Covid clouds Vietnam outlook

As Vietnam attempts to curb a new strain of Covid-19, the country’s fresh fruit importers and retailers believe demand for fresh produce will remain steady.

by Chris Komorek

Vietnam’s management of the Covid-19 pandemic throughout 2020 was world-leading As of 1 January 2021, the nation had recorded 1,474 total cases and 35 deaths; impressive figures for a country with a population of 96.46m people (as of 2019).

However, the detection of a new Covid variant in May 2021, one the BBC reported was a combination of the Indian and UK variants and easily transmissible, prompted the Vietnamese government to implement new measures to contain its spread.

Mass testing of high-risk groups in Ho Chi Minh City and new social distancing measures were brought in as a result. At the time of writing, the country had registered 8,791 cases and 53 deaths.

Nguyen Xuan Hai, chairman of importer and retailer Klever Fruit, praised the Vietnam government’s resolute action, but warned of the impact it could have on the country’s economy.

“I expect the economy to face many challenges in 2021,” says Hai. “In the first six months of this year, our (Klever Fruit’s) fresh produce sales decreased by about 30 per cent compared to the same period of 2020. We are therefore preparing for the not-so-bright situation over the next three months.”

“With schools closed and restrictions on gathering, demand does drop, but fresh fruit is less affected than other products”

SIGNS OF GROWTH

Angel Mompo, sales director for importer and marketer Fruit-X, notes consumer demand for fruit increased during the first six months of the year, and anticipates it to continue growing as the country fights the outbreak.

“We have observed sales growth of 8-10 per cent for citrus, apples and grapes in Vietnam,” explains Mompo. “We believe that to be the highest growth percentage in all of South-East Asia for these particular fruit categories, and demand continues to grow.”

Meanwhile, 2021 got off to a great start for T&G Global, according to Victor Anderson, the company’s country manager for Vietnam.

“We had a very strong Tet holiday period in January, with great demand for our US-grown Envy and Jazz apples,” says Anderson. “As usual there was a dip after the holidays that coincided with some more Covid restrictions in the market, but that recovered as we moved to the New Zealand apple season.

“We see the best results from our Envy apples, followed by Jazz. The safe, clean image of New Zealand, plus the marketing activity that focuses on health and the taste of the fruit, mean consumers are willing to pay a bit more for quality fruit that meets their taste demands,” he explains.

“We also see that if the quality doesn’t meet consumer expectation, the price can be significantly impacted. So, keeping quality and taste high to meet expectations is very important.”

What impact these new restrictions will have on sales will become apparent with time, however, Anderson is confident consumers will continue to purchase fresh produce.

“From the consumer side, there are changes in demand depending on the level of restrictions. With schools closed and restrictions on gathering, demand does drop. But fresh and healthy products are sought after, so fruit is less affected than other products or industries,” he adds.

The Tet period saw strong demand for New Zealand-grown Jazz

CHERRIES ON THE RISE

One category tipped to continue its upward trajectory is cherries. Hai says Chilean cherries will be one to watch following their “impressive” entry in 2020, while the US is about to enter the peak of its season.

Steve Reinholt, export sales manager of Oneonta-Starr Ranch Growers, says the Northwest cherry industry is anticipating plenty of large-sized fruit for supplying export markets this season.

“We’re expecting good demand from premium markets such as Vietnam. The only issue may be the airfreight situation as there are fewer planes flying to South-East Asia presently,” says Reinholt.

Mompo, meanwhile, says young families are the main consumer group Fruit-X is targeting for cherry consumption.

“Being regarded a premium fruit, our sourcing channels must be immaculate,” he outlines. “In this regard, we have developed good partnerships in the US (California), Canada and Chile, who are interested in working closely together to expand the market for cherries in Vietnam.”

Citrus sales have performed well over the past 12 months

SHIPPING INTERRUPTIONS

The pandemic has plunged the global shipping industry into turmoil. As companies do their best to manage expectations and shipping times, the unpredictability has been felt far and wide.

“The arrival time is erratic,” Anderson says. “Our team in New Zealand are doing the best they can to ship to our demand, including adding more charter vessels and new shipping lines and ports.

“To make sure we met market demand in the early season we did an airfreight programme of Envy to Vietnam the last four weeks of around 250 tonnes.”

Hai says airfreighted produce hasn’t had much luck either, with associated costs increasing significantly, ruling it out as a viable option for many.

“According to our reports, airfreight costs from Australia to Vietnam increased fourfold in 2020 compared to that of 2019,” says Hai. “During the first six months of 2021, this number decreased, but it remains as high as double the rates seen in 2019.

“Similarly, airfreight rates from the US in 2020 increased by 200 per cent compared to 2019 and in the first half of 2021, increased to 240 per cent compared to 2019,” he concludes. _A

Central Retail has rebranded a number of its Big C hypermarkets to Go

New moves on retail scene

Vietnam continues to establish itself as a market for premium produce. While the country’s modern food retail market remains extremely competitive, with ‘low-price strategies’ to the fore, leading players have been making moves to differentiate on quality and service.

At the beginning of the year, Central Retail rebranded a number of its Big C hypermarkets to Go. Then in March, the retailer announced three of its Big C supermarkets in Ho Chi Minh City would be renamed Tops Market, with a further four in Hanoi set to follow suit later this year. The Tops Market stores prioritise range and quality in the produce department, with in-store merchandisers onhand to manage their offerings.

Smaller format retail is also growing rapidly in Vietnam, providing more avenues for premium fresh produce offerings.

“Vietnam’s mini-supermarkets have exploded in consumer popularity over the last few years,” says Keith Hu, director of international operations for Northwest Cherry Growers. “These are 7-Eleven sized entities that are now selling high-end goods, including imported fruits.

“This is probably the fastest growing sector in Vietnam’s food retail market currently. Some of the leading players include VinMart, Satra Food, Coop Food and Bach Hoa Xanh.”

Meanwhile, Masan Group has taken over the VinMart grocery chain in a move deemed controversial given VinMart’s prior financial difficulties. Rebranding the retail chain to WinMart, Masan Group now operates 2,300 outlets nationwide, and is planning to build a retail ecosystem of 30,000 stores to reach up to 50m consumers within the next five years.

Vietnam Express reports the group’s final goal is to create a ‘one-stop shop’ platform to meet all customers’ demands in finance, education, entertainment and healthcare, with both online and offline channels.

Masan Group’s ambition has been labelled ‘Alibaba-esque’, with the group targeting revenues of US$7bn-10bn annually by 2025.

Across Asia, the pandemic pushed many into the online realm. E-commerce and home delivery was one guaranteed way to reach consumers in isolation. But in Vietnam, the shift online has not hit the heights seen in neighbouring countries, according to one local fresh produce marketer and consultancy.

“A lot of companies have moved into online sales of fresh fruit in an informal and unstructured way, but I don’t believe it is that big just yet,” the source tells Asiafruit.