The following report is about to introduce Food and Beverage Company from Singapore into Vietnam market and brief explanation leading companies in Singapore which are Fraser and Neave Ltd (F&N), Asia Pacific Breweries (APB), Singapore Food Industries (SFI). Besides that, to understand the market in Vietnam by providing all information on this report such as industry development, investments, political environment, government regulation, commercial law, transportation, distribution and trade restrictions. In addition, this report will give the reason why Singapore thinks Vietnam has strong export market potential.
OVERVIEW OF FOOD AND BEVERAGE COMPANIES IN SINGAPORE-
Processing & Distribution Companies
Due to limited domestic capacity, food-processing companies import almost all their ingredients. The main companies in this area are:
Fraser and Neave Ltd (F&N): F&N is the leading food and beverage manufacturing and distribution company in Singapore. F&N operates in the food, brewery, soft drinks and dairy sectors. The company has sales of over US$4 billion. F&N holds the license to distribute popular brands such as Coca-Cola and Heineken.
Singapore Food Industries (SFI): SFI is one of the leading food manufacturing and distribution companies. SFI operates with convenience foods, frozen and child foods as well as having some interests in meat and seafood processing. SFI has a strong brand reputation and targets higher incomes.
Asia Pacific Breweries (APB): APB is a joint venture between Heineken (Dutcher brewery) and Fraser and Neave (F&N). The company dominates Singapore’s alcoholic beverage sector with sales of almost US$2 billion.ii Its brands include Heineken, Tiger Beer, Tiger Classic, Anchor, Raffles Light, Guinness Stout and APB Stout.
TRADE ENVIRONMENT IN VIETNAM
The WEF noted: “Vietnam is one of the standing has upgraded most breathtakingly, leaped 18 places to 71st in the globe”. The upgrades in the nation’s trade environment reflect Vietnam’s responsibilities taking after its accession to the WTO in 2007, which is prompting a critical liberalization of trade in goods and services. Since joining the World Tade organisation (WTO), Vietnam has been importing more items from abroad. Subsequently, Vietnamese buyers are tending towards a more differed eating methodology with a more extensive extend of items. (TRE, 2012)
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WHY VIETNAM HAS STRONG EXPORT MARKET POTENTIAL FOR SINGAPORE
As we known, Vietnam-with its huge population of 79 million, presents an extraordinary opportunity to grow Food & beverage core business. There is increasing awareness of the nutritional benefits of food products – for both young and old – as a food staple, and along with a rising standard of living, Food & Beverage companies expect consumption in Vietnam to grow significantly in the years ahead. The healthy products, modern retails and packaged products, which are hygienic are expected to grow. Vietnam Singapore Industrial Park (VSIP), which is developed by a joint venture group comprising leading companies from Singapore and Vietnam and being a fully serviced industrial park, it has the full support of both the Vietnamese and Singapore governments. All these things above can prove Vietnam has strong export market potential for Singapore. (VIETNAM SINGAPORE INDUSTRIAL PARK)
INDUSTRY DEVELOPMENT
In recent years, the economy is increasingly dynamic market and the integration with world markets, the occurrence of competition between domestic and foreign enterprises. Competitors of the domestic enterprises are companies, foreign corporations have decades of experience with market economies, abundant capital, staging personnel equipped with adequate knowledge, skills necessary. To be competitive, do not lose market share on the “floor” of his, Vietnam enterprises should also be equipped with knowledge and skills match the requirements of the increasing business, and marketing is one of the most important skills. From place to produce the best products, the cheapest possible, enterprises must also believe that customers use its products rather than buying from the competitors. And to do that businesses need to understand customer needs better, they need to communicate better about their products and they need to build a long term relationship between the brand and customers. Food and beverage companies should quickly grasp the opportunity, do not stop technological innovation, the infrastructure investment, diversification of products to prepare for a new journey.
Industry standards
Vietnam has a variety of general and product specific regulations around imported products. Food and beverage products are subject to inspection when exported toVietnam. Imported food and beverage products are subject to the same regulations as domestic products. Standards are governed by the Ordinance on Hygiene and Safety of Foodstuffs. (Vietnam Legal Updates)
POLITICAL ENVIRONMENT AND GOVERNMENT REGULATION
This factor have influenced all branches of business on a whole territorial, institutional factors, the law could endanger the viability and growth of any industry. When trading on an administrative unit, the business will have to start enforcing the law institutional factors in that area. Economics and politics are two groups of factors are closely related. Political stability is a condition for economic development and vice versa, economic development is an important factor contributing to political stability. On the other hand, the institutional politics and decision guidelines of economic policy and political influence of business primarily through the economy. So consider the political environment affect pay attention to the attitude of the government-importing countries to attract foreign investment or not. Many countries do not restrict the import of goods to encourage other countries with investment incentives such as tax cuts or investment location choice. This is not only beneficial to the importing country that has a positive impact to the country to participate in investment and international business.
A very important issue for international business activities of enterprises is the political stability of nations in general and in Vietnam in particular. As mentioned above, the political economy is closely related to each other. Political stability is subject to economic development and economic development is important prerequisites for political stability. When the government can replace each other, leading to significant changes in economic policy, an incumbent government may give way and the old policy. But for the political stability brought many advantages as well as the business more confident in investing in that country which can be said that political stability is one of the most concerns the international business to invest.
Before the integration movement, the Vietnam enterprises have more opportunities to develop but also faced many difficulties. A business wants to stand on international markets face a multitude of factors beyond their control. In the political factors and the law are two issues of concern. The success or failure of enterprises in international business depends largely on understanding enterprise policies, rules of the host country or not, even where the enterprise has also affected the legal system and government policies of that country.
In addition, the Vietnamese Government encourages corporations to be involved in environmental protection, and views the fund is an important and very practical measure to protect people’s environment.
COMMERCIAL LAW AND TRANSPORTATION
Commercial activities means activities aimed at profitable, including buying and selling goods or providing services, investment and trade promotion activities and other profit-making purposes. Commercial activities in Vietnam always require businesses to comply with the commercial code:
Commercial activities must comply with the Commercial Law and relevant laws.
Commercial activities are specific provisions in other laws shall apply the provisions of that law.
Commercial activities are not regulated in the Commercial Law and other laws shall apply the provisions of the Civil Code.
Moreover, Vietnam began to have massive investments in infrastructure. Many visitors to Vietnam as the roads here are pretty basic. However, for economic development, Vietnam add more roads, road density up to 0.78 km / sq. km in 2009, higher density in the Philippines and Thailand, two thriving economy and in same year, the network of power over 96% of this country. (Thuy)
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PROMOTION OF ONE EXPORT PRODUCT FOR WHICH SINGAPORE HAVE A COMPETITIVE ADVANTAGE.
Food is essential consumer goods every day and has high growth and stability for Vietnam. Singapore’s food processing sector is quite limited and the major food producers are those in non-alcoholic beverages, snack foods, ethnic food activities and beer. As Singapore has no animals handling, no products, reasonably the vast majority of the nourishment elements are foreign made from extensive variety of counries worldwide. The aggregate yield of the generally manufactured tobacco, food, beverage sector was valued at around US$6.6billion in 2011, out of which it was appraised that over half re-exported. Products, which are exported, include soft drinks, beer, chocolates, edible oil, milk powder, processed seafood, spices, sauces and condensed milk. (Kong, 2012) The origin of rivalry fluctuates relying on the nature of the item manufactured. So, Singapore as more competitive advantage in exporting food and beverages to Vietnam because even Vietnam imports most of their food from overseas. As shown below in the graph.
vietnam food imports percent of merchandise imports wb datasingapore food imports percent of merchandise imports wb dataFOOD IMPORTS (% OF MERCHANDISE IMPORTS) IN VIETNAM FOOD IMPORTS (% OF MERCHANDISE IMPORTS) IN SINGAPORE
TARIFF POLICY AND TRADE RESTRICTIONS ANALYSIS
Many opinions from the experts in the field of import and export on the impact of international economic integration with the trade in Vietnam has still limited in import and export goods. The recent limit is the legal documents related to export control policies of the ministries regularly supplemented, modified but have not widely available yet. Next is yet to completely develop the technical standards, hygiene standards, food safety and the inadequacies in the inspection under the standards for imported goods to help produce reasonable protection domestic protection of consumer interests as appropriate; organization exports, especially exports of goods and weighing value is limited, not to create good conditions for the establishment of linkages between the producers of raw materials, processing enterprises, exporters to stabilize raw material to ensure product quality and the ability to regulate exports, reaching a high export prices. The use of trade remedies is not truly effective.
Turning to the tariff policy, there are including the policy of export tax, import, consumption tax, income tax, all will affect sales, profits of enterprises. Create equal environment for business activities, protection of business when the law-abiding businesses, there may be endowed with a certain type of business. Limit for certain businesses such as restrictions on items, business scale, and the other taxes.
FORECAST OF TRADE VOLUME AND TRADE VALUE
Volume assessment in international trade is important for buyers and the suppliers.
Food products
The overall food market is expected to develop between 3.7-5.2 percent for every annum for the period 2011-2016. There are certain items that are expected to develop faster than the overall market.
Healthy foods: The expanded health awareness of purchasers had increased an expanded interest for nutritious items. The fresh food products were valued at around US$1.2 billion in 2010 and this is expected to raise at rates between 6-7.8 percent for each annum until 2016.
Convenience and processed foods:
Urbanisation, young population and busier lifestyles are advancing towards more expenditure of convenience and processed foods. Ready to eat dishes, canned food products are expected to raise around 11 percent for the period 2012-2016.
Beverage products
The beverage market generally speaking is developing quickly and is becoming more diverse. Sales of drink items are expected to expand between 6.3-8.2 percent for every annum for the period 2011-2016. (Exporter guide food & beverage in Singapore, 2011)
CONCLUSION
Vietnam’s large and fast-growing consumer market, mainly among the middle income group, there will be an increasing demand for products and services as the people seek greater options and higher standards of living. Promoting international trade and overseas expansion of Singapore-based companies in Vietnam for companies to better understand the market and explore sector-specific opportunities.
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