Vietnam’s robust economic growth has firmly established it among the fastest-growing economies globally. With a population nearing 100 million, the country’s demand for oils and fats surged to over 1.5 million tonnes in 2023, translating to a per capita consumption of approximately 15.7 kilograms. In this dynamic market, palm oil dominates, with a commanding share of 62.3%, closely followed by soybean oil at 14.4%, and lard at 13.5%.
Despite these impressive consumption figures, local production of oils and fats has shown minimal growth over the past decade, hovering between 540,000 tonnes and 620,000 tonnes annually. This stagnation underscores the challenges faced by the domestic industry. Soybean oil and lard have emerged as the primary locally produced oils, collectively accounting for 36% and 33% respectively of total oils and fats production in Vietnam.
Chart 1: Vietnamese oils and fats production versus consumption (Oil World, 2024).
The consumption of oils and fats in Vietnam has surged due to the rapid expansion of the food and beverage sector. This growth is bolstered by Vietnam’s strong GDP expansion, rising per capita incomes, rapid urbanisation, and an expanding middle-class population. These socio-economic shifts have elevated oils and fats to crucial commodities within Vietnam’s thriving food and economic landscapes.
Chart 2: Vietnamese oils and fats import (Oil World, 2024)
Vietnam, with a self-sufficiency rate of only 39%, heavily relies on imports to meet its oils and fats demand, covering 74.5% of its needs. From 2014 to 2020, imports saw substantial annual growth, averaging 7%. However, demand disruptions during the COVID-19 pandemic slowed this growth in 2021 and 2022. In 2023, imports rebounded, rising by 12% to 1.3 million tonnes, with palm oil dominating as the primary imported oil, comprising 89% of total oils and fats imports.
Palm oil is mainly used in Vietnamese households, the foodservice sector, and food processing industries. The robust growth in Vietnam’s foodservice and food processing sectors is expected to drive further demand for palm oil. Over the past decade, palm oil imports into Vietnam have consistently grown at an average annual rate of 6%, reflecting the increasing demands of its food industry, particularly within the foodservice sector.
Emerging Growth Sectors in Vietnam
1) Tourism & Foodservice
Vietnam’s economic landscape has increasingly pivoted towards the service sector, with tourism emerging as a leading driver of growth. In recent years, international visitor numbers to Vietnam have surged, bolstering tourism’s contribution to Vietnam’s GDP. From 2015 to 2019, tourism’s GDP contribution grew steadily, averaging 1.5% annually. However, the COVID-19 pandemic in 2020 sharply curtailed this growth, reducing tourism’s GDP share from 7.01% in 2019 to 2.87%. As Vietnam gradually reopens its borders, the tourism sector is on a path to recovery, with projections indicating a return to and potential surpassing of pre-pandemic levels by 2025.
Chart 3: GDP share of Vietnam’s tourism sector 2013-2028 (Statista, 2024).
The resurgence of Vietnam’s tourism sector not only revitalises economic activity but also spurs demand across various sectors, notably foodservices. With an expanding influx of tourists – both domestic and international – there is a notable uptick in the demand for culinary offerings nationwide. This heightened demand encompasses to cooking oils, particularly palm oil, which remains a favoured choice in diverse cuisines due to its affordability and versatility. Consequently, Vietnam anticipates an increase in palm oil imports to cater to the burgeoning culinary needs driven by its thriving tourism industry.
2) Food Processing
Vietnam’s food processing industry stands as a crucial pillar of its economic landscape. According to the USDA, the sector expanded by 8.8% in 2022 compared to the previous year, driven by rapid urbanisation and the burgeoning middle class. Projections indicate that by 2035, Vietnam’s middle-class population will swell by 50%, translating into higher disposable incomes and increased consumer spending, particularly in the food sector.
Palm oil holds a pivotal role within Vietnam’s food processing industry, which constitutes 15% of the country’s GDP and continues to expand due to the rising popularity of ready-to-eat foods and growing incomes. The processing of dairy products, beverages, cooking oil, and confectionery is poised for robust growth, emerging as some of Vietnam’s most dynamic market segments. As the sector continues its upward trajectory, Vietnam is expected to increase its import of palm oil to satisfy rising demand.
Chart 4: Vietnamese food market revenue (Statista, 2023).
3) Bakery & Confectionary
Vietnam boasts one of the largest bakery and confectionery markets in the Asia Pacific region, demonstrating robust growth despite challenges posed by the COVID-19 pandemic. According to Statista, the market expanded by 29%, from USD39.42 billion in 2019 to USD50.43 billion in 2023. Projections indicate continued growth, with revenue expected to increase at a compound annual growth rate (CAGR) of 6.48% from 2023 to 2028, reaching USD69.03 billion by 2028.
Chart 5: Vietnamese bakery and confectionery revenue (Statista, 2023).
Palm oil plays a vital role in this thriving sector, presenting substantial opportunities. The fractionation of RBD palm olein yields palm mid-fraction and super olein. Palm mid-fraction is integral to frying oils, biscuit fillings, and confectionery fillings, while super olein finds widespread use in snacks and frying oil. Meanwhile, fractionation of RBD palm stearin produces mid stearin and super stearin. Mid stearin serves as a robust base for margarine, whereas super stearin is crucial for producing dry soup mixes and dry cake mixes. These versatile applications highlight palm oil’s versatility and its pivotal position in Vietnam’s dynamic bakery and confectionery market.
Malaysian Palm Oil Imports in Vietnam: A Look Ahead
Prior to the COVID-19 pandemic, Malaysia consistently exported an average of 572,411 tonnes of palm oil annually to Vietnam, with the highest volume recorded in 2017 at 633,136 tonnes. However, beginning in 2019, a declining trend emerged, continuing through 2022 due to disruptions in demand caused by the pandemic.
In 2023, Malaysian palm oil imports rebounded significantly, surging by 46.3% to reach 459,269 tonnes compared to 313,881 tonnes in 2022. Projections suggest that Malaysian palm oil imports in 2024 will surpass the 2023 figures, approaching the average levels observed from 2014 to 2019.
Vietnam presents abundant growth opportunities for Malaysian palm oil in the market. As Vietnam’s economy recovers and expands post-pandemic, the demand for Malaysian palm oil is expected to rise further. This favourable outlook offers Malaysian palm oil companies an excellent opportunity to expand their market presence and strengthen economic ties between Malaysia and Vietnam. The future appears promising for the Malaysian palm oil industry in Vietnam, poised for growth and sustained success.
Prepared by: Rina Mariati Gustam
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