Insight:
- The F&B sector in Vietnam is a potential market with many development opportunities.
- Although there are still many difficulties, the market has had impressive rebounds.
Difficulties and changes in the first half of 2024
In the first six months of 2024, the economic situation faced many difficulties, so the Vietnamese F&B industry witnessed fierce competition among businesses, with more than 30,000 stores closing. Ho Chi Minh City is the most severe decrease area, with a 5.97% decrease in the number of closed stores. Meanwhile, the number of stores in Hanoi increased slightly by about 0.1%.
The biggest challenge to F&B business is the escalating premises price. In Ho Chi Minh City, the rental price of premises increased by 25–40% in the first half year of 2024. Therefore, premises prices are considered one of the barriers for F&B businesses.
The ratio of premises costs to revenue is estimated at an average of about 14.34%, even up to 20-25% in some places, making it increasingly difficult to maintain premises. At the same time, changes in Vietnamese consumers eating habits have also created changes and challenges. Rising raw material prices and decreasing customer numbers have strained business activities in this field.
Impressive transformations
Despite many difficulties, the F&B industry’s revenue still reached VND 403.9 trillion (as of the end of July 2024), which means they reached 68.46% of the revenue for the whole year of 2023. Vietnamese F&B businesses are still flexible in adjusting their operations by flexibly adjusting operations and cutting costs to optimize cash flow, though they face many difficulties and challenges.
In addition, businesses are constantly innovating in product development to attract more customers. To overcome difficulties, many stores of different sizes have implemented diverse promotional programs, sold on many sales channels, and promoted online activities. With the creativity and flexibility in their operation, F&B business has overcome difficulties and achieved impressive numbers.
In 2024, the F&B market value is forecasted to grow by 10.92% compared to 2023. The value of the F&B sector is also expected to increase by 10.92% compared to 2023. The generated revenue is over VND 655 trillion (about $26.1 billion).
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Shift in consumer trends
A survey of 4,000 customers shows that their spending trend is increasing. Vietnamese consumers are elevating their habit of eating out by 5-10%. About 14.9% of consumers are willing to spend more than 100.000 VND (about $4) on their daily dinner, which is higher than in 2022 3.5 times.
The spending on coffee also increases slightly; 59.5% of consumers are willing to spend about 41.000 VND for this activity. Of those surveyed, 42.6% have chosen to go out 1 or 2 per month. 30.4% are 2 per week. This is an increase of 8% compared to 2022. They maintain that 6.1% of those surveyed go out every day.
The middle class accounts for about 13% of the country and is expected to increase by 4 million people by 2024. This group is concentrated in urban areas, creating conditions for the F&B industry to access the target market. With the increase of the middle class and the trend of preferring experiences, F&B stores have grown fast.
The GenZ group is also a potential target for the F&B industry. GenZ consumers are willing to experience new and ready-to-try creative dishes. However, they have short-term brand love, so businesses need to have strategies to attract and retain them.
Highlights of the F&B industry in Vietnam
In addition to the change in consumers, the tourism sector increases also boosts the revenue of the F&B industry. Especially holidays in major tourist cities like Quang Ninh, Da Nang, Nha Trang, Phu Quoc, etc. The urbanization trend with a modern lifestyle is one of the reasons driving the development of the F&B sector.
The rapid urbanization process has boosted the demand for convenient, modern, and diverse F&B services. Nowadays, many people have a modern and busy lifestyle, so online ordering and home delivery are also increasing rapidly. It also promotes the growth of F&B services.
Technology is the next important factor in boosting the F&B industry. Technology applications such as supply chain management, delivery management, food management, and online payment. have served buyers and sellers. They help both consumers and businesses make buying and selling processes easier.
Finally, there is the diversity in the cuisine of the market. Internationally, foreign dishes are increasingly sold more, allowing customers to have more choices. Specialized food needs such as vegetarianism and clean eating are served more to meet those with special diets. Therefore, the customer base is expanded, helping to extend the market.
In general, the shift in consumer behavior and habits with the development of technology will drive the development of the F&B industry. In addition, tourism is also the reason for the F&B market to increase in the future.
The prediction of Vietnam’s F&B market
According to Euromonitor, the F&B sector value prediction will increase 10.92% in 2023. Next, those values will reach CARG 10.25% in 2023-2027. The estimated value will reach 872.9 trillion (about USD 34.9 billion) in 2027.
In the restaurant service segment, the revenue of chain stores is anticipated to increase faster in 2023-2027 with CARG 14.6%. However, independent F&B stores will have a growth rate of 12.52%. The Vietnam F&B industry will continue to grow steadily, with an annual growth rate of about 10-12% in the coming years.
The F&B market is bound to diversify with the emergence of many new dishes and culinary styles, from traditional to international, vegetarian, and unique street food. The trend of specialization in market segments will also increase, focusing on specific customer needs, such as organic cuisine, clean food, catering services for people with special diets, etc.
Technology will play an important role in operations and customer service. Chain stores and restaurants will develop swiftly. The trend of franchising will also increase, helping businesses to flourish.
However, businesses should update and focus on sustainability and efficient consumption trends. Customers increasingly pay attention to environmental factors, safety, and product quality. Therefore, businesses should continuously update and improve, bringing products that meet customer needs.
Some challenges of the market
Although it is expected to have a lot of potential for development in the future, the F&B market also faces many different challenges. The fierce competition as the number of businesses increases leads to pressure on prices, product quality, services, and marketing for businesses.
The prices of raw materials fluctuate due to the effects of weather, epidemics, and policies, leading to difficulties in controlling costs and product prices. The shortage of supply, especially for organic products and clean food, also causes raw material prices to increase.
In addition, businesses also face problems such as high premises costs, food safety issues, constant consumer changes, and shortages of human resources, which are also challenges for F&B businesses in Vietnam. Therefore, F&B businesses need to prepare scenarios and strategies to face these challenges to develop in the future.
Conclusion
In the first half of 2024, the Vietnamese F&B market witnessed fierce competition, causing many businesses to close. However, this market showed significant resilience with stable revenue and positive changes. In the future, the F&B industry is expected to continue to develop steadily and develop further.
