Heralded by the World Bank as a development success story, Vietnam recently entered the lower middle-income bracket which has also increased the demand for quality of consumer goods.
According to a 2016 report compiled by Hong Kong market research firm Cimigo, the number of high-income households earning over $500 monthly has grown from 1.8 million to over 4 million over the past 10 years.
What’s more is that the number of supermarkets in Vietnam have also been rising along with increased purchasing power. In 2005, there were just 47 supermarkets but now that number has reached 975.
These details are particularly important for agriculture and food businesses, both local and foreign operated, that are trying to capitalize on consumer needs for increased food safety in Vietnam.
Dr. Dao The Anh, Director at the Center for Agricultural Research and Development in Hanoi, said that this shift has to do with the lengthening value chain — thanks to consumer’s heightened interest in food source.
“In the past there was a very short value chain, but now it’s longer and consumers are requiring more and more labeling on vegetables. In the wet market, you can buy produce for a cheaper price but now with the rising income level in cities, consumers shop more at the supermarket. As a result, you need proper labeling on products — but up until now, there’s still information lacking in regards to the origin of the products so sometimes consumers don’t trust it,” he said.
Since 2005, concerns for food safety have only increased and big local companies such as VinGroup’s Vineco have been making investments, the latest being an injection of $44 million into hygienic fresh vegetable production to ensure its VinMarts, which are small supermarkets, to be stocked with safe local produce.
While farms in Vietnam are gradually making the shift to using organic fertilizer, Dr. Dao explains that the product is in short supply in local markets and so farmers will have to produce it themselves. Organic fertilizer production currently takes 2-3 months, which is challenging for farmers who need to maintain productivity to keep their business up and running. This is where technology can come in and save the day.
“We are working with Japanese and Korean companies to import microbiological technology which will reduce the time from 2-3 months to just one day. This is really important because farmers in Vietnam have small spaces, so if they produce at low productivity, their income is really low and they won’t be able to stay in the agriculture sector. So we should work on green technology and help farmers increase their income from organic production,” said Dr. Dao.
Farmers, according to Dr. Dao, have been struggling to keep up with the increased consumer demand for safe food products — but they’ll have to adapt if they don’t want to be left behind.
“Consumer behaviour is changing really fast — but the behaviours of the farmers is changing slowly. If they want to meet market demand and they have good packaging and labeling, they’ll be able to sell at a higher price,” he said.
“If a farmer sees that his neighbor is incorporating traceability and good packaging into his products, then he’ll also decide to do the same thing and it becomes like a social movement.”