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FOOD RETAIL SECTOR IN VIETNAM

Pham Quang Dieu (MARD; Institute of Agriculture Economics; phamquangdieu@yahoo.com Tran Van Cong (MARD; International Cooperation Department; congt.htqt@mard.gov.vn)

MACRO ECONOMIC ENVIRONMENT

Changing from planning to market system Changing from state dominance toward multi-players (state; private; foreign) Opening to the world market. Increasing trend of industrialization and urbanization. Income and consumption increase (200 USD/year in the early 90s to 500 USD/year in 2004).

Vietnam and other countries in the region early phase of development

Lao Philippin China M alaysia Indonesia Thailand Vietnam 0 1000 2000 3000 4000 5000

1981

1991

2002

Vietnam and other countries in the region the challenge of industrialization (1981-1991-2002)
100
Agricultural labor share in labor force (%)

90 80 70 60 50 40 30 20 10 0 0 10 20 30 40 Malaysia Philippin Thailand Indonesia China

Lao Vietnam

50

60

Agricultural share in GDP (%)

AGRICULTURAL GROWTH AND THE FOOD RETAIL SECTOR Strong growth of the agricultural sector From self-sufficiency to commercialization (crop sale in total crop output: 1993-40%; 1998-54%; 2002-61%); available to supply to cities and for export. The free-up in domestic trade and improvement of marketing system. The restructuring process and emergence of new actors in processing industries.
Economic growth rate (%)
16 14 12 10 8 6 4 2 0 1990
40000 35000 30000 25000 20000 15000 10000
99 9 99 5 98 9 98 5 99 1 98 7 99 3 99 7 00 1

Agriculture

Industry

Service

Paddy production (1000 tons)

1992

1994

1996

1998

2000

2002

Characteristics of food retail sector


Increasing number of stake-holders in food retail sector (from state dominance to multiplayers. SOEs and cooperative are less competitive and being in the adjustment process. New actors: The private sector is on the rise (the case of Trung Nguyen coffee; Future generation tea). Trade mark and setting up domestic selling network The entering of foreign corps (Metro) Standardization process: quality; price

Characteristics of food retail sector


Traditional versus modern food retail 9000 traditional markets; 160 supermarkets; 32 trade centers. Small and large scale Technological use (PC; storing; refrigerator system) Price and quality differences Management model: family versus company Safeness problems. The quality control in farming activities and sale (in HCM city 80% processed food in traditional market is unsafe)

Characteristics of food retail sector The increasing trend of modern food retail sector (Supermarket HCM city 45; Hanoi 25) Increasing from raw material toward processed products Diversified business and restaurants (drink and food) Innovation in food retailing: institution and technology The emergence of organic products (tea; vegetable) Rising demand for modern market place (equipment, storing, facilities)

Who supply to food retailling- the value chain


Import

Import agency

Processing companies Cooperative wholesale

Metro

Supermarket Food shop Traditional market Vender

Farmer

Demand pattern and the food retail sector

Increasing income and changing demand pattern (booming effect of market renovation), use less rice and more meat, vegetable, fruit. Urbanization process, the rising of middle class, consumers increasingly depended on market for their food needs. More using canned products and packaged foods. Women increasingly join the labor force, have less time to prepare meals from scratch. Value driven versus price driven Western style on the rise, import increase

Future prospect and policy implications

The changing of food retail sector


Traditional versus modern State versus private and foreign

Shaping agriculture growth pattern- domestic versus export: the importance of domestic market Quality control Urban planning and market development How to make the poor farmers get benefit in the food retail innovation process (resource; access; association)

THANK YOU FOR YOUR ATTENTION

Consumer preference of vegetable purchase outlets in Ho Chi Minh city (Malica study) Official retail market 1. Next home 2. Fresh 3. Cheap price 4. Many types Unofficial retail market 1. Next home 2. Cheap price 3. Fresh 4. Can buy small quantity Venders Supermark et 1. Safe 2. Fresh 3. Many kinds 4. Next home 1. 2. 3. 4. Metro

1. Next home 2. Cheap price 3. Fresh 4. Seller friendly

Safe Fresh Cheap Many kinds

The rising of middle class

Income per capita (USD/year) in 2002


1600 1400 1200 2 1000 800 600 400 200 0 Hanoi HoChiMinh Vietnam 4 3

Expenditure per capita (USD/year) in 2002


1000 poorest 900 800 700 600 500 400 300 200 richest 100 0 Hanoi HoChiMinh Vietnam richest 4 3 2

poorest

The rising of middle class

Income per capita (USD/year) in 1998- 2002


1200 1000 800

1998
600 400 200 0 poorest 2 3 4 richest

2002

Urbanization and food expenditure

60 50 40

12

U S D /m o n th

10 8 6 4 2 0 Rural Urban

Food Exp share (%)

30 20 10 0

Food exp USD/month

Urbanization and food expenditure

Budget share for eating out of household 1998-2002 (%)


12 10 8 6 4 2 0 1998 2002 Rural Urban

Expenditure elasticity the increasing pattern toward nonbasic food expenditure

beverage fish meat vegetable fruit maize Rice -1.5 -1 -0.5 0 0.5 1 1.5 Rural

Urban

Food import (million USD)

1000 900 800 700 600 500 400 300 200 100 0 1995 2000 2001 2002