Japanese-born Taku Tanaka is the CEO and co-founder of KAMEREO – Vietnam’s leading online ordering platform for the F&B industry connecting businesses directly with suppliers.
In times of uncertainty, it makes sense to want to reevaluate your investment strategy. But tempting as immediate action is, it’s really the long-term trends that matter. And this is where Vietnam’s F&B industry looks more resilient than most, compared to both emerging and established markets in Southeast Asia.
Let’s take a look at the food and beverage scene in Vietnam. The industry is certainly feeling the adverse effects of the coronavirus, but being an emerging market, Vietnam’s economy has more room for growth in the medium-to long-term time frame, so the future is bright in the long run.
According to Euromonitor’s publicity available data, Vietnam’s GDP has been growing at about 6% every year between 2011 and 2020, while the compound annual growth rate (CAGR) of the F&B market, according to Statista, is said to be about 10%, outpacing the general growth curve.
As a point of comparison, if we look at the F&B sector’s performance in Japan, you will see a flat, slightly negative trend implying a long-term shrinking market.
The trend we’ve observed in Vietnam between 2011 and 2020 is clear and I don’t see it run in the opposite direction even accounting for the downturn caused by the coronavirus. But of course, some correction is inevitable, both for Vietnam and for the rest of Southeast Asia.
What is driving the trend?
There are cultural, as well as economic factors behind Vietnam’s F&B sector’s stellar performance. Take the universal popularity of dining out, for example. In Vietnam, many people prefer to grab a quick breakfast on the way to work rather than make one at home. Same applies to lunch and, for many people, dinner.
Another factor is Vietnam’s culture of drinking. Even compared to other Southeast Asian nations that are not exactly known as paragons of sobriety, Vietnam stands out.
To put things into perspective, globally Vietnam was ranked 9th in beer consumption by country in 2018. What’s more, recently women have developed a taste for alcohol too, so it’s not just male consumers driving the trend.
Per capita F&B spending per person in Vietnam is higher than in other ASEAN countries.
Catering to the hungry and thirsty are street food stalls, beer gardens, casual and fine dining establishments. According to a 2013 research by Daiwa, there are 6.3 restaurants per 1,000 people in Vietnam. In the equally food-obsessed Japan, the number is 6.5 per 1,000 people, so Vietnam has room to grow.
In fact, Japanese restaurateurs and entrepreneurs recognize Vietnam’s potential and in the last three years alone have rushed in to open the likes of CoCo Ichibanya, Ippudo, HACHIBAN Ramen, Ringer Hut, Yoshinoya, Sukiya and Watami. The highly anticipated arrival of Mos Burger – a Japanese burger chain – is expected in 2020.
Bridging the gap
Where I see a gap is in a dearth of chain restaurants in Vietnam. One of the reasons is that banks do not lend money without collateral to restaurants, so it takes time to open multiple stores. Taking on a private investor role are the private equity (PE) investors who have been actively supporting restaurants as of late.
At KAMEREO, for example, we’ve built a platform that allows small-and medium -sized restaurants to purchase commodity crops directly from the producers.
With KameRau, we are able to cut out the middleman and give businesses more purchasing power resulting in savings that can be reinvested into the business.
As we look for ways to help Vietnam’s F&B industry to better weather the storm, my advice to the industry is stay informed, engaged and focus on the future. Being an emerging market, Vietnam offers tremendous opportunities to F&B entrepreneurs looking to invest in a Southeast Asian economy, as long as we remain focused on long-term growth.