Vietnam’s Wine Industry and Opportunities for Australian Investors
Vietnam’s resilient economy and control of the pandemic have made investors note the country’s rising economic stature. Among products that have seen considerable growth in sales over recent years has been wine. Starting from a very low level, the Vietnam wine market is booming, with hotels, restaurants, and retailers now offering a wide variety of wines from around the world.
This has taken further prominence due to China’s recent tariffs of over 200 percent on Australian wine for a five-year period. While this has left Australian winemakers looking for alternative markets, ASEAN countries, such as Vietnam, are emerging as key wine trading partners.
Tackling Vietnam’s burgeoning wine market is one of Australia’s strategies to cope with the losses incurred due to the pandemic. Alongside, it will establish a new, stable, and reliable trade partnership as China reduces its consumption of Australian wine.
The South Australian Wine Industry Association announced in 2020 its plan to look for new partners in ASEAN and diversify exports.
Vietnam Briefing takes an in-depth look at Vietnam’s wine industry and opportunities for Australian investors affected by China’s tariffs.
ASEAN countries including Vietnam are emerging as key wine trading partners. In these low-price-sensitive markets, the popularity of Australian wine is growing as it becomes cheaper thanks to customs duties exemptions and free trade agreements. This growth is further supported by the increase of tourism in these regions, which counteracts religion-related factors that could shrink the number of potential consumers.
Recently, Vietnam has become the wine industry’s focus of interest. This transitional and promising alcohol market could become Australia’s strongest trade partner, to compensate for the loss of China, but also to mitigate the effects of the pandemic suffered by the industry.
Cheap beer is highly popular in Vietnam but is increasingly competing with wines, as tastes change, and a growing middle class demands higher quality alcohol.
Wine is now a staple at many social interactions, such as business dinners.
Currently, Vietnam’s local wine market features wines from such areas as France, Italy, Chile, the US, and Australia. The best-selling wines are reds with around 65 percent of the market, followed by whites with 25 percent, and sparkling wines with 10 percent.
Industry Opportunities
Growing middle class with increasing income
Vietnam’s population is projected to reach 101 million by 2025 with the working-age population accounting for 60 percent of the total, and a median age of 30. Further, Vietnam’s middle class is expected to reach 95 million by 2030 – the fastest growth rate in Southeast Asia as per market research firm Nielsen.
Going further, wine producers can target major cities such as Hanoi, Ho Chi Minh City, and Da Nang, which have working professionals that are well-educated and well-traveled.
In addition, corporate gifts represent a key market segment with the most popular occasions being the Vietnamese New Year festival or Tet which can generate up to 80 percent of wine sales. Companies in Vietnam also tend to spend on wine orders as end-of-year gifts for employees as well as partners.
Drinking culture
According to a survey conducted by the Ho Chi Minh City University of Education, most of the respondents agreed that drinking alcoholic products is to well observe social etiquette, exhibit a proper manner at work, and build and maintain social networking and business relationships. This mindset has existed in Vietnamese society for ages. In addition, Vietnamese people can consume alcoholic products for any celebrations.
The drinking culture also reflects on consumer behavior and understanding it is vital. Research conducted by Ipsos UU reveals crucial differences in alcoholic consumption behaviors of people living in the three main regions of Vietnam. Northern Vietnam-based consumers tend to be trend followers and pay strong attention to packaging, especially for gifted products, and have considerable knowledge of different brands.
Central Vietnam-based consumers tend to be reserved, less willing to try new brands, and prefer local brands. The absence of a variety of brands can be a key reason for this trend. By contrast, people living in Southern Vietnam are classified as easy-going consumers who are willing to try new brands and are knowledgeable about different brands.
Foreign brands preferred
Vietnamese people have seen vast improvements in their standard of living and consumer spending power, along with a strong obsession with foreign products, believing them to be of higher quality. Therefore, Vietnamese consumers nowadays are willing to pay more money to try higher quality products, thus creating room for imported products.