Vietnam’s market for Australian wine
Australian wines account for 15 percent of total wine imports into Vietnam, ranking second only to French wine.
Vietnam has experienced remarkable economic growth over the last decade and, with 87 million consumers and retail sales up 20 per cent year on year, is an attractive export market with increasing opportunities for Australian wine producers to get their products onto Vietnamese shelves.
Until recent years, major consumers of wine in Vietnam were Western expatriates, tourists and returned overseas Vietnamese (Vietkieu), however, the real long-term growth of the Vietnamese wine industry lies in the local population. The culture is rapidly moving towards Western-style cuisine and as Vietnam’s standard of living continues to improve we are seeing unprecedented growth in the demand for imported wine.
Market trends in Vietnam also indicate that wine consumption is likely to increase. Despite the price of a bottle of wine being higher than that of a carton of beer, more affluent local consumers are changing their preferences, with shifts in consumer behaviour apparent in large urban centres such as Ho Chi Minh city, Hanoi and Danang. Traditional distribution channels are expanding with an ever increasing range of wine available for purchase in restaurants, supermarkets, hypermarkets and local wine stores.
According to the Australian Trade Commission’s latest update, opportunity areas in the Vietnam wine industry include white and red wines, rosé, dessert wine, sparkling wines, cask and bulk wine for local bottling and the hospitality industry.
Although currently the Vietnam import tax for wine remains high, upcoming import tax cuts as part of Vietnam’s commitment to the World Trade Organisation are expected to benefit domestic consumers, giving them a wider choice of reasonably priced imported goods.
Like any emerging market, selling into the Vietnam is both an opportunity and a challenge for exporters. Modern Vietnam has a dynamic and well-educated population, and is unique in its history, culture and business environment. Yet despite the potential benefits, Vietnam is known as one of the toughest markets for conducting business. Many international organisations have learned the hard way that business models which worked in other parts of Asia will not necessarily work in Vietnam.
Vietnam is not one market with one profile. For example, Hanoi and Ho Chi Minh have very different consumer cultures, selling strategies that work in the south may not be as successful in the north. Building a brand proposition that encompasses a western flavour while still appealing to the local market is also a critical success factor in Vietnam.
Generally speaking, urban Vietnamese consumers are status driven and desire Western brands that are modern and new—the same trend is apparent in the wine consumer market. The local population is extremely receptive to advertising and, once captured, tend to show strong brand loyalty so even limited advertising budgets can go a long way in this part of the world. One market researcher noted that 18 percent of sales in the modern retail sector are as a result of advertisements and promotions.
Finding a suitable wine distributor in Vietnam can pose challenges: as a developing economy Vietnam has limited infrastructure and somewhat fragmented distribution channels (although these are improving steadily).
Traditionally, Australian wine exporters have used Australian or joint-venture companies who specialise in distribution and marketing to handle their products but if you are selling into the local market, choosing a local agent to directly distribute and market your products to the local stores is the more logical choice.
Companies opting for this strategy have saved both time and money by working with a Vietnamese business partner or a local expert to help source the right agent, handle their contract negotiation and facilitate distributor liaison. Though the opportunities are alluring, Vietnam remains a high risk market for foreign investors but with the right advice and trusted connections you can succeed.
Although entering the Vietnamese market may not be for the faint hearted, with a generous dose of understanding of the marketplace, blended with some expert advice and served with a hint of savoir-faire, you may well end up with a nice drop on your hands.
Anna Diep is the director of Red Packet Consulting (www.redpacketconsulting.com.au), a Melbourne-based consultancy that provides assistance to Australian companies wishing to establish a business presence in Vietnam.
Originally published in Australia’s Wine Business Magazine.
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