Vietnam’s Livestock Industry: Challenges and Opportunities

Vietnam’s livestock industry is dynamic and rapidly growing, presenting significant opportunities for foreign investors and businesses. In this article, we run through what those opportunities are and where to find them. Key investment and market demand areas include high-quality imported meat products, nutrition-based food and produce, and technology transfers.

The livestock business in Vietnam performed well in 2022, despite challenges created by Covid-19, the Russia-Ukraine war, and subsequent economic downturn. The total output of Vietnam’s livestock production was worth about US$21 billion, an increase of 5-6 percent over the same period in 2021.

But with the economy still lagging in 2023, the sector’s performance has deteriorated, deterring local firms from investing aggressively.

Against this background, we analyze Vietnam’s livestock industry, including the current situation, challenges, and prospects for businesses.

Vietnam’s livestock industry at a glance

The livestock industry in Vietnam plays a crucial role within the country’s agricultural sector, making substantial contributions to economic growth and employment. Livestock accounts for about one-quarter of the agricultural sector’s GDP, recording consistent annual growth of 4 to 6 percent.

The Vietnamese government has set a target to achieve 4 to 5 percent industry growth per year until 2025 and 3 to 4 percent growth from 2026 to 2030. In an attempt to reach this goal, Vietnam’s livestock industry is beginning to shift away from small-scale household farming to modern, large-scale industrial processing. High-tech applications and closed value chain production have become increasingly popular.

The livestock business in Vietnam produces and consumes a wide variety of products, including pork, poultry and eggs, beef, and milk. Historically, pork and poultry have been the most popular products in Vietnam due to their affordability and widespread availability. Interestingly, Vietnam is reportedly among the nations with the highest volume of pork production globally, with more than 4.19 billion metric tons produced in 2021.

Moreover, besides meat, there has been a significant increase in the consumption of other products, such as eggs and milk, reflecting changing dietary habits. Rising incomes, urbanization, and the growing popularity of the food and beverage (F&B) industry are all among the main reasons driving this change.

Challenges in Vietnam’s livestock industry

Rising production costs

According to FAO, the prices of wheat and maize have significantly increased from pre-conflict levels in 2021, by more than 38 percent, due to the tensions between Russia and Ukraine.

As Vietnam’s livestock production relies heavily on imported raw materials for animal feed, such as maize, wheat, and cereal, the increase in the price of those materials has caused higher production costs. Indeed, the rising production costs have severely eroded the earnings of businesses and cooperatives. Due to this reason, the leading local businesses in this industry, including Hoa Phat Group, Dabaco, Masan, and BaF, all reported losses in the first quarter of 2023.

Source: Vietnam Investment Review

Natural disasters and diseases

It is important to note that Vietnam lies in a region that is prone to natural disasters, including floods, typhoons, and droughts. In addition to endangering the health of livestock, these catastrophes have a detrimental effect on logistical operations and the production of raw materials.

Furthermore, Vietnam is particularly susceptible to the spread of infectious diseases. In recent years, Vietnam’s pork industry has been severely damaged by African Swine Fever (ASF), leading to sharp drops in hog populations and decreased consumer demand for local pork. In response to ASF, many Vietnamese consumers are no longer willing to purchase meat from the wet market, opting instead for imported products or products from reliable domestic enterprises.

Increased competition

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Since Covid-19, the demand for livestock domestically has declined. Thus despite abundant domestic supply, imported meat and other livestock products are becoming more popular. Imported meat options is widely available in the market, in both traditional marketplaces and e-commerce channels.

One of the reasons is that the imported products are becoming cheaper. The price of imported meat has become more affordable due to a range of Free Trade Agreements (FTAs), particularly the CPTPP and the EVFTA. Previously, there was a 10–20 percent tariff duty rate imposed on imported meat, but this has since been eliminated for parties to these FTAs. With the removal of trade barriers, products from countries like Australia and Canada now penetrate the Vietnamese market more easily.

Emerging trends and opportunities in Vietnam’s livestock industry

The rise of agriculture technology

In recent years, Vietnam has increasingly collaborated in high-tech agriculture with other nations, such as China, Japan, Finland, and the Netherlands.

Indeed, many local businesses have cooperated with foreign corporations and organizations on technology transfer, investments, training, and product development. For instance, De Heus Group (the Netherlands) and Hùng Nhơn Group signed a Memorandum of Understanding (MoU) with the Kon Tum provincial government to facilitate surveying, researching, and investing in numerous high-tech agricultural projects in the area.

This is in line with significant prospects for foreign businesses to work with local firms to upgrade their farms or look for new technologies to increase their output. Some of the most potent opportunities are in smart farming, blockchain applications, machinery and software, genetics, and breeding.

A preference for premium and organic

Vietnam’s middle class is currently the seventh fastest-growing in the world, and by 2030, it is anticipated that the middle class will have increased by 36 million people. This growing middle-class is also becoming more selective about the food they consume. As incomes rise and dietary preferences change, the consumer demand for higher-quality, healthier, and more sustainable products is increasing.

Along with the trend towards healthier eating, consumers are becoming more interested in food originating from reliable and sustainable sources. Furthermore, after COVID-19, consumers have become even more interested in natural and organic products. Indeed, many customers stated that they would be willing to forgo other expenses to purchase products that are healthy, natural, and fresh. This trend has led to the emergence of unique products, such as “banana-fed pigs” branded Bapi HAG, “vegetarian pork” branded BaF Meat, or “herbal pork” branded SagriFood.

A booming F&B industry

Despite the tendency for consumers to cut back on their spending amid a worldwide downturn, Vietnam’s F&B sector continues to perform remarkably well and expand rapidly.

According to Mordor Intelligence’s Vietnam’s Foodservice Market report, F&B saw a considerable recovery after the COVID-19 pandemic, reaching revenue of US$24,288 million in 2022. The surge is not a temporary phenomenon; indeed, the growth of the food service industry in Vietnam will be likely be sustained owing to the country’s young, increasingly wealthy, and modern, changing lifestyles.

The F&B sector’s rise will lead to a substantial increase in the demand for livestock products. Hence, investors should seize this opportunity to increase customer consumption and expand their market share.

Foreign investment in the livestock industry

Realizing the potential of Vietnam’s livestock industry, numerous foreign investors have already invested in the country. These foreign players bring advanced technology, management expertise, and access to international markets for the Vietnamese livestock industry. Some of the “big names” that have invested in Vietnam include the Charoen Pokphand Group (C.P Group) and the New Hope Group.

Charoen Pokphand Group

In the 1990s, Thailand’s CP Group was one of the first foreign enterprises to enter Vietnam via a representative office in Ho Chi Minh City. In 2020, CP Group invested US$250 million to build a complex of meat processing plants in Binh Phuoc province, which was the largest and most modern in Southeast Asia at the time. Currently, the company is among the most dominant players in Vietnam’s livestock market, accounting for 19.5 percent of the total pork production and 4 percent of the broiler production of Vietnam.

New Hope Group

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In 2018, New Hope Group, China’s top agribusiness enterprise, entered Vietnam by establishing New Hope Binh Phuoc Livestock Co., Ltd. Since then, the company has invested in many projects in Vietnam. Between 2018 and 2020, the corporation invested over US$170 million in Vietnam to construct numerous processing centers and farms in Binh Phuoc, Binh Dinh, and Thanh Hoa provinces. With an expenditure of US$135 million in 2021, the corporation increased its production capacity by 48,000 pigs a year. These investments have not only helped New Hope Group to capture a bigger share of the Vietnam market, but have also allowed the company to expand its footprint in Southeast Asia.

In addition to the above mentioned companies, several other foreign corporations, such as CJ, Emivest, Mavin, and more recently: De Heus, have established operations in Vietnam and continue to invest and expand their businesses. The investment of these businesses in Vietnam is recognition that the country’s livestock sector is promising and also presents a valuable opportunity for them to expand their operations within the Southeast Asian region.

Investing in Vietnam’s livestock industry

Foreign investors in Vietnam’s livestock market must prepare for a challenging and constantly changing environment.

Businesses can enhance the effectiveness, standard, and sustainability of their industrial operations by investing in innovation and technology. This may help them stay one step ahead of the competition. Indeed, some businesses have started utilizing blockchain technology to increase food safety and supply chain transparency, while others are investigating new production methods, such as using high-quality sources for livestock feed.

Moreover, investors should be ready to adopt sustainable methods and technology as worries about the environmental impact of the livestock sector increase. With this in mind, investors should prioritize reducing waste, using less energy, and implementing more environmentally friendly industrial techniques.

For more support with Vietnam’s livestock market, contact the business advisory experts at Dezan Shira and Associates.

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