam Tu, Vice Minister (email: nctu@mot.gov.vn)

**Ministry of Planning and Investment (MPI)**

2 Hoang Van Thu, Hanoi, Vietnam

Tel: 844-8435-5298; Fax: 844-8234453

Contact: Mr. Vo Hong Phuc, Minister

Mr. Duong Duc Ung, Director, Foreign Economic Relations Department

**Ministry of Health (MOH)**

Vietnam Food Administration (VFA)

138A Giang Vo Street, Hanoi, Vietnam

Tel: 844-846-3839; Fax: 844-846-3739

Email: vfa@vfa.gov.vn

Web: [www.vfa.gov.vn](http://www.vfa.gov.vn/)

Contact Mr. Tran Dang, Director of VFA

**\* Clearance for Food, Food Ingredients and Additives**

The Food Administration Department is the primary contact for most
questions and concerns regarding approved food ingredients, food safety
issues (Vietnamese and International Standards), general food-related
trade and food registration questions.

**Ministry of Agriculture and Rural Development (MARD)**

2 Ngoc Ha Street, Hanoi, Vietnam

Tel: 844-845-9670; Fax: 844-845-4319

Website: [www.mard.gov.vn](http://www.mard.gov.vn/)

Contact: Mr. Cao Duc Phat, Minister

Mr. Le Van Minh, Director, International Cooperation Dept. (Email:
<leminhmard@fpt.vn>)

**\* Department of Plant Protection ( MARD**).

149 Ho Dac Di Street, Dong Da, Hanoi

Tel: (84-4) 851 9451 Fax: (84-4) 533 0043

Website : <http://www.ppd.gov.vn/indexe.asp>

Contact Mr. Nguyen Quang Minh, Director

Mr. Le Mau Toan, Vice Director (email: <lemautoan@fpt.vn>)

Mr. Dam Quoc Tru, Vice Director

**\* Crop Protection Department / Phytosanitary Sub- Department Zone II
(HCMC)**

28 Mac Dinh Chi, Dist.1, HCMC

Tel: 848-829-4568; Fax: 848-829-3266

Email1: <nguyenvan_nga53@yahoo.com>

Email2: <kdtvv2hcmc@vnn.vn>

Contact Nguyen Van Nga, Director

**\* Department of Animal Health of Viet Nam (MARD)**

No 15, Gate 78, Giai Phong St., Phuong Mai, Dong Da District

Hanoi, Vietnam

Tel: (84-4)868-7151, (84-4)869-6788 Fax (84-4)869-1311

Website: [www.cucthuy.gov.vn](http://www.cucthuy.gov.vn/)

Email: quanganh.dah@fpt.vn

Contact Mr. Bui Quang Anh, Director

**\* Regional Animal Health Office No.6 (HCMC)**

521/1 Hoang Van Thu, Tan Binh District

Ho Chi Minh City, Vietnam

Tel: (84-8) 8444024 Fax: (84-8) 8444029

Email: <rahchcmc@hcm.vnn.vn>

Contact: Mr. Dong Manh Hoa, Director

**\* National Agro Fishery & Fishery Quality Assurance Directorate --
NAFIQAD (MARD)**

10 Nguyen Cong Hoan Street, Hanoi, Vietnam

Tel: 844- 8354 966/fax: 844 -- 8317221

Email: nafiqad@mard.gov.vn

Contact: Mr Luong Le Phuong, Director

**Vietnam Directorate For Standards and Quality (STAMEQ)**

08 Hoang Quoc Viet, Cau Giay

Hanoi, Vietnam

Tel: (84-4) 7911606 Fax: (84-4) 7911595

E-Mail: [vptdc@tcvn.gov.vn](http://www.tcvn.gov.vn/en/vptdc@tcvn.gov.vn)

Website: [http://www.tcvn.gov.vn](http://www.tcvn.gov.vn/)

## Vietnamese Websites: 

NOTE: Most Vietnamese websites contain both English and Vietnamese
documents.

Vietnam Embassy in Washington
[http://www.vietnamembassy-usa.org](http://www.vietnamembassy-usa.org/)

Ministry of Health [www.moh.gov.vn](http://www.moh.gov.vn/)

Directorate for Standards & Quality
[www.tcvn.gov.vn](http://www.tcvn.gov.vn/)

Vietnamese Customs Agency
[www.customs.gov.vn](http://www.customs.gov.vn/)

Ministry of Foreign Affairs [www.mofa.gov.vn](http://www.mofa.gov.vn/)

Ministry of Finance [www.mof.gov.vn](http://www.mof.gov.vn/)

Ministry of Trade and Industry
[www.moti.gov.vn](http://www.moti.gov.vn/)

Ministry of Ag and Rural Development
[www.mard.gov.vn](http://www.mard.gov.vn/)

Agricultural Market
[www.vitranet.com.vn/agr](http://www.vitranet.com.vn/agr)

Legal documents [www.vietlaw.gov.vn](http://www.vietlaw.gov.vn/)

Vietnam Trade Promotion Center
[www.vietrade.gov.vn](http://www.vietrade.gov.vn/)