Vietnam’s grocery sector boosted by border reopening

The country’s tourism spending is expected to start recovering this year.

Vietnam’s mass grocery retail (MGR) sector is expected to see a strong recovery over the short and medium term as the country is set to fully reopen to international tourism on 15 March, according to a report from Fitch Solutions.

MGR spending for food and non-alcoholic products is projected to rise 8.9% YoY to $44.7b (VND1,020.6t) over the year, higher than the $38.31b (VND874.7t) reported in 2019. But the growth was driven by low base effects due to the impact of COVID-19 on the sector in 2020 and 2021, the report stated.

“Unlike many countries, Vietnam avoided a retraction in consumer spending over the pandemic period but most categories were adversely affected regardless,” Fitch said.

But tourism earnings are expected to begin recovery in 2022 and surpass pre-pandemic figures by 2025, bringing in $12.53b from its tourism sector. The return of international tourism is also expected to spur growth in other sectors.

This recovery is expected to have a positive impact on the Vietnamese economy as a whole as well as to the real income of Vietnamese households between 2022 to 2026.

“We believe that the increase in real income will result in a greater ability and willingness to spend, allowing households to gradually move away from the 2020-2021 focus on essentials,” Fitch added.

Fitch expects mass grocery retail to be one of the fastest retail sectors to recover in Vietnam, projected at an annual average of 10.8% over 2022-2026 to reach $68.43b (VND1,562.3t) in 2026, even higher than the 7.2% figure between 2017-2021.

In addition, Fitch noted that the shift in shopping habits and overall growth trends in consumer spending on retail sales presents an opportunity for mass grocery retailers as Vietnam’s economy recovers.

Historically, wet markets have been a staple of everyday life for many Vietnamese consumers, for their cheaper prices as compared to the supermarkets, but the pandemic has led to the closures of wet markets, giving way for supermarkets and convenience stores to become the main channel for Vietnamese consumers to buy their groceries, Fitch said.

International retailers such as Aeon have also announced plans to open an additional 100 supermarkets in the country by 2025. The Japan-based company that owns the MaxVulu chain of supermarkets in Vietnam has also stated that this is to meet increasing demand by consumers as a result of the wet market closures.

“As consumers have more disposable income and seek a wider variety of offerings, this is a strong opportunity for mass grocery retailers to grow and retain their customer base even as wet markets reopen,” the report stated.