December 24, 2022
Manufacturing -
A Guide to Vietnam Food and Beverage Manufacturing | OneLink Holdings
Wondering what’s manufactured in Vietnam and where? This guide will give you a comprehensive overview of the country’s food manufacturing industry.
The country offers a variety of benefits for food companies, including low labour costs, proximity to key markets, government support and a large pool of potential suppliers. As the country continues to develop its infrastructure and attract more foreign investment, Vietnam is poised to become a major player in the global food manufacturing industry.
If you’re considering manufacturing food and beverage in Vietnam, there are a few things you should know. In this blog post, we’ll give you an overview of the food manufacturing landscape in Vietnam, as well as some tips for getting started.
The Vietnamese Food and Beverage Manufacturing Landscape
The food and beverage manufacturing industry has become a significant sub-sector within the thriving manufacturing industry of Vietnam. The top exports include vegetables and fruits, dairy products, coffee, meat and seafood. In 2021, food and beverage manufacturing contributed $17 billion U.S. to the gross domestic product (GDP) of the country, while employing three million people. In 2020, Vietnam became the fourth largest exporter of seafood worldwide, contributing an export value of $8.1 billion US to the economy. The growth seen in the food processing industry can be attributed to both the domestic and export market.
Vietnam is home to a growing number of food manufacturing companies, many of which are foreign owned. The country’s food processing sector is primarily concentrated in two regions: the Red River Delta in the north and the Mekong Delta in the south. There are also several smaller clusters located throughout the country.
The Red River Delta is home to Vietnam’s largest food manufacturers, including Nestle, Kraft Heinz, and Mars. The region is also home to one of Vietnam’s largest agricultural areas, making it an ideal location for food processing companies. The Mekong Delta region has a more diverse range of industries, but it too is home to a few major food manufacturers, such as PepsiCo and Unilever.
More recently, the central key economic region consisting of Da Nang City, Quang Nam and Binh Dihn has become an attractive location for marine economy and agriculture. Food and beverage processing is more centred now in this region than the north and south regions; with Da Nang emerging as a hub for seafood and food processing.
Low Labour Costs
Low labour costs in the Vietnam food and beverage manufacturing industry present businesses around the globe with an attractive alternative when considering expanding their production capabilities. With salaries for skilled workers sitting generally well below international standards, employers can further benefit from Vietnam’s significantly lower taxes and its growing free trade agreements with foreign countries. On top of that, the Vietnamese offer a highly experienced labour force who bring valuable knowledge of cutting-edge production technologies from both domestic and international sources.
Proximity to key markets
Vietnam is an ideal location for food and beverage manufacturers thanks to its key market proximity. It is a key tourist destination and the demand for food and beverage products from overseas travellers is ever increasing; having key markets in close vicinity provides a great advantage. In addition to key markets, Vietnam also provides access to key agricultural resources such as rice and other organic produce, making it more appealing for organizations looking to capitalize on the abundance of local ingredients. Furthermore, its geographical location allows businesses in the food and beverage manufacturing industry to benefit from different climates across four diverse seasons. All these factors make Vietnam an attractive choice when opting for a new base of operations or expansion in key markets that are vital for success in this sector.
Favourable government policies
The Vietnamese government has been investing heavily in the country’s food processing infrastructure. This includes tax breaks and subsidies for companies that set up production facilities in certain areas of the country. There are two main Corporate Tax Incentives offered; the preferential tax rate (reduced tax rate) and tax holidays (exempt for certain period or throughout whole project). There is also a land rental policy available for companies.
Depending on the location of your manufacturing company, you can qualify for either a 10% or 15% tax rate for 15 years. The 10% tax rate applies to locations that are considered difficult under the Vietnamese government. The 15% tax rate applies to areas considered not difficult for agriculture and aquaculture processing. The tax holiday only applies to food processing in difficult areas; with 4 years tax exemption followed by a 50% reduction for the remaining 9 years. It is important you check with the Vietnamese Government in regard to the tax incentives and holidays as it varies between industries and locations.
Along with these tax benefits, the government is also aiming to make Vietnam the world’s leading seafood processing centre by 2030.
Challenges for Foreign Companies
While the country offers many advantages for foreign investors, it’s still a developing market. Foreign companies looking to set up operations in Vietnam may face some challenges, particularly about regulations and infrastructure. Vietnam’s legal framework for the food sector is still underdeveloped, making it difficult for companies to obtain licenses and approvals needed to operate in the country. To be able to export food and beverage from Vietnam, you will need an export license. You don’t need to own a trading company to obtain an export license, but you must register with the DPI (Department of Planning and Investment) to obtain an investment certificate.
In addition, Vietnam’s infrastructure still lags behind that of other Southeast Asian countries, making it difficult for companies to transport goods around the country. Despite these challenges, many foreign companies have been successful in setting up operations in Vietnam and are reaping the benefits of doing business in the country.
Vietnam is an attractive destination for food manufacturers due to its low labour costs, proximity to key markets, various government incentives and large pool of potential suppliers. The country is home to several major clusters of food manufacturers, including those located in the Red River Delta and Mekong Delta regions. While there are some challenges that foreign companies may face when setting up operations in Vietnam, such as regulatory hurdles and infrastructure deficiencies, many companies have been successful in doing business in the country.
Written By
OneLink Holdings team
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