Vietnam’s Baby Formula Market: Key Considerations for Foreign Brands and Exporters

Vietnam’s baby formula market is experiencing remarkable growth, backed by compelling consumer evidence. We discuss the Vietnam market in this F&B segment, foreign investment opportunities, and the country’s documentary requirements for import-export.

The baby formula market in Vietnam is experiencing remarkable growth, backed by compelling data that highlights a promising landscape for foreign businesses and investors. With a population of over 96 million people and a birth rate that has been consistently above 1 million births annually, Vietnam presents a significant market for baby formula products. This demographic trend, coupled with rising disposable income, reinforces the growing demand for high-quality baby formula products among Vietnamese parents.

Foreign businesses hold a crucial role in satisfying the growing demand for high-quality baby formula products in Vietnam. Given that domestic production also currently falls short of meeting demand, there is a significant market gap that foreign companies can help fill.

In this article, we delve into the growth of Vietnam’s baby formula market, highlighting key trends and exploring the strategic opportunities it presents for foreign businesses and investors.

Market overview

According to the Vietnam Dairy Association, the market size of formula milk in Vietnam will reach approximately US$2 billion by the end of 2023, with a projected compound annual growth rate (CAGR) of 5.65 percent between 2023 and 2028.

This positive trajectory can be attributed to the surge in Vietnam’s young population. Data reveals a daily birth rate of 4,243 babies, equating to about 1.4 million newborns each year. These infants typically rely on milk powder until the age of 4, leading to an average demand of 0.3 kg of milk powder per week per child, resulting in a cumulative requirement of 84,000 metric tons each year.

Key domestic and international players

By the end of 2022, Vinamilk stood as the dominant force in Vietnam’s formula milk sector, commanding more than a quarter of the market. Nutifood secured roughly a fifth of the market share, propelled by its cost-effective pricing, robust promotional efforts, and widespread recognition as a clinically-endorsed formula for children.

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Within the Vietnamese market, notable international brands include Friesland Campina, Mead Johnson, and Nestle. FrieslandCampina and Mead Johnson maintained steady market positions by fostering strong business practices and sustaining a positive rapport with their existing customer base. Nestle, on the other hand, underwent substantial growth due to the implementation of innovative customer relationship management (CRM) strategies, effectively luring new consumers to engage with their range of formula milk offerings.

Local brands like Nutifood and Vinamilk differentiate their pricing based on the intended age group of the product. Products targeted at older children (aged two and above) are priced lower compared to those designed for children under two. Nutifood finds popularity in rural areas, whereas Vinamilk has a stronger presence in urban centers.

Friesland Campina, Abbott, and Nestle are competitors in both mainstream and premium segments, featuring offerings in varied price ranges. Meanwhile, other imported brands, such as Aptamil, Glico, Meiji, and Morinaga, target urban consumers seeking premium quality.

Consumer preferences and market trends

Preference for trusted international brands

Vietnamese consumers have exhibited a distinct preference for trusted international baby formula brands, a trend substantiated by market data. A significant percentage of parents, approximately 75 percent, consider brand reputation and global recognition as key factors influencing their purchasing decisions.

This emphasis on established brands stems from the assurance of quality, safety, and adherence to stringent nutritional standards that these brands provide.

Rising demand for organic, lactose-free, and premium baby formula

Another noteworthy trend is the escalating demand for organic and premium baby formula products. As Vietnamese parents become more health-conscious and aware of the long-term impact of their children’s nutrition, there has been a noticeable shift towards seeking organic and high-end formula options.

Organic, lactose-free, and colostrum milk varieties hold a smaller portion of the market share compared to standard formula due to their specialization for specific niche consumers. Organic formula milk, exemplified by brands like Bellamy Organic at Annam Gourmet and HiPP at specialty maternity and baby stores, gains traction within premium establishments in major urban centers. Given their association with high quality and premium status, these products command a relatively higher and less responsive pricing structure.

Although lactose-free and colostrum milk formulas are currently experiencing modest demand, they are progressively garnering attention from distinct niche consumer groups. These products are also predominantly positioned within the premium segment, primarily due to their limited demand and supply.

Online shopping and e-commerce trends

The surge in online shopping and e-commerce adoption has also significantly impacted the baby formula market in Vietnam. An impressive 70 percent of consumers research and purchase baby formula products through online platforms.

Indeed, by the end of 2022, e-commerce revenue amounted to approximately US$16.4 billion, accounting for approximately 7.5 percent of the total retail sales of goods and services in Vietnam that year.

This digital shift is particularly evident among young parents in urban areas, who appreciate the convenience, product variety, and the ability to access reviews and information before making purchasing decisions.

Localization and cultural sensitivity

While the aforementioned trends are prominent, it’s essential to emphasize the importance of tailoring products and marketing strategies to Vietnamese cultural nuances. Beyond the data, understanding the cultural context and traditions associated with infant care can make a significant difference in consumer adoption.

For instance, considering traditional herbal ingredients, which are highly regarded in Vietnamese culture, can resonate strongly with local consumers and drive brand loyalty.

Regulatory environment

In accordance with the Vietnamese Law on Customs 54/2014/QH13, customs declaration procedures are conducted electronically, with a few particular exceptions.

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The overall customs procedures, inspections, and assessment of imported foods in Vietnam are regulated under the Decree 8/2015/ND-CP. Further specifics are outlined in the Circular 38/2015/TT-BTC, which covers customs procedures, supervision, inspection, as well as the imposition and administration of export and import taxes.

The process of customs clearance for imported dairy items, including baby formula milk, into Vietnam involves several steps, as illustrated in the sections below.

Step 1: Preparation of customs imports declaration and other supporting documents

The customs import declaration serves as the official form for customs clearance, where the importer provides all the necessary details for assessing the taxable value of the imported shipment.

While the standard customs clearance documents usually encompass items, such as commercial contracts (copy), commercial invoices (copy), original packing lists, copy of the bill of lading, and original certificate of origin, there might be additional documents required for the import of baby formula milk items, as detailed in the table below.

Source: Vietnam Market Study on Formula Milk, Compiled by YCP Solidance Resource

As each entry port’s customs authority may exercise discretion on the requisite documentation, exporting parties are advised to consult both the local customs authority and an experienced importer to proactively prepare these documents.

Step 2: Registration and installation of VNACCS

The Vietnam Automated Cargo and Port Consolidated System (VNACCS) serves as the official platform for electronic customs import declaration and associated document submissions. To utilize VNACCS, one must first secure an E-Customs Registration and download the relevant software from the Customs website, available here. A digital signature must be approved by the customs authorities for this purpose.

Step 3: Registration for inspections

When importing baby formula into Vietnam, businesses and individual importers should apply for the following two types of inspections:

• Quarantine registration: Dairy products fall under the terrestrial animals and animal products category that necessitate quarantine measures. Quarantine procedures are conducted at the entry port or checkpoint. With the quarantine authority’s decision and concurrence from the customs authority, products can be moved to an inland quarantine location.
• Registration for Food Safety Inspection: In compliance with Decree 15/2018/ND-CP dated February 2, 2018, dairy products are subject to food safety inspections. These inspections typically occur at checkpoints unless the authorized inspection agency permits alternative locations for safe product storage.

Step 4: Customs Import Declaration Form

Importers must initiate and submit the customs import declaration to the Vietnam Customs Office either before arrival or within 30 days after arrival.

Following submission, the product is classified within one of the following three categories:

• Green line or simplified inspection: The imported goods are exempt from both types of inspections—documentation review and physical one.
• Yellow line or ordinary inspection: The imported goods are only subject to documentation review.
• Red line or strict inspection: The imported goods are subject to both documentation review and physical inspection.

Step 5: Custom clearance

Lastly, to complete custom clearance, depending on the outcome of the previous step, importers will have to follow different guidelines according to each case illustrated:

• Green line or simplified inspection: Importer must submit printed customs declaration form and receipt of VAT and import tax payment at entry.
• Yellow line or ordinary inspection: Undergo the document inspection with the customs office—physical inspection may be requested by the customs officer if there is any suspicion about the accuracy of the documents.
• Red line or strict inspection: Like in the yellow line case, after completing documentation review and upon satisfactory outcome, customs authority shall conduct physical inspection of the actual shipment (such as weight and types of imported foods).

Challenges and opportunities for foreign enterprises and traders

While the baby formula market in Vietnam presents certain challenges, it also holds significant promise for foreign investors and businesses engaged in import-export trade.

It is important to acknowledge that the market outlook for baby formula products might not be as buoyant as for other dairy products due to factors such as a shift towards liquid milk for older toddlers and the impact of the COVID-19 pandemic, which has further influenced consumer preferences towards more budget-friendly options.

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However, amid these challenges lie numerous opportunities. Vietnam’s status as a growing consumer market, backed by political and social stability, remains a key strength. The rising income of young parents who prioritize quality nutrition for their children, including imported and organic products, adds to the market’s potential. Moreover, the demand for dairy ingredients and products is notable, especially as local dairy processors rely on imported milk powders and components.

While competition is fierce in both mainstream and premium segments, the growing demand for premium offerings, such as organic products, presents an attractive avenue for expansion. Modern retail channels are extending their reach to rural areas, tapping into new consumer groups. The openness of Vietnamese consumers to new products and products from trusted international brands, as indicated by consumer surveys, signifies the evolving nature of the market.

While the Vietnam market’s administrative barriers are expected to ease with regulatory improvements, the path to success demands careful consideration of market entry strategies, pricing strategies, and product positioning. As the Vietnamese economy continues to rebound, premium products are likely to gain traction.

Foreign businesses and investors can leverage the growing consumer demand, expanding retail accessibility, and the appetite for quality offerings to establish a strong foothold in Vietnam’s evolving baby formula market.

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