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Vietnam Food & Drink Report - Q3 2023

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Vietnam Food & Drink Report - Q3 2023

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Q3 2023

www.fitchsolutions.com

Vietnam
Food And Drink R
Report
eport
Includes 5-year forecasts to 2027
Vietnam Food And Drink Report | Q3 2023

Contents
Key View............................................................................................................................................................................................ 5

SWOT .................................................................................................................................................................................................. 9
Food & Drink SWOT...................................................................................................................................................................................................................... 9

Industry Forecast.........................................................................................................................................................................10
Food .................................................................................................................................................................................................................................................10
Drink.................................................................................................................................................................................................................................................16

Industry Trends And Developments .....................................................................................................................................23

Vietnam ..........................................................................................................................................................................................................................................23

Industry Risk/Reward Index ....................................................................................................................................................29

Asia Food & Non-Alcoholic Drinks Risk/Reward Index: Malaysia Leads The Region, Spotlight On Australia.........................................29
Asia Alcoholic Drinks Risk/Rewards Index: Australia Tops Asia, Spotlight On Thailand As International Tourism Recovers ..........40

Market Overview..........................................................................................................................................................................51
Food .................................................................................................................................................................................................................................................51
Drink.................................................................................................................................................................................................................................................54
Mass Grocery Retail....................................................................................................................................................................................................................58

Competitive Landscape.............................................................................................................................................................61

Company Profile...........................................................................................................................................................................63
Carlsberg ........................................................................................................................................................................................................................................63
Hanoi Beer Alcohol And Beverage Joint Stock Corporation (Habeco) ..................................................................................................................66
Masan Consumer Corporation..............................................................................................................................................................................................69
Nestlé Vietnam............................................................................................................................................................................................................................73
Saigon Alcohol Beer And Beverages Corporation (Sabeco) ......................................................................................................................................76
Saigon Co-Op ...............................................................................................................................................................................................................................79
San Miguel Pure Foods Vietnam...........................................................................................................................................................................................82
Unilever Vietnam........................................................................................................................................................................................................................84

© 2023 Fitch Solutions Group Limited. All rights reserved.

All information, analysis, forecasts and data provided by Fitch Solutions Group Limited are for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.

All content, including forecasts, analysis and opinion, is based on information and sources believed to be accurate and reliable at the time of publishing. Fitch Solutions
Group Limited makes no representation or warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for
any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.

This report from BMI – A Fitch Solutions Company is a product of Fitch Solutions Group Limited; UK Company registration number 08789939 ('FSG'). FSG is an affiliate of
Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

Copyright © 2023 Fitch Solutions Group Limited.

This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 3
Vietnam Food And Drink Report | Q3 2023

Vietnam Demographic Outlook ..............................................................................................................................................87

Food & Drink Glossary ................................................................................................................................................................90

Food & Drink Methodology .......................................................................................................................................................91

fitchsolutions.com/bmi 4
Vietnam Food And Drink Report | Q3 2023

Key View
Key View: During 2023 we forecast robust growth across the Vietnamese food and drinks sector, which will be sustained over the
remainder of the forecast period to the end of 2027. Underlying growth through the period will be supported by favourable
demographics, growing disposable incomes and the development of the mass grocery retail sector. The expected return of
international tourism will also boost food and drinks spending in Vietnam.

Food And Drink Spending Continuing To Grow

Vietnam - Food & Drink Spending (2020-2027)

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

Latest Updates And Industry Developments

• In 2023, we expect food sales in Vietnam to grow by 10.6% y-o-y, on a par with the 10.7% y-o-y growth recorded in 2022.
Weakness in the domestic market is likely to constrain consumer spending from rising further.
• Over the medium term to 2027, we forecast food spending to record sustained growth on an annual basis. The fastest-growing
food segment is projected to be fresh and preserved fruits. Spending on these products are set to increase by an annual average
of over 11% y-o-y during our forecast period.
• In 2023, we forecast alcoholic drinks spending in Vietnam growing by 10.7% y-o-y. Between 2023 and 2027, alcoholic drinks
spending is set to rise by an average of 10.0% to 11.0% per year.
• Alcohol consumption in Vietnam is projected to grow by 4.6% in 2023 to 4.2bn litres. Over our medium-term forecast period, the
consumption of alcoholic drinks is forecast to increase by an annual average of 3.0% to 4.0% y-o-y to reach 4.9bn litres in 2027.
• Spirits consumption will see the fastest growth through to 2027, averaging 11.0% to 12.0% a year from a low base, with sales
being driven by higher-income consumers and their shift in tastes.
• In 2023, we expect non-alcoholic drinks spending growth to come in at 9.4% y-o-y to take total spending to VND48.1trn.
Medium-term growth in spending on non-alcoholic drinks is projected to average around 9.0% a year, taking total spending to
VND69.4trn in 2027.
• The outperforming non-alcoholic drinks segment is expected to be carbonated drinks, with spending on these products forecast
to rise by an annual average of around 10% to 11% during our forecast period..
• In April 2023 the Vietnam Trade Promotion Agency stated that the country’s food and drinks sector is expected to witness strong
growth, boosted by robust domestic consumption. To meet rising demand the number of domestic players in the food market
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 5
Vietnam Food And Drink Report | Q3 2023

has increased by more than 80% since 2019 to reach more than 5,000 currently.
• In March 2023, leading Vietnam-based dairy producer Vinamilk and Japan-based trading house Sojitz started construction on
a massive beef processing complex in the north of the country. Vinamilk is looking at additional revenue streams.
• In February 2023, the CEO of Unilever, Alan Jope, whilst visiting Vietnam stated that the company will continue to invest in the
country, in terms of production, brand and people development. In South East Asia, Vietnam and Indonesia are the most
attractive markets for Unilever with their large populations and well-managed economies. According to Jope, since per capita
consumption of consumer products in Vietnam is still quite low, there is much room for growth. Unilever has ambitions for the
Vietnamese market, and expects its market to double in the next five to 10 years.
• In March 2023, the beverage sector in Vietnam called for a delay in the country’s proposed tax increase on alcohol stating that
the industry is at risk from high inflation, increased material costs and low demand. Alcohol, tobacco and sugary drinks could be
subject to an increased excise tax aiming to improve community health.
• In February 2023, Masan Group announced that it is targeting international expansion for Phuc Long Coffee & Tea during
2024 and is looking for the brand to become the largest coffee and tea chain in Vietnam 'within a few years'. Based on the
current level of growth, Masan Group expects the coffee chain to become Vietnam's second largest in terms of outlets by the
end of June 2023.
• In February 2023 Central Retail Group of Thailand announced plans to invest USD1.5bn in Vietnam over the next five years.
The group is looking to double the number of its stores to 600 and reach a sales target of USD4.3bn by 2027. During 2023,
Central Retail plans to invest USD173.1mn in the Vietnamese market where it operates Go hypermarkets and Tops supermarkets
amongst other banners.

Inflation Outlook

Inflationary pressures are peaking in many markets, as central banks raise rates to rein in higher prices. However, inflation, especially
for food items, remains elevated. Higher prices are eroding nominal wage gains, squeezing the purchasing power of households
and shifting consumer spending from discretionary spending. In many markets, a combination of higher wage inflation, localised
supply chain constraints and bottlenecks, and continued mismatches in demand and supply are adding upward pressure to prices.
Similarly, the global effects of geopolitical events and flashpoints will weigh on prices beyond the short term.

In Vietnam, inflation has been ticking upwards, reaching 4.9% y-o-y in January 2023. This was the highest rate of inflation in the
country since March 2020. The increase is mainly due to the sharp rises in prices across most categories. Additionally, in January
2023, food inflation came in at 3.7% y-o-y, the highest since December 2021. As Vietnamese consumers are focusing on essentials
as budgets tighten, we expect the rising cost for daily essentials to be felt further by consumers. We forecast inflation to mediate
downwards for 2023, averaging 4.5% y-o-y and ending the year at 4%. The risk now is that inflation remains elevated at these levels
for longer than anticipated, which will accelerate the erosion of household purchasing power.

fitchsolutions.com/bmi 6
Vietnam Food And Drink Report | Q3 2023

Inflation To Ease Over 2023

Vietnam - Consumer Inflation Indicators, % y-o-y (2019-2023)

Source: National Statistics, Fitch Solutions

The wider economic challenges facing households and consumers stem from the reopening of many economies. Inflationary
pressures are driven by demand-pull and cost-push inflation. In an attempt to rein in inflation, central banks have hiked their policy
rates at some of the quickest rates ever, making much of the debt issued during the historically low interest rate period less
valuable. This is combined with the tightening of quantitative easing, financial institutions facing liquidity issues severe interest rate
risks. While this is a relatively new issue, ongoing factors, such as labour market dynamics and the Russia-Ukraine conflict, continue
to place downward pressure on our consumer outlook. The economic trajectory of many markets' post-Covid recovery highlight
the risk of increasing unemployment and its impact on consumer outlooks in the short term.

The graphic below summarises these risks to the outlook over 2023.

fitchsolutions.com/bmi 7
Vietnam Food And Drink Report | Q3 2023

Inflation High But Moderating

Inflation Channels

Source: Fitch Solutions

fitchsolutions.com/bmi 8
Vietnam Food And Drink Report | Q3 2023

SWOT
Food & Drink SWOT
Strengths Weaknesses
• A large, youthful and growing population offers high growth • Wide income disparities exist between urban and rural areas.
opportunities for retailers. • Local consumption patterns vary significantly according to
• One of the fastest-growing consumer markets in emerging income.
Asia. • Cultural preference for small, family-run stores and traditional
• Western-style retail is already well established in large cities so format stores.
the necessary infrastructure and logistics are already in place. • Vietnam's retail distribution networks remain
• Vietnamese consumers, particularly the young and affluent, underdeveloped and expansion-oriented firms must invest in
have fairly good brand awareness by regional standards. infrastructure development as well as in new store openings.
• Competitive pressure is increasing rapidly in the drinks sector, • Despite the growing presence of multinationals, local firms
which is likely to drive greater dynamism and growth in the continue to dominate the beer market.
sector. • Historically, the business environment in Vietnam has been a
• A growing multinational presence in the food retail sector has largely unattractive one.
strengthened the acceptance of modern retail best practices in
Vietnam, particularly regarding added value and in-store
services.

Opportunities Threats
• International tourism, a major driver of hospitality and • We expect real household spending growth to be inhibited in
gastronomy sales in the country, has returned to the country 2023 due to the effects of increased inflation.
and can be expected to provide a strong boost to food and • Households will increasingly have to allocate disposable
drinks spending. income towards debt financing, placing downward pressure on
• Free trade agreements are opening up the Vietnamese market consumer spending going forward.
to a number of regions including the EU, Chile and Australia. • Covid-19 remains a potential risk to hospitality, tourism and
• As of May 2022, the signed Regional Comprehensive Economic gastronomy sales in 2023.
Partnership will benefit Vietnamese agricultural produce and • Over the longer term, the retail sector in major cities will
seafood exports. become saturated.
• As a result of the tensions between Mainland China and the US • Few alternative communities can currently support modern
over trade since 2018, Vietnam's food-processing sector may retail development.
stand to benefit if more companies decide to set up shop in • If relations with China deteriorate, the Vietnamese economy
Vietnam due to the higher costs in China. will suffer and it could lose a significant political ally and trade
• Rising income levels and changing lifestyles, particularly in partner.
urban areas, are increasing consumer demand for snacks, • Tightening of alcohol laws will weigh on spending in the
convenience and luxury food, and drink items. alcoholic drinks sector.
• As the Vietnamese government plans to reduce its stake in
state-owned enterprises, interest from regional and global
players will pick up, translating into opportunities to modernise
the sector.

fitchsolutions.com/bmi 9
Vietnam Food And Drink Report | Q3 2023

Industry Forecast
Food
Key View: Over the course of 2023, food spending in Vietnam is projected to grow in double digits, maintaining the rate of growth
seen in 2022. Through to 2027, spending is set to remain in double digits on an annual basis, supported by rising consumer
incomes, favourable demographic factors and increased urbanisation.

Latest Updates

Structural Trends

2023 Food Outlook

In 2023, we expect food sales in Vietnam to grow by 10.6% y-o-y, on a par with the 10.7% y-o-y growth recorded in 2022. Weakness
in the domestic market is likely to constrain consumer spending from rising further.

Over the course of the year, the outperforming food category is projected to be fresh and preserved fruits with a growth rate of
11.0% y-o-y. In contrast, sugar and sugar products spending growth will underperform the sector with a forecast growth rate of
7.2% y-o-y.

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Vietnam Food And Drink Report | Q3 2023

Food Sales Steady Ahead

Vietnam - Food Sales (2020-2027)

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

Medium-Term Trends

Vietnam will remain one of the most attractive markets for investment in the region over our forecast period (2023-2027). The
country is already a major regional hub for exports, and domestic consumer expenditure will continue to grow. At the same time, the
food sector represents a large and growing portion of the country's manufacturing output.

We forecast total food sales increasing at an average annual rate of between 10% and 11% over our medium-term forecast. The
sector's strong performance will be supported by growing household incomes and favourable macroeconomic conditions.
Meanwhile, the mass grocery retail (MGR) sector remains underdeveloped. Through to 2027, this will offer multiple opportunities
across the food industry, given rapidly rising incomes and steady population growth.

Currently, income levels in Vietnam are a behind those in developed economies, and consumers continue to spend mainly on food
staples and daily necessities. However, we anticipate double-digit growth across most income bands over the medium term, with
the lower-income groups making the greatest gains over this period. Net household incomes are set to rise by about 50% in US
dollar terms by 2027. As a result, consumer tastes and preferences are expected to shift towards the higher-value food and
beverage segments, which promises a receptive and growing audience for branded products in the medium term.

Within the food segment, staples continue to account for the vast majority of purchases, which is consistent with low consumption
levels. Bread, rice and cereal sales will grow from VND436.9trn in 2023 to over VND653trn by 2027, with average annual growth
reflecting the industry norm. The fastest-growing food spending category is projected to be fresh and preserved fruit products,
which will expand by an average of over 11% a year to 2027.

The massive potential provided by the burgeoning middle class in Vietnam is already attracting major consumer-facing players. The
ongoing expansion of the MGR industry will drive up per capita food consumption levels, provided goods sold through such outlets
remain competitively priced. Ultimately, we believe food consumption growth will be driven by the government's ability to harness
rural spending power and by modern retailers' ability to find a model that stirs consumer interest.

Despite being the slowest-growing food spending category, rapid increase in disposable income could translate into a greater
discretionary appetite for sugar products, specifically premium confectionery products. We forecast that sugar and sugar products
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 11
Vietnam Food And Drink Report | Q3 2023

will see modest average growth of 7% to 8% annually. As an increasing number of domestic confectioners expand their product
ranges, especially premium ones, this is likely to strengthen the value of sales growth in the coming years. As almost half of the
Vietnamese population are estimated to be younger than 30, the mass market will have dynamic opportunities to target them as
they mature. Since this demographic group is generally more receptive to Western tastes and innovative products, we believe that
demand for confectionery will grow. With health awareness prompting shifts in consumption habits towards more functional and
healthy confectionery products, capitalising on the growing trend will be important. So far, domestic confectioners such as Tan Tan
Food & Foodstuff and Vina Mit are already expanding their offerings in this category. As such, these products typically carry
higher price tags, and rising demand for them is likely to translate into higher-value sales in the sector.

The Vietnamese pasta market is underdeveloped, although the product has become more popular with increasingly Westernised
tastes, particularly in urban areas. Currently, around half of the retail market is dominated by Barilla, with other prominent importers
including Italpasta and Pasta Zara. The pasta products segment will grow by an average of 10% to 11% a year to 2027.

However, the market for instant noodles is well established, with the market supplied by a mixture of local (Masan Consumer and
Acecook Vietnam Joint Stock Company) and imported products. Such goods have been receiving strong marketing and
advertising support, especially as challenging economic times have prioritised non-discretionary spending. Instant noodles are
expected to remain popular on account of their affordability, versatility as a cooking ingredient, availability and convenience.

The Vietnamese dairy sector has experienced particularly strong growth in recent years and will continue to do so with dairy sales
projected to grow along the lines of the industry average of between 10% and 11% through to 2027. Key drivers of this growth are
increasing urbanisation and rising incomes, supported by a shift in consumer eating habits. Large multinational companies have
managed to sway consumer preferences with their considerable advertising. Dramatic increases in the amount of cattle and in
public and private sector investment - part of the effort to reduce the country's growing dependency on imports - will be the main
drivers of growth.

Vietnam Dairy Products is one of the key players in the sector and aims to become one of the 50 largest dairy firms in the world.
The company is also expanding internationally, as Vietnam is in a geographically key place to take advantage of the growing Asian
dairy market. Other prominent dairy producers include Dutch Lady, Hanoimilk and Anco. Vietnam Nutrition Food and
Japanese beverage group Asahi Group Holdings announced the establishment of a joint venture in a bid to bring nutritional
products for children to the Vietnamese market in January 2019.

fitchsolutions.com/bmi 12
Vietnam Food And Drink Report | Q3 2023

FOOD SALES (VIETNAM 2021-2027)

Indicator 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Food,
sales, 955,971,704.1 1,057,991,340.0 1,169,932,048.0 1,299,624,624.6 1,433,168,523.5 1,580,037,745.7 1,750,254,424.7
VNDmn

Food,
sales,
VNDmn, % 4.6 10.7 10.6 11.1 10.3 10.2 10.8
growth y-
o-y

Bread, rice
and
cereals, 357,344,789.3 395,313,640.5 436,977,485.6 485,250,213.7 534,961,541.1 589,636,607.0 653,005,519.9
sales,
VNDmn

Bread, rice
and
cereals,
sales, 4.6 10.6 10.5 11.0 10.2 10.2 10.7
VNDmn, %
growth y-
o-y

Pasta
products,
1,171,686.5 1,295,716.4 1,431,814.7 1,589,499.6 1,751,882.4 1,930,477.9 2,137,470.6
sales,
VNDmn

Pasta
products,
sales,
4.6 10.6 10.5 11.0 10.2 10.2 10.7
VNDmn, %
growth y-
o-y

Meat and
Poultry,
289,583,102.7 320,349,964.2 354,110,939.4 393,227,205.1 433,509,187.2 477,813,370.1 529,162,326.8
sales,
VNDmn

Meat and
Poultry,
sales,
4.6 10.6 10.5 11.0 10.2 10.2 10.7
VNDmn, %
growth y-
o-y

Fish and
fish
products, 84,409,636.0 93,692,311.1 103,879,561.7 115,683,945.7 127,841,093.3 141,213,010.9 156,712,043.4
sales,
VNDmn

fitchsolutions.com/bmi 13
Vietnam Food And Drink Report | Q3 2023

Indicator 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Fish and
fish
products,
sales, 4.8 11.0 10.9 11.4 10.5 10.5 11.0
VNDmn, %
growth y-
o-y

Dairy,
sales, 18,586,648.7 20,590,955.6 22,790,428.8 25,338,902.8 27,963,416.6 30,850,072.2 34,195,813.3
VNDmn

Dairy,
sales,
VNDmn, % 4.7 10.8 10.7 11.2 10.4 10.3 10.8
growth y-
o-y

Oils and
Fats, sales, 29,701,798.5 32,898,969.4 36,407,437.9 40,472,590.0 44,659,018.0 49,263,579.6 54,600,422.0
VNDmn

Oils and
Fats, sales,
VNDmn, % 4.7 10.8 10.7 11.2 10.3 10.3 10.8
growth y-
o-y

Fresh and
preserved
56,683,803.7 62,990,805.8 69,912,686.0 77,933,621.0 86,194,474.6 95,280,966.8 105,813,070.1
fruit, sales,
VNDmn

Fresh and
preserved
fruit, sales,
4.8 11.1 11.0 11.5 10.6 10.5 11.1
VNDmn, %
growth y-
o-y

Fresh
vegetables,
48,623,608.6 53,837,928.7 59,554,817.1 66,173,153.6 72,983,153.1 80,467,662.0 89,136,201.2
sales,
VNDmn

Fresh
vegetables,
sales,
4.7 10.7 10.6 11.1 10.3 10.3 10.8
VNDmn, %
growth y-
o-y

Sugar and
sugar 12,432,022.0 13,309,644.4 14,267,165.3 15,374,162.2 16,503,401.8 17,739,359.8 19,169,511.2
products,
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 14
Vietnam Food And Drink Report | Q3 2023

Indicator 2021e 2022e 2023f 2024f 2025f 2026f 2027f

sales,
VNDmn

Sugar and
sugar
products,
sales, 2.8 7.1 7.2 7.8 7.3 7.5 8.1
VNDmn, %
growth y-
o-y

Other food
products,
57,434,608.0 63,711,403.8 70,599,711.4 78,581,330.8 86,801,355.5 95,842,639.3 106,322,046.2
sales,
VNDmn

Other food
products,
sales,
4.7 10.9 10.8 11.3 10.5 10.4 10.9
VNDmn, %
growth y-
o-y
Fitch Solutions/National Statistics

fitchsolutions.com/bmi 15
Vietnam Food And Drink Report | Q3 2023

Drink
Key View: Over the course of 2023, we expect robust spending growth in Vietnam on alcoholic and non-alcoholic drinks. Through
the forecast period to 2027, we forecast sustained strong growth in spending on both sub-sectors. Over this period, we expect that
spirits will have the strongest average annual increase in consumption terms, whilst carbonated drinks are set to outperform other
non-alcoholic drinks categories.

Latest Updates

• In 2023, we forecast alcoholic drinks spending in Vietnam growing by 10.7% y-o-y. Between 2023 and 2027, alcoholic drinks
spending is set to rise by an average of 10.0% to 11.0% per year.
• Alcohol consumption in Vietnam is projected to grow by 4.6% in 2023 to 4.2bn litres. Over our medium-term forecast period, the
consumption of alcoholic drinks is forecast to increase by an annual average of 3.0% to 4.0% y-o-y to reach 4.9bn litres in 2027.
• Spirits consumption will see the fastest growth through to 2027, averaging 11.0% to 12.0% a year from a low base, with sales
being driven by higher-income consumers and their shift in tastes.
• In 2023, we expect non-alcoholic drinks spending growth to come in at 9.4% y-o-y to take total spending to VND48.1trn.
Medium-term growth in spending on non-alcoholic drinks is projected to average around 9.0% a year, taking total spending to
VND69.4trn in 2027.
• The outperforming non-alcoholic drinks segment is expected to be carbonated drinks, with spending on these products forecast
to rise by an annual average of around 10% to 11% during our forecast period. Spending will be driven by demand among
Vietnam's young consumer base and growing investment in the sector.

Structural Trends

Alcoholic Drinks

2023 Alcoholic Drinks Outlook

In 2023, we expect alcoholic drinks spending in Vietnam to remain relatively steady growing by a projected 10.7% y-o-y. Volume
consumption is also expected to remain steady, rising by 4.6% y-o-y.

The outperforming segments during 2023 are projected to be spirits with consumption growth rates of 12.2% y-o-y and wine with
10.3% y-o-y. In contrast, beer consumption will grow by just 4.5% y-o-y. There are fewer opportunities for consumption growth in
this category, as beer is already well-established in Vietnam.

fitchsolutions.com/bmi 16
Vietnam Food And Drink Report | Q3 2023

Alcohol Consumption to Remain Steady

Total Alcohol Consumption, litres mn (2020-2027)

e/f = Fitch Solutions estimate/forecast. Source: WHO, Fitch Solutions

Medium-Term Trends

A favourable demographic landscape, rising affluence and strong economic growth imply a large scope for alcoholic drinks
consumption. The emergence of a thriving tourist industry in Vietnam is likely to bolster alcoholic drinks consumption. Although we
caution that the tax rate levied on alcoholic drinks was increased in January 2017, this has not significantly affected our positive
outlook for the industry.

Increasingly affluent consumers in Vietnam will translate into growth in alcohol spending. Over the medium term (2023-2027),
alcohol spending will expand by an average of 10.0% to 11.0% annually, outpacing volume consumption growth, which is set to
expand by between 3% to 4.0% over the same period. In line with positive economic prospects and a developing mass grocery
retail network in Vietnam, we maintain a very positive outlook for the country's drinks industry. In particular, we believe that the beer
industry will post good growth; we expect foreign investment to flow into the sector as global beer companies strengthen their
presence in the country. We forecast per capita beer consumption to grow from 68.0 litres in 2023 to 77.6 litres in 2027, and total
beer consumption to grow at an average annual rate of 3.9%. A young and growing population as well as rising tourist numbers will
ensure the prevalence of beer in the alcoholic drinks market.

Beer, in particular, is set to benefit and will continue to dominate the alcoholic drinks sector, accounting for the vast majority of
volume sales. It will also remain the main contributor to value sales. This is reflected in the strong interest the beer sector has been
attracting from both local and international brewers. We expect foreign brewers to take on a more prominent role in driving beer
sales growth in Vietnam as they seek to enter emerging markets. Global brewers have expressed a strong interest in purchasing
stakes in previously state-owned companies Hanoi Alcohol Beer and Beverage Company (Habeco) and Saigon Beer Alcohol
Beverage Corporation (Sabeco), as the Vietnamese government is seeking to reduce its participation in the two companies.
Carlsberg has reportedly been interested in acquiring a stake in Habeco. We caution that recent reluctance by the government to
sell stakes to foreign players highlights government intervention and operational obstacles.

Volume sales growth in the wine and spirits industries is expected to outpace that of beer, but this is because they will be developing
from much lower bases. Vietnam has a relatively underdeveloped wine market, but this is rapidly changing. The Vietnamese
consumer has historically opted for cheaper beer products over wine. The average Vietnamese adult consumes just 0.3 litres of
wine per year (2023 estimate). Regionally, consumers in Singapore, Thailand and Malaysia all consume more wine per capita.
However, with a population of approximately 97.0mn, Vietnam's total wine consumption is relatively high, with the market offering
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 17
Vietnam Food And Drink Report | Q3 2023

the third-largest in wine in the Association of Southeast Asian Nations region, at 16.4mn litres in 2023. Only Thailand (103.3mn
litres) and Malaysia (26.7mn litres) offer a larger market. However, wealth accrual among Vietnamese consumers is shifting
consumption habits towards higher-value alcoholic drink products, and this trend is particularly evident in urban centres such as Ho
Chi Minh City, Hanoi and Da Nang.

Red wine dominates the wine market in Vietnam, accounting for approximately 76.7% of total wine consumed in 2023.
Proportionally, we foresee this remaining relatively constant over our medium-term forecast period. White wine accounts for a
further 18.1% of total wine consumption, followed by sparkling wines (2.3%) and fortified wines (2.9%). Historically, red wine has
always dominated wine consumption patterns in the country, mostly varietals coming from the Bordeaux region of France. However,
the entry of New World wines from Chile and Australia has seen the introduction of new red varietals and blends, re-enforcing the
dominance of red wine consumption in the country.

Traditionally, wine was mostly consumed via the hotels, restaurants and bars of the tourism sector and a small immigrant
community in Vietnam. Wine offerings were, therefore, of a higher price point than sparkling wines. Such high price points excluded
the domestic consumer, leaving beer as the more dominant alcohol consumed. However, rising incomes and the entry of cheaper,
New World wines (through free trade agreements) into the mass grocery retail channel in Vietnam have increased the visibility of
wines for the Vietnamese consumer. It is not uncommon to see wines from Chile, France, Italy and Australia for sale in local
supermarkets. While there are no specific statistics on wine consumption during meals, the beverage has become a staple of many
social interactions, such as business dinners.

Investment in the Vietnamese spirits and wine sub-sectors are expected to intensify as an increasing number of investors recognise
the higher margin growth opportunities in these sub-sectors; this is likely to instill further dynamism and drive volume sales.

TOTAL ALCOHOLIC DRINKS SPENDING AND CONSUMPTION (VIETNAM 2020-2027)

Indicator 2020e 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Alcoholic drinks
spending, 60,068.57 62,789.47 69,451.06 76,876.71 85,479.96 94,338.69 104,081.38 115,372.85
VNDbn

Alcoholic drinks
spending, VND 2.57 4.53 10.61 10.69 11.19 10.36 10.33 10.85
% y-o-y

Alcoholic drinks
spending, VND 1,959,772.55 2,008,775.63 2,184,408.44 2,370,419.46 2,592,998.90 2,806,696.00 3,037,488.91 3,303,194.27
per household

Alcoholic drinks
spending, VND 621,514.58 644,205.76 707,335.63 777,640.40 859,115.11 942,407.03 1,033,785.19 1,139,731.84
per capita

Total alcohol
consumption, 3,693.8 3,811.3 3,997.6 4,181.9 4,362.6 4,538.4 4,708.1 4,870.7
litres mn

Total alcohol
consumption,
-1.0 3.2 4.9 4.6 4.3 4.0 3.7 3.5
litres mn, % y-o-
y

Total alcohol
consumption, 62.0 63.6 66.3 69.1 71.8 74.4 76.9 79.2
litres per capita

Beer, litres mn 3,644.1 3,757.1 3,937.4 4,114.6 4,287.4 4,454.6 4,615.0 4,767.3
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 18
Vietnam Food And Drink Report | Q3 2023

Indicator 2020e 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Beer, litres mn,

-1.0 3.1 4.8 4.5 4.2 3.9 3.6 3.3
% y-o-y

Beer, litres per

61.2 62.7 65.3 68.0 70.6 73.0 75.4 77.6
capita

Wine, litres mn 12.5 13.6 14.9 16.4 18.1 20.0 22.0 24.3

Wine, litres mn,

-2.5 8.1 9.6 10.3 10.4 10.3 10.2 10.2
% y-o-y

Wine, litres per

0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4
capita

Spirits, litres mn 37.1 40.6 45.3 50.9 57.1 63.8 71.1 79.1

Spirits, litres
-2.8 9.4 11.6 12.2 12.2 11.8 11.5 11.3
mn, % y-o-y

Spirits, litres per

0.6 0.7 0.8 0.8 0.9 1.0 1.2 1.3
capita
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

Non-Alcoholic Drinks

2023 Non-Alcoholic Drinks Outlook

In 2023, we expect non-alcoholic drinks spending in Vietnam to grow by 9.4% y-o-y, a rise from 7.7% y-o-y in 2022 as improved
economic conditions and growing inflation pushes up spending growth.

Carbonated soft drinks will be the outperforming non-alcoholic drinks category in 2023, delivering spending growth of 10.7% y-o-y.
Companies have paid attention to the growing wave of health-conscious consumers and reacted swiftly by introducing healthier
offerings such as zero-calorie or fortified carbonated drinks. This has been the key driver behind the high growth in spending on
carbonated soft drinks.

The underperforming non-alcoholic drinks category is forecast to be the fruit and vegetable juices category, which will see growth
of 6.2% y-o-y in 2023. As consumers continue to be price-sensitive about their purchases, the value proposition of fruit and
vegetable juices falls behind other drinks categories as they typically cost more, and some may even cost more than a meal. This
prices out segments of the consumer market, who would prefer a cheaper option such as carbonated drinks, despite
acknowledging the greater health benefits of fruit and vegetable juices.

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Vietnam Food And Drink Report | Q3 2023

Healthy Growth For Non-Alcoholic Drink Sales

Vietnam - Non-Alcoholic Drinks (2020-2027)

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

Medium-Term Trends

Vietnam boasts a very vibrant non-alcoholic drinks sector, with household spending on this segment spread out relatively evenly
across the different elements. Over 2023, we project that Vietnamese households will spend VND48.1trn on non-alcoholic drinks.
This will grow by an average of around 9% a year over the medium term (2023-2027), to a total of VND69.4trn in 2027.

Proportionally, coffee accounts for the largest non-alcoholic drinks spending categories, at 42% of spending in 2023. Additionally,
over the next five years (through to 2027), coffee spending will see the strongest growth (forecast to average 10.6%) across all the
non-alcoholic drinks spending segments. This dominant growth will see it maintain its largest segment by 2027 at 43.1% of all non-
alcoholic drinks spend.

Historically, Vietnam has been a coffee-drinking market, with a rich coffee culture. Coffee consumption per capita in Vietnam is at
about 170 cups per year. This is higher than markets such as Mainland China where the average Chinese consumer only drinks five
cups a year while in markets like the US or Norway, this figure is 400 and 1,000 cups per year respectively. Nevertheless, Vietnam
has boasted strong market demand for entry-level products, such as low-cost instant and high volume, low-quality coffee products.
As such, a significant proportion of coffee consumption happens at home, with spending through the Mass Grocery Retail channel.
This trend has steadily evolved, with the liberalisation of trade in the late 1980s. Between the late 1990s and the early 2000s,
domestic coffee chain shops such as Trung Nguyen and Highlands Coffee began operations and has expanded across the market.
This shifted consumer preferences towards brewed coffee options, as Vietnamese consumers are increasingly able and willing to
spend more on higher-quality coffee (which is typically sold at higher price points). Domestic coffee chains now dominate the Quick
Service Restaurant (QSR) market, with Trung Nguyen, Highlands, Phuc Long and Cong Ca Phe being available in the majority of
Vietnamese cities. International brands such as Starbucks, have also been rapidly expanding their store network across the major
cities and have carved out a unique prestige position for itself.

In the main urban centres of Hanoi and Ho Chi Minh City, the coffee market is currently in its third coffee wave (first wave = cheaper
coffee, second wave = coffee chains), with the spread of more specialty and bespoke offerings. There are even signs of the fourth
wave of coffee, described as the 'science of coffee' where coffee drinkers are obsessed with details and the perfect taste experience.
This has resulted in several specialty coffee roasters and grinders popping up across the market. Even though specialty coffee
makes up a small share of the market, Vietnamese consumers are starting to move a towards more researched, single-origin taste

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Vietnam Food And Drink Report | Q3 2023

and new brewing methods. This trend will be seen first through the QSR sector, but increasingly, retailers will look to stock products
to meet this growing at-home demand.

We forecast total coffee spending in Vietnam to reach VND20.5trn (USD868.3mn) in 2023, growing 11.2% y-o-y over the year.
Coffee spending has had outperformed the other hot drinks spending segments, growing an average of 7.9% a year between 2013
and 2023, while tea spending grew 7% a year. This will continue over the medium term, with spending on coffee growing by an
average of 10.6% a year, reaching VND30.6trn (USD1.2bn) by 2027.

Bubble tea, a cold milky tea with toppings of fruit, jelly and tapioca balls that originated from Taiwan, has been popular in Vietnam
and regional players have expanded into Vietnam. In 2021, Vietnamese consumers spent USD362mn on bubble tea. This makes
the bubble tea market in Vietnam the third largest in Southeast Asia, behind only Indonesia and Thailand. In Vietnam, many bubble
tea stores also sell coffee and many coffee chains such as Phuc Long also sell variations of bubble tea at their outlets. By
incorporating bubble tea into their offerings, it allows the large coffee chains to capitalise on the growing bubble tea market in the
country.

Fruit and vegetable juice sales will underperform with annual average growth of between 5.0% and 6.0%, as despite rising health-
consciousness efforts encouraging healthier options, the higher prices of healthy juices over other drinks outprice many price-
sensitive consumers.

Our forecast envisages carbonated drink sales outperforming over the medium term, with annual average growth of between
10.0% and 11.0%. We are witnessing a rapid emergence of competition in the Vietnamese soft drinks market. Opportunities
provided by an emerging middle class in Vietnam are firmly within the sights of domestic drinks producers such as PepsiCo
Vietnam, Tan Hiep Phat Beverage Group and Coca-Cola Beverages Vietnam. These companies' aggressive initiatives in
terms of product innovation, portfolio expansion and advertising will instill even greater dynamism in the sector.

A favourable demographic profile and rising consumer affluence create strong growth opportunities across the sector. The youth
demographic (aged 0-14 years) is an underlying driver of soft drinks consumption, particularly the carbonated drinks category. As a
result, carbonated soft drinks will experience the strongest growth in this segment. An influx of investment will provide another
major impetus for the industry's growth.

Domestic soft drinks manufacturers will continue to engage in product innovation by offering different bottle formats and sizes in
an attempt to cater to varying consumer tastes and preferences. For instance, Coca-Cola Beverages Vietnam and PepsiCo Vietnam
produce their soft drinks in varying sizes, and this has facilitated their reach to the end-consumer market. As more companies
expand their product innovation, this will further fuel sales growth.

Local soft drink manufacturers are now gradually calibrating their portfolios towards healthier and more functional beverages, such
as fruit juices and ready-to-drink teas, as they look to tap into a health-conscious trend in the country. For instance, Big C
introduced its private-label fruit juice range, Casino Bio. Carbonated drinks will remain the outperforming category - at odds with
most markets globally - as is common in markets where soft drinks consumption is relatively low, and consumer preferences are not
highly dynamic.

However, it should be noted that sugary drinks could be subject to an increased excise tax aiming to improve community health in
Vietnam which could pose challenges for the sector going forward.

NON-ALCOHOLIC DRINKS SALES (VIETNAM 2020-2027)

Indicator 2020e 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Non-alcoholic
drinks, sales, 39,362,103.1 40,858,565.9 43,991,758.5 48,105,264.2 52,871,101.0 57,778,463.1 63,175,493.3 69,430,476.7
VNDmn

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Vietnam Food And Drink Report | Q3 2023

Indicator 2020e 2021e 2022e 2023f 2024f 2025f 2026f 2027f

Non-alcoholic
drinks, sales,
5.1 3.8 7.7 9.4 9.9 9.3 9.3 9.9
VNDmn, %
growth y-o-y

Coffee, teas and

other hot
26,420,599.0 27,429,551.3 29,544,338.4 32,320,071.9 35,538,116.6 38,853,962.2 42,503,119.4 46,735,356.4
drinks, sales,
VNDmn

Coffee, teas and

other hot
drinks, sales, 5.1 3.8 7.7 9.4 10.0 9.3 9.4 10.0
VNDmn, %
growth y-o-y

Soft drinks,
12,941,504.1 13,429,014.6 14,447,420.1 15,785,192.3 17,332,984.5 18,924,500.9 20,672,373.9 22,695,120.4
sales, VNDmn

Soft drinks,
sales, VNDmn, 5.1 3.8 7.6 9.3 9.8 9.2 9.2 9.8
% growth y-o-y

Fruit and
vegetable
4,183,360.7 4,294,585.6 4,502,891.1 4,784,111.1 5,087,307.1 5,375,707.7 5,666,851.6 5,972,577.4
juices, sales,
VNDmn

Fruit and
vegetable
juices, sales, 4.5 2.7 4.9 6.2 6.3 5.7 5.4 5.4
VNDmn, %
growth y-o-y

Mineral or
spring waters, 345,549.0 357,947.5 383,527.2 417,229.8 455,927.6 495,407.1 538,423.8 587,789.2
sales, VNDmn

Mineral or
spring waters,
5.0 3.6 7.1 8.8 9.3 8.7 8.7 9.2
sales, VNDmn,
% growth y-o-y

Carbonated
drinks, sales, 8,412,594.4 8,776,481.5 9,561,001.8 10,583,851.5 11,789,749.7 13,053,386.1 14,467,098.4 16,134,753.7
VNDmn

Carbonated
drinks, sales,
5.3 4.3 8.9 10.7 11.4 10.7 10.8 11.5
VNDmn, %
growth y-o-y
e/f = Fitch Solutions estimate/forecast. Source: National Statistics, Fitch Solutions

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Vietnam Food And Drink Report | Q3 2023

Industry Trends And Developments

Vietnam
Key View

• The average Vietnamese household will spend 20.4% of their total household budget on food in 2027, marginally
increasing from 19.0% in 2007.
• Vietnamese households have seen significant growth in their disposable incomes over our forecast period (2007-2027). This has
fed through to their food spending patterns, allowing them to diversify their palate and purchase food that is not commonly
found in their country.
• Healthification is gaining ground, as consumers look closer at health benefits when tailoring their diets. Fruits will see strong
spending growth, with imported fruits increasingly being the main choice for Vietnamese consumers. Despite having an
abundance of fruits domestically, Vietnamese consumers perceive foreign fruits to be of a higher quality and safety standard
than domestically produced ones.
• Poultry and pork products will see significant consumption and spending growth, as opposed to beef, due to the significantly higher price an
beef products.
• Dairy consumption will continue to outperform, as Vietnamese consumers are paying more attention to their food choices as
part of the ongoing healthification trend. Milk consumption will increase from 3.8kg per capita in 2007 to 12.3kg per capita in
2027, while convenient dairy products, such as yoghurt, will grow by an annual average of 14.9% over this period.

Dietary Shift Spending Overview

The average Vietnamese household will spend 20.4% of the total household budget on food in 2027, marginally increasing from
19.0% in 2007. Over the 2008 to 2027 period, we forecast nominal household spending on food items will grow by an average of
12.8% a year. However, over this period, food price inflation is forecast to average 2.7% a year, suggesting that food spending in real
terms will grow by an average of 10.1% a year to VND1.2bn in 2027. Despite food spending as a percentage of total household
budget not changing significantly, growing wages and disposable income over the past 20 years has led to real growth in food
spending and consumption, enabling the average Vietnamese household the ability to afford more than just basic food staples.
The shift in dietary spending is a result of changing taste and preferences, as they have access to a wide range of food variety
throughout our comparison period.

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Market Is Gradually Maturing With Strong Growth In Food Spending

Vietnam - Food Spending, Real (2010-2027)

e/f = BMI estimate/forecast. Source: National statistics, BMI

When breaking down the average Vietnamese household spend on food, three food categories (bread, rice and cereals; meat and
poultry; fish and fish products) will account for more than 70% of total food spending in 2027. Staples (bread, rice and cereals) will
account for the largest share, at 37.3% of total food spending; meat and poultry at 30.2%; and fish and fish products at 9%. These
three food categories will see their share of total food spending decrease marginally, from 79.3% of total food spending in 2007 to
76.5% in 2027.

Within the three dominant food categories, we highlight that Vietnamese consumers spending on staples will be the largest share
of the staples spending category. Like many developing Asia markets, rice in Vietnam will remain as a staple food and main source
of calories for families across all income brackets, but will account for a bigger proportion of consumption in lower-income bracket
households, due to its affordability. Spending on meat and poultry will increase from 29.5% of total food spending in 2007 to 30.2%
in 2027, while spending on fish and fish products will decrease from 13.9% to 9.0% over the same period.

We note that the decline in spending on fish and fish products is due to the lower annual inflation of fish prices, compared to other
food products, such as meat and poultry, and not as a result of decreasing fish consumption. Vietnam has one of the largest
domestic fish markets and is one of the top fish exporters in the world. Pangasius freshwater fish (catfish), or known locally as Basa, is
the top consumed fish locally due to its affordability. Basa is inexpensive as it grows fast, is easily harvested and processed in
factories near the farm, which helps to keep prices low.

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Three Food Categories Dominate Spending Patterns

Vietnam - Food Spending Breakdown, % of total food sales (2007-2027f)

f = BMI forecast. Source: National sources, BMI

Consumers Are Making More Health-Conscious Decisions

Vietnamese consumers are becoming increasingly health conscious, as major dietary spending shifts indicate a steady increase in
spending on food items that scientific studies show have health benefits. Over the 2007-2027 period, fresh fruits is the fastest-
growing category, growing by 16.1% a year. Spending growth in this category will continue to outperform and surpass top-line food
spending average growth of 10.1% per year. This growth will see the fresh and preserved fruits proportion of total food spending
increase from 3.8% in 2007 to 6.1% in 2027, making fresh and preserved fruits the category of food with the biggest increase in
share of food spending. Conversely, sugar and sugar products will be the slowest-growing category, at just 7.1% average growth per
year over the same period. The outperformance of fresh fruits spending and the weak growth in sugar spending underpin our view
that consumers in Vietnam are increasingly health conscious, with priority given to spending on healthier foods.

Vietnam is home to a wide variety of rare tropical and exotic fruits, such as langsat, mangosteen, rambutan, longan and many other
fruits which are not commonly found in other parts of the world. However, in recent years, Vietnamese consumers are consuming
more imported fruits, which are generally more expensive, despite the abundance of fruits domestically. Vietnamese consumers
perceive foreign fruits to be of a higher quality and safety standard than domestically produced ones. Farmers Market, a Vietnam-
based premium agricultural products retailer, indicated in April 2023 that durians and mini pineapples imported from Thailand saw
strong demand at many supermarkets in Vietnam, while their Vietnamese counterparts were rejected by locals.

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Healthier Food Categories Have Attracted Significant Growth

Vietnam - Spending Growth Per Food Category, % chg y-o-y (2007-2027f)

f = BMI forecast. Source: National statistics, BMI

Households Consuming And Spending More on Meat Due To Rising Income And Affordability

Between 2007 and 2027, Vietnamese households will allocate a larger portion of their total food spending towards meat and
poultry products, increasing from 29.5% of total food spending in 2007 to 30.2% in 2027. Collectively, total meat consumption
(beef, pork and poultry) per capita will grow by a compound annual growth rate (CAGR) of 3.1%, increasing from 28.5kg in 2007 to
52.6kg in 2027. Pork will remain the most consumed meat throughout this entire period, accounting for 59% of
total meat and poultry consumed in 2027. On the other hand, poultry will see the highest growth in consumption, growing from a
per capita consumption of 4.8kg in 2007 to 17.0kg in 2027.

Poultry And Pork Will Continue To Dominate Vietnamese Household Meat Consumption
Vietnam - Meat Protein Consumption By Category (2007-2027)

e/f = BMI estimate/forecast. Source: National sources, BMI

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All three categories of meat will see growth surpass average headline food spending growth of 10.1% per year. Spending on
pork and poultry will grow by an annual average of 13.3% and 13.9% respectively, while spending on beef will grow by an annual
average of 13.6%. Despite the high annual growth of beef spending, we highlight that beef consumption will only increase
marginally from 1.8kg in 2007 to 4.4kg in 2027. The low consumption growth of beef is due to the much higher prices and higher
annual inflation of beef.

Youthful Population, Growing Convenience And Healthification Trend Supports Dairy Consumption

Demand for high protein and high energy food, such as dairy products, have increased over the years, as Vietnamese consumers
are increasingly paying more attention to their food choices as part of a healthification trend. This growing health awareness is
increasing in Vietnam, as the government rolls out initiatives to improve the general population’s knowledge of health, such as
educational television programmes explaining the function of calcium intake to increase bone strength and supporting a dairy-rich
diet for children’s development. Additionally, the large size of Vietnam’s youthful population (29.8mn in 2027), who have recently
entered the workforce, will support demand for convenience products. As a result, demand for high protein and high energy food,
such as dairy products, have increased significantly. Spending on dairy products will grow by an annual average of 14.1% between
2007 and 2027, with total milk consumption (liquid milk and whole milk powder) increasing from 3.8kg per capita in 2007 to 12.3kg
per capita in 2027.

We highlight that yoghurt is undergoing a similar growth trajectory, due to its relative affordability, ease of consumption and health
benefits it provides. Spending yoghurt products will grow by an annual average of 14.2% during this period. Within the last 10 years,
dairy companies have been successful in launching branded yoghurt products that promise to ensure better food safety standards
than the traditional home-made yoghurt.

Dairy Consumption Has Increased Significantly

Vietnam - Total Milk Consumption, kg per capita (2007-2027)

e/f = BMI estimate/forecast. Source: OECD-FAO, BMI

In April 2023, Singapore-based private equity firm Growtheum Capital Partners announced an investment of USD100mn in
Vietnam-based International Dairy Products, as the firm looks to tap into the growing demand for dairy products in the region.
Vietnam-based dairy company Vinamilk announced plans to increase its capacity by 20% through the construction of two large
plants in Hung Yen and Moc Chau provinces. The Hung Yen plant will will have a total capacity of 400mn litres annually and the Moc
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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Vietnam Food And Drink Report | Q3 2023

Chau facility will consist of high-tech dairy farms and processing factories, with a production capacity of up to 1,000 tonnes per day.
Vinamilk has also announced plans to build cow farms in the Philippines, after the company deems the export market to be big
enough. Another key player, TH Milk announced plans to build dairy facilities in Russia worth USD2.7bn, in line with strengthening
trade relations between Vietnam and the Eurasian Economic Union in part facilitated by the VN-EAEU FTA.

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Industry Risk/Reward Index

Asia Food & Non-Alcoholic Drinks Risk/Reward Index: Malaysia Leads
The Region, Spotlight On Australia
Key View: In our 2023 update of the Food & Non- Alcoholic Drinks Risk/Rewards Index, the Asia region retains its second place
position among six regions globally. Asia offers attractive markets for food and drinks companies, with strong demographics, rapid
urbanisation and expanding income levels contributing to an average score for the region of 58.9 out of 100 Industry Rewards.
Malaysia leads the region with an overall RRI score of 74.2 out of 100, due to its rapidly urbanising population with strong income
growth, making it an attractive long-term market. Overall, the region boasts strong Rewards scores and a navigable risk outlook.

Asia Region Offers A Strong Rewards Profile

Asia - Food & Non-Alcoholic Drinks Risk/Reward Index

Note: May include territories, special administrative region, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

Important Note: Our Food & Drink Risk/Reward Index includes two Food & Drink Risk/Reward indices: our Food & Non-Alcoholic
Drinks Risk/Reward Index and our Alcoholic Drinks Risk/Reward Index. The first quantifies the risks and rewards associated with food
and non-alcoholic drink sales in each market, while the other quantifies the risks and rewards associated with the alcoholic drinks
sector.

Main Regional Features And Latest Updates

• In our Q323 Food & Non-Alcoholic Drinks Risk/Reward Index (RRI), Asia retains its second-place position out of our six regions
globally. Asia's regional average score of 58.9 out of 100 placing it behind North America & Western Europe (NAWE)'s 63.8 out of
100, but considerably ahead of Central & Eastern Europe (CEE) in third place, with its score of 47.6.
• Asia has the most attractive Rewards profile globally, with an average score of 60.7 out of 100, above the second-placed NAWE
with 56.8 out of 100. Most markets across the region offer positive growth outlooks for consumer spending, which feeds
through into high growth rates for food and non-alcoholic drinks spending. Similarly, the region boasts attractive demographics
profiles, with large and youthful consumer bases.

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• Malaysia leads in the Asia region, with an overall RRI score of 74.2 out of 100. However, with the 2024-2027 consumer outlook in
Australia increasingly becoming more positive, the gap between second place is closing. Australia currently scores 73.8 out of
100.
• Mainland China has fallen from second place in Asia to fourth on the back of worsening Risk scores. However, the market
remains attractive as a result of its impressive Rewards profile.

Asia Presents Strong Mix Between Risks And Rewards

Asia - Food & Non-Alcoholic Drinks Risk/Reward Index

Note: May include territories, special administrative region, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

Australia Climbs To Second Place

Australia has overtaken Mainland China in 2023, to become the second most attractive market in our Asia region and the third most
attractive globally, from the third in Asia and fifth in the world in Q223. This rise is attributed to the market's improvement across its
Rewards and Risks Profiles, resulting in Australia's overall RRI score coming in at 73.8 out of 100 for this quarter. Australia records an
increase in the real household spending five-year growth (forecast at an average of 5.8% a year over 2023-2027), as well as
maintaining a high level food & non-alcoholic drink spending per capita (USD1,983 in 2023). This has seen the market's Real
Household Spend 5-Year Growth indicator improve to 45.7 out of 100, up from 39.0 in Q223, giving its overall Industry Rewards
score a healthy boost. We believe Australia can offer significant premiumisation opportunities for food and non-alcoholic drink
manufacturers and retailers, especially in terms of organic products and premium snacks.

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Steady Spending Growth In Australian Households

Australia - Household Spending, AUDbn (2021-2027)

e/f = BMI estimate/forecast. Source: National statistics, BMI

Australia has always been an attractive food and drinks market that offers a population of wealthy consumers, who have the
disposable incomes to purchase premium products, and buy into new and emerging food and non-alcoholic drinks trends.
Premiumisation has been steadily taking shape in the Australian food and non-alcoholic drinks scene, particularly in the mass
grocery retail (MGR) sector. Both major MGR retailers Coles and Woolworths have premium outlets or premium sectors within
their supermarkets, Coles Finest and Woolworths Premium respectively. Coles also announced in November 2022 that it would be
expanding drone delivery of groceries directly to consumers' homes in certain suburbs in the Australian state of Queensland in a
trial of the new service. As we forecast steady growths in the real incomes of Australian consumers, their propensity to spend will
increase. When consumers are less price sensitive, they will begin to value the element of convenience again and will be more
willing to shell out the 'convenience tax' of having ultra-fast drone groceries delivery.

Individual Australian food brands such as Patties and Primo have also expanded their product offerings to include pricier but more
exclusive flavours, such as Patties' Quiche Lorraine and Primo's Pepper Crusted Roast Beef. In February 2023, Mercanto Centrale, a
leading food market spanning four Italian cities, announced that it will be opening its first location outside of Italy in Melbourne,
Australia by the end of 2023. Mercanto Centrale will feature gourmet pizzas and pasta alongside fresh bakes, giving Australian
consumers another avenue to access premium Italian food products that have been growing in popularity in Australia.

Malaysia Reclaims Top Spot

In our 2023 update, Malaysia ranks as the most attractive market in the Asia region and second globally, climbing one position in our
regional and global rankings, with an overall RRI score of 74.2 out of 100. In line with wider economic improvements in the market,
consumer spending in Malaysia has grown in Q223. The country has an Industry Rewards score of 75.2 out of 100, rising from 74.9
out of 100 in Q223. Malaysia will remain an attractive market over the medium term (2023-2027). This is apparent from Malaysia's
overall Rewards score of 73.9 out of 100, the fourth highest in the region and well above the Asia average of 60.7, highlighting the
growth opportunities for companies in the market over the medium term.

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Malaysia's Consumer Profile Picks Up

Malaysia - Reward Scores (2017-2023)

Note: Scores out of 100; higher score = more attractive market. Source: BMI

Malaysia also offers the third-highest Industry Risks score in the Asia region, at 77.8 out of 100, below only that of Singapore (98.1
out of 100) and Hong Kong, China (94.9 out of 100). The market offers a well-diversified and high-quality transport network,
offering supply chains with strong levels of internal and international connectivity. Malaysia's transport network offers strategic
advantages to businesses with regional supply chains given the strong linkages with that of key regional peers such as Singapore
and Thailand. Similarly, with a score of 85.7 out of 100, Malaysia's Regulatory Environment is also attractive. Combined, these two
scores highlight the attractiveness of doing business in Malaysia, as companies face relatively smoother regulatory processes than
regional peers, while also being able successfully transport their goods around Malaysia in a timely manner.

Mainland China Remains Attractive Despite Fall in Index

Mainland China has fallen by two regional and global positions in our 2023 RRI update, with an overall RRI score of 73.4 out of 100. It
is now the third attractive market in the Asia region and the fourth most attractive market globally. We forecast consumer spending
in China to recover strongly in Q323 as authorities ease pandemic restrictions, leaving the two years of Covid-related economic
pressure on consumer spending levels behind. Globally, Mainland China offers the most attractive Rewards profile, scoring 78.2 out
of 100. It boasts the second-largest consumer market in the world (in terms of total household spending) after the US, and the food
and drinks industry is one of the market's fastest-growing industries. Similarly, high disposable incomes in cities are creating an
aspirational consumer base, with access to modern retailing, and increasing interest in premium food and drinks products.

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Mainland China Outperforms On Most RRI Pillars

Mainland China & Regional Average - Risk/Reward Scores (2023)

Note: May include territories, special administrative region, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

China scores 100 out of 100 for two Rewards indicators (the highest and most attractive score in our Index), including Total Food &
Drink Expenditure and Urban Population, and it also performed well for other indicators such as the Population indicator at 99.0 out
of 100. Additionally, the market has relaxed its zero-Covid policy and has eased restrictions considerably, giving a strong boost to
household spending. We expect household spending to outperform over the 2023-2027 period. The market scores 97.1 out of 100
for our five-year Real Household Spending Average Growth indicator, which highlights the spending growth opportunities and so
the overall attractiveness of the market for consumer-facing companies. Over the medium term (2023-2027), we forecast real
household spending to grow by an average annual rate of 6.9%.

While China's Risk profile is still more attractive than the regional average (62.3 out of 100, compared to the regional average of 54.5
out of 100), it does weigh down its overall RRI score. The Regulatory Environment (29.5 out of 100) is still relatively complicated and
time consuming, compared to other developed markets, and companies risk sudden regulatory changes. There have been a
number of food hygiene incidents across the food and grocery retail industries, highlighting the vulnerabilities of the marketplace.
Similarly, outside of the Tier I and Tier II cities, the food and drink industry is still relatively fragmented and informal (China scores
39.0 out of 100 for our Food & Drink Formalisation indicator).

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Mainland China Has Some Of The Highest Scores In The Region

Mainland China - Select Reward Indicators (2023)

Note: May include territories, special administrative region, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

As outlined in its 14th Five-Year Plan announcement, Beijing is seeking to reduce its import dependency, emphasising a shift
towards the expansion of the domestic market via domestic production over the medium term as part of its 'dual circulation
strategy'. In 2021 (latest data available), food and drink products imported by China collectively accounted for more than
USD123.9bn (approximately 37.5% of total imported consumer goods) and the shift towards domestic production will reduce
imports of foreign food products progressively over the medium-to-long term. Furthermore, brands from outside of China may find
it difficult to navigate consumer behaviour while operating there, due to the rising preference for domestic brands as part of the
wider guochao trend.

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ASIA - FOOD & NON-ALCOHOLIC DRINKS RISK/REWARD INDEX

Industry Country Industry Country Regional Global
Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank

Malaysia 75.2 71.9 73.9 77.8 71.7 74.7 74.2 1 2

Australia 75.2 66.9 71.9 70.5 86 78.2 73.8 2 3

Mainland
81 74 78.2 49.8 74.8 62.3 73.4 3 4
China

South Korea 63.5 68.3 65.4 72.4 86.9 79.6 69.7 4 10

Japan 66 64.3 65.3 74.3 81.9 78.1 69.2 5 12

Indonesia 74.9 75.5 75.1 43.5 60.4 51.9 68.2 6 14

Taiwan,
63.5 57.6 61.1 74.3 86.3 80.3 66.9 7 15
China

India 71.4 78.3 74.2 39.4 54 46.7 65.9 8 18

Thailand 70.2 61.9 66.9 56.8 52.7 54.8 63.2 9 26

Philippines 73.3 70.5 72.2 33 48.7 40.8 62.8 10 27

Vietnam 64.4 62.4 63.6 51.7 64.8 58.3 62 11 29

Singapore 45.1 48.8 46.6 98.1 92.6 95.4 61.2 12 31

New Zealand 58.4 42.6 52.1 64.4 85.1 74.8 58.9 13 33

Bangladesh 69.5 74.3 71.4 18.1 37.8 27.9 58.4 14 35

Hong Kong,
40 36.9 38.8 94.9 82.5 88.7 53.8 15 45
China

Pakistan 47.6 69 56.2 20.3 15.6 17.9 44.7 16 69

Cambodia 54 48.1 51.6 28.3 25.6 26.9 44.2 17 71

Myanmar 40.6 63.1 49.6 9.8 6.3 8.1 37.2 18 85

Sri Lanka 44.8 34 40.5 22.2 28.6 25.4 36 19 86

Laos 37.5 43.3 39.8 16.5 22.4 19.4 33.7 20 90

Global
50 50 50 50 50 50 50 ~ ~
Average

Regional
60.8 60.6 60.7 50.8 58.2 54.5 58.9 ~ ~
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

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ASIA - FOOD & NON-ALCOHOLIC DRINKS INDUSTRY REWARDS

Food & Drink
Real Household Spend Total Food & Industry
Spending Per Rewards
5-Year Growth Drink Expenditure Rewards
Capita

Malaysia 59 87.6 79 75.2 73.9

Australia 97.1 45.7 82.9 75.2 71.9

Mainland China 45.7 97.1 100 81 78.2

South Korea 68.6 36.2 85.7 63.5 65.4

Japan 95.2 5.7 97.1 66 65.3

Indonesia 36.2 93.3 95.2 74.9 75.1

Taiwan, China 67.6 48.6 74.3 63.5 61.1

India 17.1 99 98.1 71.4 74.2

Thailand 44.8 84.8 81 70.2 66.9

Philippines 40 91.4 88.6 73.3 72.2

Vietnam 20 98.1 75.2 64.4 63.6

Singapore 58.1 41.9 35.2 45.1 46.6

New Zealand 94.3 34.3 46.7 58.4 52.1

Bangladesh 24.8 100 83.8 69.5 71.4

Hong Kong, China 49.5 39 31.4 40 38.8

Pakistan 8.6 69.5 64.8 47.6 56.2

Cambodia 32.4 89.5 40 54 51.6

Myanmar 2.9 75.2 43.8 40.6 49.6

Sri Lanka 22.9 74.3 37.1 44.8 40.5

Laos 13.3 86.7 12.4 37.5 39.8

Global Average 50 50 50 50 50

Regional Average 44.9 69.9 67.6 60.8 60.7

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

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ASIA - FOOD & NON-ALCOHOLIC DRINKS COUNTRY REWARDS

Mass Affluent Urban Spending Country
Population Rewards
Class Population Population Rewards

Malaysia 61 64.8 71.4 90.5 71.9 73.9

Australia 57.1 96.2 64.8 49.5 66.9 71.9

Mainland China 99 56.2 100 41 74 78.2

South Korea 74.3 93.3 79 26.7 68.3 65.4

Japan 89.5 72.4 94.3 1 64.3 65.3

Indonesia 97.1 41.9 96.2 66.7 75.5 75.1

Taiwan, China 55.2 79 62.9 33.3 57.6 61.1

India 100 25.7 99 88.6 78.3 74.2

Thailand 82.9 47.6 77.1 40 61.9 66.9

Philippines 88.6 24.8 86.7 81.9 70.5 72.2

Vietnam 86.7 21 78.1 63.8 62.4 63.6

Singapore 25.7 90.5 34.3 44.8 48.8 46.6

New Zealand 21 78.1 24.8 46.7 42.6 52.1

Bangladesh 93.3 21.9 90.5 91.4 74.3 71.4

Hong Kong, China 30.5 68.6 39 9.5 36.9 38.8

Pakistan 96.2 8.6 91.4 80 69 56.2

Cambodia 46.7 43.8 23.8 78.1 48.1 51.6

Myanmar 76.2 37.1 60 79 63.1 49.6

Sri Lanka 54.3 16.2 20 45.7 34 40.5

Laos 31.4 38.1 14.3 89.5 43.3 39.8

Global Average 50 50 50 50 50 50

Regional Average 68.3 51.3 65.4 57.4 60.6 60.7

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

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ASIA - FOOD & NON-ALCOHOLIC DRINKS INDUSTRY RISKS

Regulatory Environment Food & Drink Formalisation Logistics Risk Industry Risks Risks

Malaysia 85.7 61.9 85.7 77.8 74.7

Australia 54.3 80 77.1 70.5 78.2

Mainland China 29.5 39 81 49.8 62.3

South Korea 57.1 65.7 94.3 72.4 79.6

Japan 33.3 90.5 99 74.3 78.1

Indonesia 41 31.4 58.1 43.5 51.9

Taiwan, China 68.6 62.9 91.4 74.3 80.3

India 44.8 8.6 64.8 39.4 46.7

Thailand 79 22.9 68.6 56.8 54.8

Philippines 45.7 17.1 36.2 33 40.8

Vietnam 76.2 13.3 65.7 51.7 58.3

Singapore 99 99 96.2 98.1 95.4

New Zealand 38.1 81 74.3 64.4 74.8

Bangladesh 6.7 14.3 33.3 18.1 27.9

Hong Kong, China 96.2 99 89.5 94.9 88.7

Pakistan 17.1 9.5 34.3 20.3 17.9

Cambodia 66.7 1.9 16.2 28.3 26.9

Myanmar 20 5.7 3.8 9.8 8.1

Sri Lanka 15.2 0 51.4 22.2 25.4

Laos 27.6 11.4 10.5 16.5 19.4

Global Average 50 50 50 50 50

Regional Average 50.1 40.8 61.6 50.8 54.5

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

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ASIA - FOOD & NON-ALCOHOLIC DRINKS COUNTRY RISKS

Long-Term Short-Term Long-Term Short-Term
Operational Country
Economic Risk Economic Risk Political Risk Political Risk Risks
Risk Index Risks
Index Index Index Index

Malaysia 70.5 83.3 48.6 71.4 78.1 71.7 74.7

Australia 89.5 91.9 83.8 82.9 83.8 86 78.2

Mainland
87.6 90.5 57.1 87.6 62.9 74.8 62.3
China

South
95.7 100 85.7 80 80 86.9 79.6
Korea

Japan 74.3 61.9 90.5 91.4 86.7 81.9 78.1

Indonesia 71.4 80 46.7 51.9 56.2 60.4 51.9

Taiwan,
99 98.1 70.5 65.7 92.4 86.3 80.3
China

India 44.8 78.1 49.5 58.1 46.7 54 46.7

Thailand 69.5 61 28.6 33.3 61.9 52.7 54.8

Philippines 53.3 73.3 42.9 53.8 34.3 48.7 40.8

Vietnam 68.6 70.5 44.8 90.5 57.1 64.8 58.3

Singapore 81 91.9 82.9 100 100 92.6 95.4

New
88.6 78.1 87.6 84.8 85.7 85.1 74.8
Zealand

Bangladesh 56.2 63.8 37.1 33.3 18.1 37.8 27.9

Hong Kong,
90.5 95.2 32.4 81 98.1 82.5 88.7
China

Pakistan 14.3 9.5 21 6.7 21 15.6 17.9

Cambodia 13.3 18.1 30.5 47.6 21.9 25.6 26.9

Myanmar 4.8 15.2 1.9 1 7.6 6.3 8.1

Sri Lanka 8.6 19 41.9 23.8 39 28.6 25.4

Laos 9.5 12.4 20 67.6 12.4 22.4 19.4

Global
50 50 50 50 50 50 50
Average

Regional
59.5 64.6 50.2 60.6 57.2 58.2 54.5
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

Please Note: Our Risk/Reward Indices are updated frequently and, as a result, the scores in this section may not match the scores
in the rest of the report.

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Asia Alcoholic Drinks Risk/Rewards Index: Australia Tops Asia, Spotlight

On Thailand As International Tourism Recovers
Key View: The Asia region scores 55.9 out of 100 in our Alcoholic Drinks Risk/Reward Index in the 2023 update, ranking second
out of five regions and boasting one of the best demographic’s profiles globally, while income growth drives consumption and
spending. In more developed alcoholic drinks markets, like South Korea and Australia, a premiumisation trend is prominent,
especially in wine and spirits, as growth in spending levels outperform consumption levels. We highlight Thailand as a market that
will benefit from the return of international tourism. The wider recovery in the international tourism sector bodes well for several
markets' alcoholic drinks sectors over the medium term (2023-2027).

Asia Region Offers A Number Of Attractive Rewards Profiles

Asia - Alcoholic Drinks Risk/Reward Index

Note: May include territories, special administrative region, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

Main Regional Features And Latest Updates

• In our 2023 update to the Alcoholic Drinks Risk/Rewards Index (RRI), Asia ranks second out of our five regions, with an overall
average RRI score of 55.9 out of 100. This is considerably below the first placed North American and Western Europe region, with
an average score of 64.2 out of 100, but well above the third placed Central and Eastern Europe region, with an average score of
48.6 out of 100.
• Australia tops the Asia region, with an overall score of 69.1 out of 100. South Korea (68.7 out of 100) and Mainland China (67.1
out of 100) are a close second and third respectively. South Korea and Australia offer a more developed alcoholic drinks market,
where consumption levels are slowing but spending levels are growing, suggesting a premiumisation trend. This is especially
prevalent in the wine and spirits category. Meanwhile, China offers a more developing alcoholic drinks market, where both
consumption and spending levels are increasing, driven by an attractive demographics profile and rising incomes.
• We highlight Thailand as a market that will benefit from the international tourism recovery. With a high proportion of residents in
the South East Asia region not consuming alcohol, alcoholic drinks majors rely on international tourism to drive growth in the
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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alcoholic drinks market. With the tourism sectors in the majority of markets forecast to recover by 2024, so too will there be a
recovery in the respective alcoholic drinks market.
• We maintain our spotlight on Singapore, which presents opportunities for alcoholic drinks majors due to our positive outlook for
consumer income growths, growing premiumisation and healthification trends as well as its favourable business environment,
which presents low risks for investors. As a connecting destination, the recovery in global tourism also bodes well for the industry.

Relatively Low Risk Region

Asia - Alcoholic Drinks Risk/Reward Index

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch
Solutions

Spotlight On Thailand As Overall South East Asian Tourism Recovers In 2023

We spotlight Thailand as a performing alcoholic drinks market in 2023. The market ranks 12th regionally out of the 18 markets in
Asia and 38th globally, an improvement from the Q223 ranking when Thailand ranked 14th regionally and 40th globally. With a
higher proportion of people that do not drink alcohol, or where the purchasing power of consumers is generally too low, several
alcoholic drinks segments in markets of the South East Asia region rely heavily on tourism to drive spending growth. These markets
have seen significant contractions in the sector’s performance during the pandemic years. With international tourism resuming for
all South East Asian markets in 2023, we believe it will mark the beginning of the recovery in each market's alcoholic drinks
market. With the rapid recovery, and even growth in some cases, in the tourism sectors of these markets, alcoholic drinks sales will
also return to positive growth over the medium term. For our International Tourism Receipts indicator, Malaysia (72.3 out of 100),
Vietnam (67.0 out of 100) and Indonesia (68.1 out of 100) all score above the regional average of 66.4 out of 100. Tourists returning
to popular tourist destinations across the region will drive growth in both consumption and spending on alcoholic drinks over the
medium term in many of these markets. We forecast Thailand to boast the first tourist recovery in the region, surpassing pre-Covid
levels over 2023. All other markets will achieve a similar feat over 2024.

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Tourism To Recover Over 2023 And 2024

South East Asia - Tourism Arrivals, '000 (2019-2027)

e/f = BMI estimate/forecast. Source: Local sources, BMI

The country's improvements in the rankings come from its improved Industry Rewards Profile, with a total score of 52.8 out of 100.
This is driven by the total alcohol consumption component, which scores 80.9 out of 100. Between 2023 and 2027, we forecast
total alcohol consumption in the nation to grow by an average of 3% a year, to a total of 2.7bn litres. The high alcohol consumption
levels are due to Thailand’s large population of nearly 71.8mn, making it an attractive consumer target market. More importantly,
the population will continue to grow through to 2050 with strong birth rates projected. The population is also young, with the
majority in the 20- to 39-year-old bracket, accounting for a projected 27.3% of the total population in 2023, a key demographic that
alcoholic drinks companies, retailers and the hospitality sector target.

Thailand's scores for the Alcohol Spending Per Capita, Alcohol Spending Five-Year Growth Rate and Alcohol Spending Total
indicators (46.8, 24.5 and 76.6 out of 100 respectively) have also all improved from its Q223 performance where the country scored
40.4, 9.6 and 71.3 out of 100 respectively. Thailand’s rapid economic growth, the expansion of households’ disposable income
levels, combined with a large youthful consumer base, are driving greater levels of spending on alcohol, which is leading to greater
wine consumption in the country. Furthermore, Thai consumers have a strong preference for foreign brands, as they view them to
be of higher quality, which creates an opportunity for exporters of foreign beer. A strong international brand appeal has been, and
will remain, instrumental in protecting domestic market share, while facilitating domestic brewers' push into international markets,
particularly given the industry's reliance on the tourism sector. Domestic brewers have successfully entrenched their brand identity
among local consumers (examples include APB's Tiger brand, Singha's eponymous product and ThaiBev's Chang Beer). These
brewers are likely to continue ramping up aggressive marketing and branding initiatives as beer continues to be the alcoholic drink
of choice through to 2027.

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Australia Tops The Asia Region With South Korea And Mainland China Close Second And Third

Australia tops our Asia region and ranks seventh globally, with an overall RRI score of 69.1 out of 100. However, South Korea and
Mainland China are a close second and third, scoring 68.7 and 67.1 out of 100 respectively. All three markets rank in the top 10
alcoholic drinks markets globally. Australia and South Korea have more developed alcoholic drinks markets, supported by better
Risks scores (77.0 and 78.7 out of 100 respectively for our Risks pillar). In these markets, alcoholic drinks spending outperforms
consumption growth, as consumers cut down on their consumption and focus on more premium products. Meanwhile, China
boasts a more developing alcoholic drinks markets, with an attractive demographics profile (it scores 98.9 out of 100 for our Total
Population and 100 out of 100 for our Urban Population pillar) and income growth supporting a rise in both consumption and
spending levels.

Contrast In Alcoholic Drinks Profiles For Top Three Markets

South Korea, Australia & Mainland China - Alcoholic Drinks Risk/Reward Index

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: BMI

South Korea and Australia both boast low-risk operating environments (77.7 and 81.9 out of 100 respectively for our Operational
Risk pillar), with high levels of formalisation in the market (68.1 and 81.9 out of 100 respectively for our Food & Drink Formalisation
pillar). Combined with more wealthy consumers (92.6 and 95.7 out of 100 respectively for our Mass Affluent Class pillar), alcoholic
drinks majors are more willing to retail premium products. South Korea has a strong drinking culture, in particular due to ‘hweshik’,
which is a social obligation in Korean companies for co-workers to go out together for after-work drinks. In addition, while the long-
standing ‘chimaek’ trend of consuming fried chicken with beer has meant that beer has long been the most regularly consumed
alcohol by South Koreans. Many consumers, especially younger generations, are shifting away from consuming large quantities of
the traditionally dominant and cheap beer, into consuming more expensive wine, but in lesser quantities. A similar trend is playing
out in Australia, but with more of a shift into spirits. Australia has a strong drinking culture, and as such, alcohol plays a key role in
many social gatherings and functions with liquor stores located on most streets with a wide range of offerings. Many Australians
also enjoy weekend road trips out to countryside locations such as Yarra Valley in the Australian state of Victoria where they can
enjoy wine-tasting sessions and purchase bottles to bring home.

In China, per capita consumption of alcoholic drinks is still on the rise and is forecast to grow from 47.4 litres per adult in 2023, to
52.6 litres by 2027. The Covid-19 pandemic and its related restrictions sped this up, by changing traditional perceptions around
consuming alcohol at home. Previously, alcoholic drinks consumption, especially wine, was reserved for special occasions and
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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purchases were largely gift-based. With consumers spending more time at home, perceptions shifted, normalising the consumption
of alcohol at home. This was more prevalent among female consumers as well as younger consumers, especially regarding ready-
to-drink products. These tend to have a lower alcohol content and are more palatable, making them an easier choice for these
groups to try alcoholic beverages. These channels will continue to drive both consumption and spending levels over the medium
term (2023-2027).

Alcohol Premiumisation In Singapore

Singapore maintains its ranking of 10th regionally out of the 18 countries in Asia , but has improved to 31st globally from its
previous ranking of 36th. With an overall score of 58.0 out of 100 within our Alcoholic Drinks RRI, Singapore offers an attractive
alcoholic drinks market, which is well developed and open to the most recent trends in the sector. With a score of 99.5 out of 100
for our Food & Drink Formalisation indicator, Singapore has the most urbanised market in the region, making it easier for alcohol
majors to reach a larger pool of consumers. The country's main Rewards offering comes from its Country Rewards profile, scoring an
impressive 90.4 out of 100 for our Mass Affluent Class indicator. Singapore ranks third for the Mass Affluent Class indicator within
the region, illustrating Singaporean consumers wealth levels. Around 80.7% of households (or 1.4mn households) in the market
are projected to have a disposable income of USD50,000 in 2023 and this figure is forecast to reach 88.9% (or 1.6mn households)
by 2027.

Combined with solid scores for our International Tourism Receipts Total (92.6 out of 100) and our International Tourism Receipts Per
Visitor (95.7 out of 100) indicators, the Singapore market offers alcohol companies and those involved in the wider retail and
hospitality sectors with a market that supports two key alcoholic drinks trends (premiumisation and healthification) across a number
of our alcoholic drinks categories.

Premiumisation Taking Hold In Singapore's Alcoholic Drinks Market

Singapore & Asia Regional Average - Alcoholic Drinks Risk/Reward Index Categories

Note: May include territories, special administrative regions, provinces and autonomous regions. cores out of 100; higher score = more attractive market. Source: BMI

Public campaigns advocating responsible drinking are also indirectly fuelling the rise in more premium and more healthy alcoholic
drinks options, albeit at the cost of lower volume. Mainstream commercial beer will be the most affected by these trends, as
consumers shift to smaller quantities of higher-quality beers. The craft beer segment continues to experience double-digit growth,
albeit from a low base, a trend that has been observed in most developed markets. Premiumisation and health awareness will also
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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favour the further development of the wine market. Younger drinkers are driving this trend, with the mentality of 'less but better'
when shopping for their alcoholic beverages.

In 2023, spending on alcohol-free beer, wine and spirits in Singapore will see strong growth. In 2022, Carlsberg launched two
alcohol-free offerings in Singapore, the Carlsberg Alcohol-Free Pilsner and the Carlsberg Alcohol-Free Wheat. We believe
Singaporean consumers who continue to purchase alcohol-free variants will substitute these drinks for their typical alcoholic drinks,
which will contribute to a lower alcohol consumption over the medium term. In October 2022, Singapore-based brewery Trouble
Brewing launched the first Singapore-brewed hard seltzer, Joe's Singapore Seltzer. Brewed and fermented with champagne
yeast and a plant-based sweetener, the beverage has zero sugar, gluten-free and has lesser calories than the average seltzer. We
believe the growing healthification wave in Singapore will underpin the trend of more health-centric alcohol offerings progressively
introduced in the Singapore market.

We believe the premiumisation trend in Singapore will continue over the medium term, with Singaporean consumers continuing to
trade up for lower-volume/higher-value alcoholic drinks, such as wine and spirits. As a result, we forecast wine and spirits
consumption as a share of total alcohol consumption to increase by 0.5 percentage points over the medium term, from 12.9% in
2023 to 13.4% in 2027, while beer consumption will decrease by the corresponding amount over the same period, going from
87.1% in 2023 to 86.6% by 2027. In order to better cater to local flavours, there is a growing number of home-grown gin distilleries
in Singapore producing craft gin with a unique Singaporean touch. Local distilleries such as Compendium, Brass Lion
Distillery and Tanglin Gin often use local ingredients in their recipes, aiming to cater to local consumers seeking a familiar taste
and international consumers looking for offerings unique to Singapore.

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ASIA - ALCOHOLIC DRINKS RISK/REWARD INDEX

Industry Country Industry Country Regional Global
Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank

Australia 64.2 68.1 65.7 69.1 84.8 77 69.1 1 7

South Korea 61.5 68.9 64.5 71.6 85.7 78.7 68.7 2 9

Mainland China 66 75 69.6 48.2 74.1 61.2 67.1 3 11

Taiwan, China 58.5 58.2 58.4 73.8 85.6 79.7 64.8 4 15

Japan 55 63.8 58.5 73.4 80.9 77.1 64.1 5 16

New Zealand 66.5 42.6 56.9 63.1 83.9 73.5 61.9 6 23

Vietnam 64.2 63.3 63.8 51.1 63.3 57.2 61.8 7 24

Malaysia 41.8 73.1 54.4 77.3 70.1 73.7 60.2 8 26

India 56.7 78.7 65.5 37.9 52.8 45.4 59.5 9 29

Singapore 37.6 48.9 42.1 98 91.9 95 58 10 33

Indonesia 47.3 75.5 58.6 41.5 59 50.2 56.1 11 36

Thailand 52.8 63 56.9 56 51.3 53.7 55.9 12 38

Philippines 56.9 71.3 62.7 30.9 46.5 38.7 55.5 13 40

Hong Kong,
43.1 36.2 40.3 94.5 82.1 88.3 54.7 14 41
China

Cambodia 50.8 48.4 49.8 27 23.9 25.4 42.5 15 63

Laos 46.6 43.6 45.4 14.2 21.3 17.7 37.1 16 76

Myanmar 40.5 63.8 49.8 8.5 4.6 6.6 36.9 17 77

Sri Lanka 35.8 34.6 35.3 20.9 27 23.9 31.9 18 90

Global Average 50 50 50 50 50 50 50 ~ ~

Regional
52.6 59.8 55.5 53.2 60.5 56.8 55.9 ~ ~
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

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ASIA - ALCOHOLIC DRINKS INDUSTRY REWARDS

Alcohol Alcohol Alcohol Alcohol Spending Alcohol
Total Alcohol Industry
Consumption 5-Year Spending Per 5-Year Growth Spending Rewards
Consumption Rewards
Per Capita Growth Rate Capita Rate Total

Australia 70.2 12.8 74.5 94.7 42.6 90.4 64.2 65.7

South
52.1 23.4 83 53.2 76.6 80.9 61.5 64.5
Korea

Mainland
34 44.7 100 30.9 88.3 97.9 66 69.6
China

Taiwan,
42.6 67 69.1 58.5 43.6 70.2 58.5 58.4
China

Japan 28.7 33 81.9 75.5 13.8 96.8 55 58.5

New
68.1 39.4 35.1 98.9 83 74.5 66.5 56.9
Zealand

Vietnam 51.1 61.7 92.6 31.9 81.9 66 64.2 63.8

Malaysia 6.4 71.3 24.5 42.6 51.1 55.3 41.8 54.4

India 9.6 70.2 96.8 10.6 67 86.2 56.7 65.5

Singapore 25.5 73.4 14.9 50 34 27.7 37.6 42.1

Indonesia 0 52.1 31.9 35.1 80.9 84 47.3 58.6

Thailand 38.3 50 80.9 46.8 24.5 76.6 52.8 56.9

Philippines 27.7 72.3 84 26.6 68.1 62.8 56.9 62.7

Hong
Kong, 43.6 16 34 54.3 74.5 36.2 43.1 40.3
China

Cambodia 63.8 92.6 66 21.8 37.8 22.9 50.8 49.8

Laos 80.9 84 57.4 17 26.6 13.8 46.6 45.4

Myanmar 11.7 90.4 58.5 21.8 37.8 22.9 40.5 49.8

Sri Lanka 22.3 95.7 46.8 23.4 0 26.6 35.8 35.3

Global
50 50 50 50 50 50 50 50
Average

Regional
37.6 58.3 62.9 44.1 51.8 60.6 52.6 55.5
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

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ASIA - ALCOHOLIC DRINKS COUNTRY REWARDS

Mass International
Urban Spending International Tourism Country
Population Affluent Tourism Receipts Rewards
Population Population Receipts Per Visitor Rewards
Class Total

Australia 57.4 95.7 64.9 54.3 87.2 98.9 68.1 65.7

South
74.5 92.6 79.8 28.7 76.6 78.7 68.9 64.5
Korea

Mainland
98.9 56.4 100 44.7 84 74.5 75 69.6
China

Taiwan,
56.4 77.7 62.8 36.2 77.7 94.7 58.2 58.4
China

Japan 90.4 71.3 93.6 0 90.4 80.9 63.8 58.5

New
19.1 76.6 23.4 51.1 29.8 27.7 42.6 56.9
Zealand

Vietnam 87.2 20.2 78.7 67 67 41.5 63.3 63.8

Malaysia 61.7 63.8 72.3 94.7 72.3 40.4 73.1 54.4

India 100 23.4 98.9 92.6 85.1 92.6 78.7 65.5

Singapore 24.5 89.4 33 48.9 92.6 95.7 48.9 42.1

Indonesia 96.8 40.4 95.7 69.1 68.1 59.6 75.5 58.6

Thailand 84 46.8 77.7 43.6 95.7 86.2 63 56.9

Philippines 89.4 22.3 88.3 85.1 63.8 72.3 71.3 62.7

Hong
Kong, 28.7 68.1 38.3 9.6 80.9 29.8 36.2 40.3
China

Cambodia 46.8 42.6 22.3 81.9 40.4 33 48.4 49.8

Laos 29.8 36.2 14.9 93.6 23.4 16 43.6 45.4

Myanmar 76.6 35.1 60.6 83 33 22.3 63.8 49.8

Sri Lanka 55.3 13.8 19.1 50 26.6 57.4 34.6 35.3

Global
50 50 50 50 50 50 50 50
Average

Regional
65.4 54 62.5 57.4 66.4 61.2 59.8 55.5
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

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ASIA - ALCOHOLIC DRINKS INDUSTRY RISKS

Regulatory Environment Food & Drink Formalisation Logistics Risks Industry Risks Risks

Australia 50 81.9 75.5 69.1 77

South Korea 53.2 68.1 93.6 71.6 78.7

Mainland China 25.5 39.4 79.8 48.2 61.2

Taiwan, China 66 64.9 90.4 73.8 79.7

Japan 29.8 91.5 98.9 73.4 77.1

New Zealand 33 83 73.4 63.1 73.5

Vietnam 74.5 12.8 66 51.1 57.2

Malaysia 84 63.8 84 77.3 73.7

India 40.4 8.5 64.9 37.9 45.4

Singapore 98.9 99.5 95.7 98 95

Indonesia 36.2 30.9 57.4 41.5 50.2

Thailand 77.7 22.3 68.1 56 53.7

Philippines 41.5 16 35.1 30.9 38.7

Hong Kong, China 95.7 99.5 88.3 94.5 88.3

Cambodia 63.8 2.1 14.9 27 25.4

Laos 23.4 10.6 8.5 14.2 17.7

Myanmar 17 6.4 2.1 8.5 6.6

Sri Lanka 12.8 0 50 20.9 23.9

Global Average 50 50 50 50 50

Regional Average 51.3 44.5 63.7 53.2 56.8

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

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ASIA - ALCOHOLIC DRINKS COUNTRY RISKS

Long-Term Short-Term Long-Term
Short-Term Operational Country
Economic Risk Economic Risk Political Risk Risks
Political Risk Index Risk Index Risks
Index Index Index

Australia 88.3 92 81.9 83 81.9 84.8 77

South
95.2 100 84 79.8 77.7 85.7 78.7
Korea

Mainland
86.2 90.4 54.3 88.3 62.8 74.1 61.2
China

Taiwan,
98.9 97.9 67 67 91.5 85.6 79.7
China

Japan 72.3 60.6 89.4 92.6 85.1 80.9 77.1

New
87.2 76.6 86.2 85.1 84 83.9 73.5
Zealand

Vietnam 66 68.1 41.5 91.5 56.4 63.3 57.2

Malaysia 68.1 82.4 45.7 73.4 75.5 70.1 73.7

India 43.6 76.6 46.8 58.5 45.7 52.8 45.4

Singapore 78.7 92 80.9 100 100 91.9 95

Indonesia 69.1 78.7 43.6 51.6 55.3 59 50.2

Thailand 67 59.6 26.6 31.4 61.7 51.3 53.7

Philippines 50 71.3 40.4 53.7 31.9 46.5 38.7

Hong
Kong, 89.4 95.7 30.9 80.9 97.9 82.1 88.3
China

Cambodia 12.8 17 28.7 46.8 19.1 23.9 25.4

Laos 8.5 10.6 18.1 69.1 10.6 21.3 17.7

Myanmar 3.2 13.8 0 0 5.3 4.6 6.6

Sri Lanka 7.4 18.1 39.4 22.3 37.2 27 23.9

Global
50 50 50 50 50 50 50
Average

Regional
60.7 66.8 50.3 65.3 60 60.5 56.8
Average

Note: May include territories, special administrative regions, provinces and autonomous regions. Scores out of 100; higher score = more attractive market. Source: Fitch Solutions

Please Note: Our Risk/Reward Indices are updated frequently and, as a result, the scores in this section may not match the scores
in the rest of the report.

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Market Overview
Food
Owing to Vietnam's vast population, the state's focus on ending its reliance on food imports has been a concern. As a result, the
country's agricultural sector has become one of its most important industries, also serving as a major employment provider,
particularly in rural areas.

Recent Developments

• In May 2023, it was announced that Vietnam is one of the markets that Nestlé is pioneering in applying digital transformation in
logistics activities in order to optimise the transportation/distribution of goods in the domestic market.
• In April 2023, the Vietnam Trade Promotion Agency stated that the country’s food and drinks sector is expected to witness
strong growth, boosted by robust domestic consumption. To meet rising demand, the number of domestic players in the food
market has increased by more than 80% since 2019 to reach more than 5,000 currently.
• In March 2023, leading Vietnam-based dairy producer Vinamilk and Japan-based trading house Sojitz started construction on
a large beef processing complex in the north of the country. Vinamilk is looking at additional revenue streams. The complex will
have the capacity to breed around 10,000 head of beef cattle annually and to process about 30,000. Once the venture takes off,
Vinamilk and Sojitz will expand to pork and poultry.
• In February 2023, the CEO of Unilever, Alan Jope, whilst visiting Vietnam stated that the company will continue to invest in the
country, in terms of production, brand and people development. In South East Asia, Vietnam and Indonesia are the most
attractive markets for Unilever with their large populations and well-managed economies. According to Jope, since per capita
consumption of consumer products in Vietnam is still quite low, there is much room for growth. Unilever has ambitions for the
Vietnamese market, and expects its market to double in the next five to 10 years.

Market Drivers And Trends

Food Processing

Despite a significant proportion of processed food being imported, the consumption of imported products remains fairly low,
although it has increased in the main centres of Ho Chi Minh City and Hanoi. Overall, the Vietnamese food processing industry
remains largely fragmented and is dominated by relatively small domestic operators. However, an increasing number of consumer
goods investors are entering Vietnam, and we expect competitive pressures to heat up quickly. In May 2017, CJ Group spent
USD13.4mn to acquire a 64.9% stake of Minh Dat Food, considered the biggest Vietnamese private meatball company. In late April
and early May 2017, CJ also acquired a 20.0% stake of Cau Tre Export Goods Processing Joint Stock Company after acquiring
a 51.0% stake in the company. Cau Tre specialises in making frozen food from seafood and meat and in tea products.

In November 2014, Mondelēz International acquired an 80.0% stake in the domestic snack company Kinh Do. In 2012,
Philippine food major Jollibee Foods Corporation acquired a 50.0% interest in SuperFoods Group, which would gave it a 49.0%
stake in SF Vung Tau Joint Stock Company in Vietnam and a 60.0% share in Blue Sky Holdings in Hong Kong, China.

In March 2020, Viet-Uc Seafood Corporation was expected to begin construction of a shrimp processing plant in the high-quality
shrimp production complex in Bac Lieu Province. In April 2020, Viet-Uc Seafood Corporation also signed a memorandum of
understanding with BioMar, a Denmark-based supplier of high performance feed for the aquaculture industry, to establish a
collaboration on aquafeed production in Vietnam. This partnership provides Viet-Uc Seafood Corporation with the research and

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development capability to produce 'perfect' shrimp, focusing on provide sustainable, high-quality shrimp to the domestic and export
market.

In March 2023, leading Vietnam-based dairy producer Vinamilk and Japan-based trading house Sojitz started construction on a
large beef processing complex in the north of the country. Vinamilk is looking at additional revenue streams. The complex will have
the capacity to breed around 10,000 head of beef cattle annually and to process about 30,000. Once the venture takes off, Vinamilk
and Sojitz will expand to pork and poultry.

In February 2023, the CEO of Unilever, Alan Jope, whilst visiting Vietnam stated that the company will continue to invest in the
country, in terms of production, brand and people development. In South East Asia, Vietnam and Indonesia are the most attractive
markets for Unilever with their large populations and well-managed economies. According to Jope, since per capita consumption of
consumer products in Vietnam is still quite low, there is much room for growth. Unilever has ambitions for the Vietnamese market,
and expects its market to double in the next five to 10 years.

In February 2021, Vietnam culled more than 100,000 poultry in a bid to contain the spread of bird flu, since small-scale outbreaks
had sporadically occurred in the country over the last few years. Vietnam reported outbreaks of the highly pathogenic H5N1 and
H5N6 bird flu strains in 14 provinces. In July 2021, the H5N8 avian flu variety was also reported in Vietnam's Quang Ninh province
but the impact has so far been limited.

Food Consumption

Vietnam's economic growth has led to the expansion of modern lifestyles and a rise in disposable incomes, particularly in major
urban centres. This has increased consumer demand for snacks, convenience food and premium food items. Domestic food
manufacturers are slowly beginning to respond to this trend and are increasing the range of ready-to-eat and semi-prepared foods.
Domestic food producers also have to respond to increasingly Western consumption habits and brand preferences, particularly
among younger and more affluent consumers. The dairy sector, in particular, has experienced strong growth in recent years,
alongside increasing urbanisation and rising incomes. Huge multinational companies have managed to sway consumer
preferences with their considerable advertising and promotional power, and domestic firms have had to work hard to secure brand
loyalty.

Foreign brands are making better headway than domestic brands in the Vietnamese consumer goods industry. The modest
presence of domestic brands in Vietnam can be attributed to the distribution hurdles faced by local consumer goods players and
the stronger brand appeal and perceived better quality of foreign goods. In our view, local players will need to improve their product
quality and tailor their portfolio to meet the needs of the Vietnamese consumer.

• Distribution Challenges: The majority of domestically produced consumer goods can be found in local supermarket stores
such as Saigon Co-op and Big C. However, domestic consumer firms have a less extensive reach than their foreign
counterparts across the traditional retail channels such as wet markets and independent stores. Given that organised grocery
retail remains a newer concept in Vietnam, traditional retail networks provide the best reach to the end-consumer market, which
explains the weaker presence of domestic brands in the country.
• Perceived Better Quality Of Foreign Goods: Foreign consumer goods are typically considered to be of better quality than
domestically produced goods among local consumers. As foreign consumer goods investors typically have stronger financial
power, they are equipped with a greater capacity to invest in production infrastructure and in research and development to
improve product quality.
• Stronger Brand Appeal Of Foreign Brands: Foreign consumer firms typically enjoy stronger brand appeal than their
domestic counterparts, which can largely be attributed to the aggressive branding initiatives they employ. Foreign brands, such
as US coffee firm Starbucks, are generally associated with social prestige. As consumer affluence grows, more consumers are
likely to associate themselves with foreign rather than local brands.

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With more multinationals entering Vietnam looking to benefit from the country's dynamic consumer growth story, domestic
companies are likely to find it more difficult to compete for market share gains. Thai brewer Singha, Philippines-based fast-food
chain Jollibee and Japanese retailer Aeon are looking to further expand in Vietnam, fuelling competitive pressure for domestic firms.
As competition heats up, domestic firms must tailor their product offerings to cater for the unique tastes of the Vietnamese
consumer and improve their product quality to compete against their foreign counterparts. Domestic companies typically have a
competitive advantage over foreign companies with regard to understanding local market needs and preferences and they could
use this insight to grow their market share. Although domestic firms have a weaker competitive advantage in terms of distribution
reach, the ongoing spread of organised grocery retail is likely to ease distribution challenges for these companies.

In April 2023, the Vietnam Trade Promotion Agency stated that the country’s food and drinks sector is expected to witness strong
growth, boosted by robust domestic consumption. To meet rising demand, the number of domestic players in the food market has
increased by more than 80% since 2019 to reach more than 5,000 currently.

Food Services

Over the years, Vietnam’s growing urban population and increasing disposable incomes have contributed to the healthy growth of
the consumer food service. Since Vietnam reported its first cases of Covid-19 in January 2020, the government stepped up its
efforts to curb the spread of the virus including the closure of eateries that have more than 30 seats. With social distancing orders
enforced in some areas, many businesses were impacted as revenues from dine-in customers plummeted.

Despite Vietnamese consumers having predominantly traditional tastes when it comes to eating out, international fast-food brands
are beginning to make inroads into the market. KFC was one of the first major Western brands to arrive in the country, opening its
first outlet in 1997 and now boasting more than 140 outlets in cities across the country. Pizza Hut opened a decade later and
reached its 100-restaurant mark in January 2021. Their main challenger Domino's Pizza opened in Vietnam in 2010 and has
around half the number of outlets. South Korea-based Lotteria sells burgers, fried chicken and other traditional fast foods. Since its
establishment in Vietnam in 1998, it now has more than 210 restaurants across the country.

US fast-food giant McDonald's launched its first restaurant in Vietnam under franchise in 2014 in the commercial capital Ho Chi
Minh City. Vietnam is the 38th Asian market that McDonald's has entered. Despite plans to open 100 outlets across the country in
10 years, it has only 20 stores in the country as of 2022. Burger King also had ambitious expansion plans when it entered the
Vietnamese market in 2011 (expecting to have opened 60 outlets by 2017). As of 2021, the food chain had 23 outlets across the
country. The company has reportedly closed some of its outlets, but pledges not to exit the market entirely. The disappointment of
these two fast-food chains comes from the wide array of street food options in the country, which are often faster for consumers to
grab and go without the queue and checkout at McDonald's or Burger King. In July 2019, Australian restaurant chain Oporto
announced plans to launch in Vietnam under local franchisee Ben Thanh Group, planning to open 24 restaurants across the
territory in the next 10 years.

The first Jollibee fast food store was opened in Vietnam in 2005. The chain has announced an aggressive expansion plan for
Vietnam, looking to expand at a rate of 20-30 stores per year. By March 2022, the company had 150 stores in the country.

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Drink
In the coming decade, as incomes continue to rise, coffee consumption in Vietnam is expected to grow as coffee becomes more
accessible to the general population. Carbonated soft drinks are also expected to outperform, largely supported by purchases made
by young people with low incomes.

Recent Developments

• In March 2023, the beverage sector in Vietnam called for a delay in the country’s proposed tax increase on alcohol, stating that
the industry is at risk from high inflation, increased material costs and low demand. Alcohol, tobacco and sugary drinks could be
subject to an increased excise tax aiming to improve community health.
• In February 2023, Japan-based coffee chain % Arabica announced plans to expand into Vietnam opening its first store in Ho Chi
Minh City, with other stores to follow in Vietnamese cities including Hoi An, Hanoi and Phu Quoc.
• In February 2023, Sabeco reported a 33% jump in revenues for FY22 to VND35.2trn as consumption bounced back after the
Covid-19 pandemic. Profits surged by almost 40% to VND5.5trn. Higher input costs impacting on price have been minimised by
improvements in production efficiency and in cost-saving measures.
• In February 2023, Masan Group announced that it is targeting international expansion for Phuc Long Coffee & Tea during
2024 and is looking for the brand to become the largest coffee and tea chain in Vietnam 'within a few years'. Based on the
current level of growth, Masan Group expects the coffee chain to become Vietnam's second largest in terms of outlets by the
end of June 2023.
• In December 2022, Heineken CEO Dolf van den Brink, on a trip to Vietnam, said that the brewer has invested USD1bn in the
country to date and will continue to invest USD500mn over the next decade.
• In December 2022, it was reported that Jollibee Foods was in advanced discussions to sell a minority 10% to 15% stake in
Vietnam-based coffee chain Highlands Coffee.

Market Drivers And Trends

Hot Drinks

In the 1990s, a coffeehouse chain trend developed in Vietnam, as the country’s economy begin to grow after the Doi Moi (renewal/
new age) reforms introduced by the Vietnamese authorities in 1986 saw increased privatalisation and a greater role of market
forces. This led to an overall rise in the livelihoods and wages of Vietnamese consumers. It also led to the development of domestic
chains, with the first, Trung Nguyen, opening in 1998, followed quickly by the Starbucks-inspired Highlands Coffee in 2002. In
2022, other similar coffeehouse chains populated the country such as Cong Coffee, The Coffee House, Phuc Long Coffee And
Tea. While it is mainly domestically developed coffee chains that exist in Vietnam, there are some international franchises that have
broken into the segment. The US-based Coffee Bean and Tea Leaf entered Vietnam in 2006. In 2013, US-based coffee giant and
breakfast coffee and snacks chain Dunkin' Donuts entered the market, opening their first stores in Ho Chi Minh City.

Despite the rise of Vietnamese incomes and the growing premiumisation trend of coffee in Vietnam, international brands continue
to struggle to perform in the market. Vietnamese coffee giant Highlands Coffee currently dominates the coffee chain market, with
478 stores in the country, with Trung Nguyen coming in as a close second at 454 stores. International brands, such as Coffee Bean
and Tea Leaf, have been operating in the country, but with limited success. The company entered Vietnam in 2006 and, despite the
company's initial plan to expand rapidly in the country, have only eight stores in the country. Other global players like Dunkin'
Donuts are also facing a similar issue in terms of expansion prospects. Australia-based Gloria Jeans left the market in 2017, after
failing to attain sustainable growth. Even the most successful foreign player, Starbucks (77 stores), has less than half the stores of its
nearest competitor Vietnam-based The Coffee House, with 152 stores.

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This is primarily due to the inability of international brands to capture the tastes of Vietnamese consumers. As mentioned,
Vietnamese coffee primarily uses Robusta beans, catering to local consumption preferences. In contrast, the international players
tend to offer Arabica coffee, which consumers are not used to. In a country where approximately 95% of coffee production is
Robusta, the use of Arabica beans also means that most of the coffee beans used by the international players have to be imported
and the increased operational costs are then passed over to the consumers in the form of higher prices, sometimes twice that of
domestic players. The higher prices and different taste offerings mean that large consumer segments of the emerging Vietnamese
economy continue to see visiting these international chains as an occasional treat. In terms of actively replacing domestic chains as
their daily coffee consumption, many still do not see the value-proposition of paying more for a coffee that is not their preferred
taste.

While the Vietnamese coffee industry is set to post strong growth over the medium term, it will be underpinned by the relatively
attractive consumer market more widely. With a projected population of 98.9mn in 2023, of which 39.5% (or 39mn) live in cities and
towns (thereby offering the benefits of urbanisation for formal retail and developed logistics links), Vietnam offers a large consumer
market for coffee majors to target. Vietnam’s demographic profile is attractive, with 30.8% of the population, or 30.4mn people in
the key 20-39 year old age group. This age group traditionally is in the early stages of their careers, with disposable incomes,
allowing them to make more frequent purchases. This is also the age bracket that traditionally adheres to trends, making them a
key target market for consumer-facing companies. As the coffee culture develops, this age group will be key, as they also tend to
enjoy the social aspect.

In December 2022, it was reported that Jollibee Foods was in advanced discussions to sell a minority 10% to 15% stake in Highlands
Coffee. In February 2023, Masan Group announced that it is targeting international expansion for Phuc Long Coffee & Tea during
2024 and is looking for the brand to become the largest coffee and tea chain in Vietnam 'within a few years'. Based on the current
level of growth, Masan Group expects the coffee chain to become Vietnam's second largest in terms of outlets by the end of June
2023. In the same month, % Arabica announced plans to expand into Vietnam opening its first store in Ho Chi Minh City, with other
stores to follow in Vietnamese cities including Hoi An, Hanoi and Phu Quoc.

The crowded coffee segment is expected to become more competitive, especially among local companies that have a more
intuitive grasp of the local market and what consumers are looking for. This is apparent from the fact that Trung Nguyen,
Highlands Coffee, Passio and VinaCafé are all launching morning stores or outlets that serve the lower- and middle-income
consumer, a strategy that aims to serve a larger proportion of the population. This is in stark contrast to Starbucks's more upmarket
branding strategy, which is yet to pay off in Vietnam.

Soft Drinks

Per capita consumption of soft drinks in Vietnam is still low, but it is growing quickly and becoming more dynamic on the back of
positive demographic trends and rising consumer affluence. The country's large youth consumer group holds potential for strong
future growth in the carbonated soft drinks sub-segment. The soft drinks sector is dominated by multinationals The Coca-Cola
Company and PepsiCo. In 2013, PepsiCo signed a strategic alliance with Suntory Beverage & Food Limited, under which
Suntory PepsiCo Vietnam Beverage (SPVB) operates. The Coca-Cola Company is set to open a USD300.0mn production facility
in Hanoi, which will make it the fourth factory in the country. Other multinational players include the Taiwanese Uni-President,
which acquired SaiGon Beverages Joint Stock Company (Tribeco) in 2012, and Nestlé through its popular bottled water brand
La Vie.

In June 2020, Vinamilk and Kido signed a memorandum of understanding to set up a joint venture, Vibev, producing ice cream
and healthy non-carbonated soft drinks. Vinamilk and Kido will own 51.0% and 49.0% of the new entity's shares respectively. This
resolution was approved in February 2021, and Vibev products were slated to be sold to customers by April 2021. Kido Group's
representative noted that they are 'very optimistic' on the potential of the joint venture and believe that this tie-up will help them to
capitalise on the Vietnamese beverage market.

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A noteworthy aspect of the Vietnamese drinks market is that the major focus of multinational soft drinks manufacturers is on
carbonated beverages, while small local drink firms produce other types of drinks and compete among themselves for the
remaining market share.

In March 2023, the beverage sector in Vietnam called for a delay in the country’s proposed tax increase on alcohol, stating that the
industry is at risk from high inflation, increased material costs and low demand. Alcohol, tobacco and sugary drinks could be subject
to an increased excise tax aiming to improve community health. According to the Vietnam Beer-Alcohol-Beverage Association, it is
too early to fully assess the impact of tax rises or the addition of sugary drinks to the list of special taxable goods because the
changes are only tentative.

Alcoholic Drinks

The government levies substantial duties on all imported alcoholic beverages along with consumption taxes. In January 2017, the
tax rate on beer and spirits increased from 55.0% to 60.0% with further tax hikes planned. As a result, a substantial black market for
smuggled products has developed and the government estimates that a third of spirit sales come from smuggled goods.

The Vietnamese government targeted excessive consumption of alcohol by the January 2020 introduction of a ban on the
advertising of alcohol on radio and TV from 18:00 to 21:00 or before or after children's programmes. Another bill that aimed to
restrict the hours for alcohol sales failed to pass in parliament. However, the enforcement of laws against driving under the influence
may cause alcoholic drink sales and revenues to decrease, and there has already been anecdotal evidence that this is the case.

The government may enact further regulations limiting alcohol sales and consumption. This is amid concerns about underage
drinking, which may be worsened by the fact that many drinks that have the same alcohol content as beer (4%-5%) are not labelled
as alcoholic in the country.

Owing to the inherent price-sensitivity of Vietnamese consumers, the majority of alcoholic drink products in the country are at the
economy end of the market. However, this is changing gradually, particularly within wealthier urban centres, and the brewing
industry is a major driver of the slow move towards premiumisation.

Western immigrants and tourists remain the biggest consumers of wines and spirits in Vietnam. Nevertheless, domestic drinking
habits are changing in line with higher consumer incomes and greater exposure to Western cultures. Traditional alcohol
consumption habits of the Vietnamese consumer involves cheap beer and whiskies. However, we are now witnessing a shift in
consumption habits towards quality wines at reasonable prices. Wines are often perceived as a symbol of social prestige and, as
living standards improve, the demand is likely to increase.

Beer

Despite rising foreign interest in recent years, domestic brewers continue to dominate. Saigon Beer Alcohol Beverage Corporation is
the market leader, accounting for 45%-50% of beer sales in the country, with a very strong presence in the south. Hanoi Alcohol
Beer and Beverage Company (Habeco) is another leading player, with a strong presence in the north. The dominance of
domestic state-backed brewers in their respective regions shows the less competitive nature of the sector. This is set to change as
foreign presence increases and the Vietnamese state reduces its stake in these two brewers. Sabeco was sold to ThaiBev,
Thailand's largest beverage enterprise, in December 2017. The deal, worth USD4.8bn for a 53.9% stake, was considered the largest
merger and acquisitions deal in Vietnam at the time. In November 2018, the company announced that it had removed its cap on
foreign ownership. After acquiring 100% of shares in Vietnam-based Hue Brewery, Carlsberg is planning to increase its shares in
Habeco, Vietnam's second-largest beer maker, from 17.5% to 61.8%.

In January 2021, AB InBe

InBevv acquired Vietnam's SAB Beer after having received the green light from the Ministry of Industry and
Trade. A legal representative of AB InBev said that the merged company will have the capacity and resources to operate with 'higher
productivity' and to 'improve both competitiveness and quality' in the Vietnamese market. SAB Beer's brewery will produce
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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Budweiser and Beck's while AB InBev's local brewery will continue to brew Hoegaarden beer and some products for the
Japanese and South East Asian markets.

Foreign brewers have increased their presence in Vietnam in recent years. Among international companies, Heineken has
established the strongest presence through majority-owned Vietnam Brewery Limited - the second-largest beer company in the
country - and fully owned Asia Pacific Brewery (Hanoi). In December 2022 Heineken CEO Dolf van den Brink, on a trip to
Vietnam, said that the brewer has invested USD1bn in the country to date and will continue to invest USD500mn over the next
decade.

Other players include SABMiller, now under AB InBev (through a 50/50 joint venture with Vinamilk), Carlsberg (operating both
alone and through its stake in Habeco) and AB InBev, which opened its first brewery in the country in June 2015. Japanese brewers
Sapporo, Kirin and Asahi also operate in the country, alone or through joint ventures. Finally, Thai beer company Singha is also
increasingly interested in entering the market, due to stagnating sales in its home market.

Wine

Vietnam has seen its main wine import partners change over the past decade. Historically, France has always been the country's
main wine partner, accounting for 68.5% of all total wine value imports in 2001. However, the dominance of French wines in
Vietnam has gradually been reduced. We point to three main reasons for this:

• New World began aggressively expanding their wine offerings.

• Consumers are demanding more affordable, as well as different, wines.
• Trade deals have lowered market prices.

By 2020, French wine only accounted for 22.6% of total Vietnamese wine imports. Italy and Chile accounted for just 1.4% and 0.4%
of total wine imports in 2001. By 2020 (latest data available), Italian wine was the largest partner, accounting for 29.9% of
Vietnamese wine imports, while Chilean wine accounted for 23.3%.

Red wines account for the large majority of Vietnamese wine imports at approximately 80%. Red wine has historically been the
most popular varietal. The most popular varietals are French reds from Bordeaux, Chilean Cabernet Sauvignons and red blends.
White wine typically accounts for between 10% and 15% of total wine imports and mostly comes from Chile, with Sauvignon Blanc
and Chardonnay being the most popular.

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Mass Grocery Retail

As the number of supermarkets and shopping centres increased over the past five years, the number of the traditionally dominant
position of open-air markets in urban areas has gradually decreased. Modern mass grocery retail outlets are concentrated around
Vietnam's major urban centres, particularly Hanoi and Ho Chi Minh City, although also appearing in smaller central towns and cities.

Recent Developments

• In May 2023, Saigon Co-op and Urbox signed a cooperation agreement under which they will jointly launch Co-opmart e-
vouchers to continue improving customer service. In the short term, the e-vouchers will be accepted for use at the retailer’s
supermarkets and hypermarkets nationwide, with the programme then extended to other Saigon Co-op banners and outlets.
• In March 2023, it was reported that Vietnam-based conglomerate Vingroup is in talks to sell a stake in its shopping mall unit
Vincom Retail. The latter operates 83 shopping malls in Vietnam with Thailand-based retail giant Central Retail, believed to be
interested in acquiring the stake.
• In February 2023, Central Retail Group of Thailand announced plans to invest USD1.5bn in Vietnam over the next five years.
The group is looking to double the number of its stores to 600 and reach a sales target of USD4.3bn by 2027. During 2023,
Central Retail plans to invest USD173.1mn in the Vietnamese market where it operates Go hypermarkets and Tops supermarkets
amongst other banners.
• In January 2023, Japan-based AEON Group revealed plans to expand in Vietnam with the ambition to open 100 supermarkets
by 2025 as well as tripling the number of malls in the country. The retailer is also seeking more market share in the central
region, with its first mall in Hue due in 2024.
• In November 2022, South Korea-based retailer GS25 achieved a milestone in Vietnam when the business extended its
operations to 200 stores in the country.

Major Players

Saigon Co-op remains the domestic market leader within the country's MGR sector. As Vietnam's leading retailer, it has around 200
convenience stores and almost 75 supermarkets. The majority of its stores are located in Ho Chi Minh City, where Co-op controls
50% of the supermarket sector. It also has a chain of convenience stores called Co-op Food. Its network is oriented towards low-
income consumers, while it increasingly resembles the modern retail concept thriving in the country. In July 2019, the company
fully acquired French retailer Auchan's Vietnamese operation. Accordingly, Saigon Co-op took over 18 stores, 15 of which the
French retailer had previously closed, three that had been operating at a profit, and the e-commerce platform and online application
from Auchan Vietnam. However, as competition from foreign retailers has increased in recent years, Saigon Co-op has had to
innovate. In January 2020, it launched a new supermarket concept, Finelife, in Ho Chi Minh City. The store occupies a 660sq m area,
featuring more than 4,000 premium items including organic food, cosmetics, utensils, garments and imported beverages. In January
2021, Saigon Co-op said it launched new Co-op Food stores in several provinces across Vietnam and aims to expand its network to
at least 2,000 stores across Vietnam.

Big C is the leading player in the hypermarket format and has 35 stores (hypermarkets and supermarkets) as of August 2017. In
May 2016, Casino Group sold its Vietnamese operations of Big C to Thailand's Central Group as part of its programme to reduce
its debt burden and to focus on its core assets. While its upmarket positioning compared with Saigon Co-op means that it does not
have access to lower-income consumers, we believe that the retailer will strongly benefit from rising incomes.

In March 2022, Japan-based Sumitomo Corporation announced it will expand its FujiMart grocery supermarket chain in
Vietnam, opening 50 new stores by 2028. Sumitomo signed an agreement to extend its partnership with BRG Group, one of
Vietnam's leading, private, multi-sector, enterprises, to develop the FujiMart chain. The first FujiMart store opened in Hanoi in 2018,

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with three currently in operation. The partners planned to open five to 10 new stores per year, beginning in 2022.They are expected
to have about 50 stores in big cities by 2028.

In September 2019, a consortium led by GIC paid USD500.0mn for a minority stake in a retail unit of Vingroup JSC. The
consortium acquired a stake in VCM Services and Trading Development Joint Stock Company, a unit that Vingroup set up to
oversee the operations of its supermarket and convenience store chains. VCM operates VinMart+ and VinMart outlet stores in
Vietnam. Vingroup has more than 108 VinMart supermarkets and some 1,700 VinMart+ convenience stores, continuing to
strengthen its portfolio in convenience stores. Its retail arm VinCommerce, which manages Vinmart supermarkets and Vinmart+
convenience stores, will update infrastructure, staff and goods at the acquired stores. Vinmart also launched virtual stores in June
2019. Each store provides images and QR codes of more than 100 product groups for customers to scan and order via the VinID
app. The products are then delivered in two to four hours.

Japan-based FamilyMart also operates in the segment. South Korea's GS25 is expanding in Vietnam, after entering the market in
2018 through a joint venture with the SonKim Group.GS25 achieved a milestone in Vietnam when the business extended its
operations to 200 stores in the country in late 2022 but plans for 2,000 over the next decade. Japan's 7-Eleven, under the Seven &
I Holdings Company, signed a franchise contract with Vietnam's Seven System. It currently operates 24 stores and plans to build
1,000 new stores, mostly focused on Ho Chi Minh City and Hanoi. Having been present in Vietnam since 2008, Lotte Group has
invested more USD390.0mn there The company has 14 shopping malls, one department store, and two duty-free shops operating
across the country. Meanwhile, Vietnamese petroleum retailer Petrolimex announced plans to build a convenience store chain in
May 2019. The group plans to add stores across its network of 5,200 locations across the country.

In December 2019, MM Mega Market Vietnam Company officially launched its first retail MM supermarket in Vietnam, with a
total area of 7,000sq m and more than 10,000 products.

In January 2023 Japan-based AEON Group revealed plans to expand in Vietnam with the ambition to open 100 supermarkets by
2025 as well as tripling the number of malls in the country. The retailer is also seeking more market share in the central region with
its first mall in Hue due in 2024.

While several international retailers are already present in the market, we believe that Vietnam will continue to offer the greatest
investment opportunities in South East Asia, as the MGR market is still highly fragmented and will continue to expand. In June 2014,
Auchan and CT Group signed a partnership to open supermarkets in the country, illustrating the appeal of the Vietnamese market.
In March 2020, the first Matsumoto Kiyoshi Vietnam store opened, with 10 to 15 stores projected to open in the next five years,
before expanding to hundreds of outlets. Matsumoto Kiyoshi Vietnam features health food, functional foods and beauty products
from Japanese brands including exclusive product lines such as Blanc White and Argelan. We believe that the entrance of leading
global retailers such as Tesco, Carrefour or Walmart is unlikely, as they are refocusing on domestic activities and overseas
operations in places where they have the potential to become market leaders. The exit of German Metro in August 2014 illustrates
this dynamic.

Market Drivers And Trends

Vietnam's rapid economic development is likely to spur the emergence of a new consumer class in major urban centres which is
interested in modern consumption trends and can afford to participate. This will help grow sales in the MGR sector since it will
guarantee a growing consumer segment that is receptive to branded food and drink products. As consumers become more
affluent, we expect them to embrace formal food retail and gradually move up the value chain, switching to higher price points. We
forecast household incomes to increase rapidly over our forecast period, with the USD5,000-USD10,000 income bracket
experiencing the greatest gains in the next five years.

The Covid-19 pandemic resulted in a greater focus on health and wellness and dining at home, as well as a broad-based shift
towards e-commerce. As Vietnamese consumers become accustomed to these habits, many of these are likely to become
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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permanent changes in the post-Covid environment. Supermarkets and grocery stores were one of the few retail operations that
were allowed to remain open and saw greater footfall. In the context of Covid-19, growth of large modern trade formats including
hypermarkets and supermarkets outpaced that of traditional trade formats. This is due to the wide variety of products, brands and
pack sizes which they offer, which Vietnamese consumers preferred to reduce travel and social contact. During the uncertainty
from the pandemic, Vietnamese consumers visited hypermarkets and supermarkets more often than before.

In addition to their brick-and-mortar stores, modern trade retailers also saw other channels face a surge in demand. For instance,
supermarket operator Saigon Co-op saw its telephone orders surge upwards by four to five times, and visits to its e-commerce
platform increase tenfold since January 2020. This suggests an overall shift towards greater omnichannel shopping.

Owing to the higher profitability per store for supermarkets and hypermarkets, these formats will continue to dominate the MGR
sector. These formats, often anchored in shopping centres, are proving popular among consumers and reflect increasingly Western
modes of consumption. In our view, they also provide a stronger alternative to wet markets or traditional small-scale outlets for
consumers who seek more product diversity. In line with rising incomes, Vietnamese consumers are increasingly demanding more
product variety. As a result, supermarkets and hypermarkets are expanding their product offering with food sold alongside
products including toys, gifts and electrical appliances. In fact, MGR outlets in Vietnam focus more on non-food items than similar
stores in the West. Daily food items are still, for the most part, purchased from markets.

Despite rapid expansion of modern trade outlets across Vietnam, traditional grocery retailers still have an important role to play in
the overall retail market and continue to exhibit steady growth. For many rural consumers and lower-income urban consumer
segments who need to budget daily for food and make purchases in small quantities, traditional grocery retailers, such as local
markets and mom-and-pop stores, are a convenient and affordable alternative to modern trade outlets, such as supermarkets.

Although Vietnam is equipped with the aforementioned elements that are necessary to support strong growth in mass grocery
retailing, the sector is unlikely to reach its full potential in the near future. Organised retail accounts for less than 20% of overall
grocery sales, highlighting the prevalence of mom-and-pop shops. In our view, the low degree of formalisation, combined with
market fragmentation, allows for new entrants.

While Vietnam has traditionally had a restrictive business climate, we expect ongoing reforms and the recent liberalisation of the
retail sector to attract foreign interest. Vietnam is still a volatile place to do business due to a lack of transparency in laws and
regulations, poor transport infrastructure that complicates distribution, and rising labour costs. Nonetheless, the government is
stepping up efforts to reform the business climate and attract foreign investment. Regulations surrounding foreign direct
investment in the retail sector were relaxed in January 2015 and 100% foreign ownership is now allowed. We therefore expect
foreign interest to pick up over the coming years.

The fresh fruit business may be an area that supermarkets should increase their offerings in to capitalise on growing incomes and
appetite for variety. Vietnam's increasing GDP per capita and a growing middle class will allow its citizens to consume higher-priced
fresh produce.

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Competitive Landscape
KEY PLAYERS IN VIETNAM'S FOOD SECTOR
Company Sub-Sector Ownership

Bibica Corp Food - confectionery Private company

Ha Long Canned Food Joint Stock Food - canned seafood, meat, fruit and Private company
Company vegetables

Hanoi Milk Joint Stock Company Food and beverages - dairy Public company: Hanoi Stock Exchange

Masan Consumer Food - instant noodles, sauces Parent company: Masan Group Corporation

Nam Viet Corporation Food - seafood Public company: Ho Chi Minh Stock Exchange

Nestlé Vietnam Food and beverages Parent company: Nestlé

San Miguel Pure Foods Vietnam Food and beverages - miscellaneous Parent company: San Miguel Pure Foods International,
Limited

Sao Ta Foods Joint Stock Company Food - seafood Parent company: Hung Vuong Corporation

Unilever Vietnam Food and beverages Parent company: Unilever

Vinamilk Food - dairy Public company: Ho Chi Minh Stock Exchange

Source: Trade press, company data, Fitch Solutions

KEY PLAYERS IN VIETNAM'S DRINK SECTOR

Company Sub-Sector Ownership

Coca-Cola Vietnam Beverages - soft drinks Parent company: The Coca-Cola Company

Habeco Beverages - alcoholic Majority owner: Ministry of Industry and Trade Vietnam

Hanoi Milk Joint Stock Company Food and beverages - dairy Public company: Hanoi Stock Exchange

Nestlé Vietnam Food and beverages Parent company: Nestlé

Pepsi-IBC Vietnam Beverages - soft drinks Parent company: PepsiCo

Sabeco Beverages - alcoholic Majority owner: ThaiBev

San Miguel Pure Foods Vietnam Food and beverages - Parent company: San Miguel Pure Foods International,
miscellaneous Limited

Tan Hiep Phat Group Beverages - alcoholic and soft Private company

Trung Nguyen Corp Beverages - coffee Parent company: Trung Nguyên

Unilever Vietnam Food and beverages Parent company: Unilever

Vietnam Brewery Beverages - alcoholic Parent company: Heineken Asia

VinaCafé Bien Hoa Joint Stock Beverages - hot drinks Public company: Ho Chi Minh Stock Exchange
Company

Vinamilk Beverages - dairy Public company: Ho Chi Minh Stock Exchange

SAB Beer Beverages - alcoholic Parent company: Anheuser-Busch InBev

Source: Trade press, company data, Bloomberg, Fitch Solutions

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KEY PLAYERS IN VIETNAM'S MASS GROCERY RETAIL SECTOR

Parent Company Market Of Origin Ownership Fascias Format

Saigon Co-op Vietnam Private company Co-op Mart Supermarkets

Co-op Convenience
stores

Co-op Food Convenience

stores

CP All Thailand/ Parent company: CP Group FreshMart Convenience

Vietnam stores

Central Group Thailand Parent company: Central Group Big C Hypermarkets

Hanoi Trade Corporation Vietnam Private company Hapro Supermarkets

Hapro Convenience
stores

Saigon Trading Vietnam Private company Saigon Supermarkets

Corporation

Dairy Farm Vietnam Parent company: Dairy Farm International Giant Hypermarkets
Holdings

Seiyu Japan/Vietnam Parent company: Seiyu Seiyu Supermarkets

BJC TCC Group Vietnam Parent company: BJC TCC Group MM Mega Hypermarkets
Market

Vingroup Vietnam Parent company: Vingroup VinMart Supermarkets

Lotte Co Ltd South Korea Parent company: Lotte Co. Ltd. Lotte Mart Hypermarkets

Source: Company financials, Trade press, Bloomberg, Fitch Solutions

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Company Profile
Carlsberg
Strengths Weaknesses
• Carlsberg's strong financial capacity enables it to make • Distribution infrastructure remains problematic; having brewing
significant capital investment without the need for immediate facilities in separate regions overcomes this despite the
returns. obvious expense.
• The famous Carlsberg brand is popular with young, brand- • Carlsberg lacks a presence in the economy end of the price-
oriented consumers. sensitive market.
• Early pursuit of a diverse regional presence has given Carlsberg
a head start.
• Carlsberg acquired Scottish & Newcastle's expansionary
Vietnamese business, significantly lifting its output.
• Corporate social responsibility (CSR) and socio-cultural
programmes such as football tournaments have been met with
relative success.

Opportunities Threats
• The return of international tourism will likely be a boost to beer • We expect real household spending growth to be inhibited in
sales. 2023 due to the effects of increased inflation.
• Economic growth is likely to boost sales of Carlsberg's premium • Households will increasingly have to allocate disposable
international brands. income towards debt financing, placing downward pressure on
• Small-scale brewers, struggling with increased competition, consumer spending going forward.
could be acquisition targets. • In line with market liberalisation, the beer market is expected to
• Strong perceived CSR and strengthened brand recognition in receive a flood of investment in the coming years, dramatically
consumers may help enhance sales. increasing competition levels.
• While beer dominates alcoholic drinks spending in Vietnam,
wine and spirits are outpacing beer in terms of growth.
• While wine and spirits still lag behind in sales, demand for forms
of alcohol other than beer is rising, as real incomes rise.

Company Overview

Carlsberg entered Vietnam in 1993 via the acquisition of a 60.0% stake in South East Asia Brewery in northern Vietnam. It has since
expanded, acquiring 50.0% of Central Vietnam's Hue Brewery in 1994, and 30.0% of Ha Long Brewery in the north east in early
2007, and acquiring the remaining 50.0% in 2009. The Danish company now has a market share of around 10.0% in Vietnam, which
increased following the completion of the Hue Brewery acquisition. It is the country's second-largest international player (fourth
overall), behind Heineken-backed Asia Pacific Breweries.

Strategy

One of Carlsberg's key objectives is to improve its regional presence. In 1994, Carlsberg formed a joint venture with the Thua Thien
Hue Province People's Committee for the construction of the Hue Brewery. The brewery is now 100% owned by Carlsberg after
acquiring a 50.0% stake from its partner in 2011.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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Carlsberg's focus remains on economy local brands, such as Hue. However, it is increasingly targeting tourists and wealthy urban
residents with its premium Carlsberg brand. As the Vietnamese beer market continues to attract major investment,Carlsberg will
want to ensure that its early entry will see it retain a favourable position. Inorganic growth will be integral to this and Carlsberg is
expected to play an active role in the future auction of small-scale brewers. With its increased stake in Hanoi Beer Alcohol and
Beverage Joint Stock Corp (Habeco), the company is optimistic about achieving market leadership, after which regional growth is
likely to become a priority. The company has also been investing in marketing and brand building and is now the sponsor of the
Carlsberg Golf Classic in the region.

Recent Developments

2023

In February, Carlsberg reported full year results for 2022. In Vietnam, the market recovered strongly after the Covid-19 pandemic,
growing by more than 20% (YTD November), albeit with large regional differences due to the different implementation of Covid-19
restrictions during 2021. The company achieved strong volume growth of more than 25%, driven by the local Huda brand and the
international premium brands. In addition, the brewer strengthened its route-to-market, expanding the coverage and number of
outlets selling the products, and increased its marketing investments.

2022

In November, Carlsberg launched a challenge, providing free beer to consumers who are able to pronounce the brand's name to an
AI-infused billboard with an automatic beer dispenser. The challenge was inspired by the fact many Vietnamese consumers have
difficulty in pronouncing the brand's name. The initiative aims to strengthen the brand's presence in the country, partly in the
southern regions, where the brand is less popular.

In April, following the Russian invasion of Ukraine, Carlsberg announced that it would be selling its Russian assets and focusing more
on its Asia business unit, including the company's business in Vietnam.

2021

Carlsberg noted in its Q321 guidance that a number of APAC markets, including Vietnam, were witnessing slower recovery owing to
the emergence of Delta and Omicron variants and the restrictive recovery measures including social distancing still in place at the
time.

In April, Carlsberg announced that it saw a good start to the year in India and Vietnam, while markets such as Nepal and Malaysia
were impacted by lockdowns and restrictions.

2020

In October, Carlsberg Vietnam and local committee 'Vietnam Fatherland Front' donated 6,000 care packages to citizens in the six
hardest-hit provinces following severe floods. The packs contain urgently needed drinking water, food and other essentials.

In July, Carlsberg said that its Q2 net profit dropped 7.3% to USD458mn as all its markets were affected to a greater or lesser extent
by the global Covid-19 outbreak.

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In April, Huda, a brand owned by Carlsberg Vietnam, launched a CSR campaign 'Fresh water for beloved Central' across four central
provinces in Vietnam to tackle the lack of clean water that central Vietnam residents face. The project was set to positively impact
15,000 local people across nearly 4,000 households. At the same time, Carlsberg Vietnam launched a new product line, Festival
Beer, while making a donation of VND2.0bn to support the frontline forces of the central provinces contending the Covid-19
pandemic.

The new drunk driving law, enforced in 2020, may hurt revenues and profits of beer makers, including Carlsberg, as many
supermarkets had already reported that sales dropped between 25% and 30%.

Financial Data

Financial year ending in December

Total Revenues (Asia Region)

• 2022: DKK23.6bn
• 2021: DKK15.4bn
• 2020: DKK16.6bn
• 2019: DKK18.4bn
• 2018: DKK15.5bn
• 2017: DKK13.9bn
• 2016: DKK14.7bn

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Hanoi Beer Alcohol And Beverage Joint Stock Corporation (Habeco)

Strengths Weaknesses
• Backing from the global beer giant, Carlsberg, will provide • Habeco's relatively weaker presence in the more affluent,
access to capital as well as the ability to enhance its product southern part of Vietnam limits the potential for stronger
offering. Habeco is seeking regional expansion, profitable revenue growth.
partnerships and premium brands. • Its focus on the economy segment could eventually impede
• It has a good position in what is perceived as one of the world's growth as incomes increase.
highest-potential beer markets.
• Its economy-heavy portfolio means that Habeco brands tend to
perform well even during periods of low consumer confidence.

Opportunities Threats
• Vietnam's proximity to the dynamic frontier beer markets of • We expect real household spending growth to be inhibited in
Laos, Cambodia and Myanmar offers huge opportunities for 2023 due to the effects of increased inflation.
regional expansion. • Households will increasingly have to allocate disposable
• The company's relationship with Carlsberg is likely to facilitate income towards debt financing, placing downward pressure on
wider distribution and synergies. consumer spending going forward.
• Vietnam's beer market has grown rapidly supported by • The alcoholic drinks industry experienced turmoil from laws in
economic growth, rising tourism and favourable age 2020 by the government that strictly enforce reduced drunk
demographics. driving.
• Competition in the sector continues to intensify as
multinationals seek out the few remaining explosive growth
opportunities in the regional beer market.
• The pace of expansion by market leaders has raised concerns
that the beer industry is now over-supplied, particularly
considering that much of the population earn very low
incomes.
• Carlsberg's internal problems could limit investment in Habeco.

Company Overview

Hanoi Beer Alcohol And Beverage Joint Stock Corporation, Habeco, is the third-largest Vietnamese brewer which dominates sales in
the north, particularly in the increasingly affluent city of Hanoi. Danish beer company, Carlsberg, is the company's largest single
investor, with a stake of around 17.5%. Carlsberg has been in talks with the government to fully privatise Habeco by buying over the
remaining shares, but the deal fell through in July 2020.

As Carlsberg offers a number of popular Western beer brands, Habeco could look to bring in these brands to bolster its premium
portfolio and to ramp up its presence beyond its northern stronghold. For the time being, the firm has focused on economy brands,
which has helped it to ward off international competition and has delivered sustained growth. The firm is also positioning itself for
growth in the spirits market. In 2008, through its subsidiary, Hanoi Liquor Joint Stock Company (Halico), the firm entered into a joint
venture with Diageo, the world's largest spirits company. The two companies have joined forces to expand within what remains a
fledgling branded spirits industry and to exploit the strong growth potential that exists in the market.

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Strategy

While Habeco has a sizeable presence in northern Vietnam, the company will have to work on improving its reach in the higher-
spending southern region and the higher-end beer segments to establish a strong competitive foothold. The Vietnamese beer
market has previously been regionalised, with Habeco dominating in the north and Saigon Alcohol Beer and Beverages Corporation
(Sabeco) in the south. However, the rapid influx of investments from regional brewers such as Asia Pacific Breweries and Carlsberg
has seen competition intensify. Given the rapidly growing middle class in Vietnam, Habeco will need to expand into the higher-
spending southern region to take advantage of increased consumer spending. On this front, Habeco could leverage the financial
backing of its expansion-oriented shareholder, Carlsberg, to facilitate expansion across the market.

Habeco's focus on the economy segment could prove to be an impediment to growth as incomes increase and spur the
premiumisation trend. The brewer's expansionary efforts are primarily focused on the low-margin, high-volume Bia Hoi draught beer
segment. The unique distribution challenges of Bia Hoi, which is sold in Hanoi's street cafés, mean that Habeco is largely catering to
the lower-income crowd. As Habeco builds a nation-wide presence across Vietnam, it is also important for the company to calibrate
its product portfolio towards the higher-end and to position itself to better capture the increasingly sophisticated tastes of the
Vietnamese consumers. Habeco currently has a market share of 16.0% in the Vietnam beer market, which pales in comparison to
Sabeco's 40.0% share.

Recent Developments

2023

In January, Habeco reported after tax profit of VND527bn for FY22, up 63% y-o-y. Net revenues for the year grew by 21% to
VND8,398bn, 27% higher than target.

2021

In November, Habeco announced its quarterly earnings for Q321, with sales reaching VND1.7trn, down 36.7% y-o-y. Its profit after
tax declined by 59.8% y-o-y, despite the efforts made to reduce expenses.

In August, Habeco announced its quarterly earnings for Q221, with sales reaching VND1.9trn, down 9.0% y-o-y. Its profit after tax
declined by 26.0% y-o-y, with the increase in expense mainly due to advertising, promotion and support.

In April, Habeco reported that it expected sales to be hit by Covid-19 and profits to plummet to a decade low. The brewery was
targeting post-tax profits of VND255.0bn, representing a decline of 64.0% y-o-y. The company's chairman stated that
the resurgence of Covid-19 cases in January meant tourism companies, hotels and restaurants continue to suffer, directly causing a
decline in the sales of alcoholic beverages.

In February, Habeco released its 2020 full-year financial results, reporting a 20.0% y-o-y drop in revenues, to VND7.5trn. Weeks
before in January, Habeco announced that dividends in arrears for 2018 and 2019 will be paid on March 31 2021, totalling
VND656.0bn.

2020

In August, Habeco released its Q220 business results reporting a 13.0% y-o-y drop in revenues, to VND2.1trn. Over H220, according
to management, tourism, service and restaurant activities will be slow to recover. In addition, the economic pressure of high

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unemployment and slower income growth will reduce consumer demand. The continued tightening of Decree 100 (on driving
under the influence) will continue to weigh on spending levels over the medium term.

In July, talks of buying over the government's share in Habeco fell through when Carlsberg could not agree with officials on a sales
price.

In May, Habeco reported a loss of VND96.0bn (USD4.1mn) in the first quarter, hit by the stringent new drunk driving laws and
Covid-19. This loss is almost the same as its first quarter pre-tax profit the previous year. Revenues fell 50.0% y-o-y to VND774.0bn
(USD33.0mn), while operating costs remained mostly unchanged, according to its financial report. Habeco said Vietnam's new
decree on drunk driving, which imposed stiff penalties, has caused a slump in beer demand. This is exacerbated by the pandemic,
which caused restaurants, bars and other places of entertainment to close down for much of the quarter.

In April, to support Covid-19 efforts, Habeco donated 2,000 barrels of UniAqua purified water, and 480 bottles of HaliClean
disinfectant solution to the National Hospital of Tropical Diseases. Habeco was to continue to give gifts to frontline hospitals,
security checkpoints and concentrated isolation facilities including 29,000 barrels of bottled drinking water, 7,200 bottles
of antiseptic solutions and 1,000 medical protective suits.

Financial Data

Financial year ending on December 31

Total Revenue

• 2022: VND8,938bn
• 2021: VND5,265bn
• 2020: VND7,464bn
• 2019: VND9,335bn
• 2018: VND9,100bn
• 2017: VND9,802bn
• 2016: VND9,996bn

Net Income

• 2022: VND527bn
• 2021: VND317bn
• 2020: VND722bn
• 2019: VND540bn
• 2018: VND499bn
• 2017: VND657bn
• 2016: VND791bn

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Masan Consumer Corporation

Strengths Weaknesses
• Steady revenue recovery in 2022. • Local consumers generally do not exhibit strong brand loyalty
• A nationwide distribution network gives Masan rare access to or a preference for Vietnamese products.
both the high-spending urban centres and the low-spending • Domestic and multinational competition is high, even in a
rural population. fragmented marketplace.
• Established strong brands are a significant advantage in the • Masan will have to continue pouring in capital investment to
current environment of regional food hygiene and safety secure its market share.
scares.
• Investment from a leading private equity fund is likely to
provide capital for expansion, both organically and via
acquisitions.
• Its increasingly diversified product portfolio caters specifically
to local tastes.

Opportunities Threats
• A young, fast-growing population presents a receptive audience • We expect real household spending growth to be inhibited in
for branded foods. 2023 due to the effects of increased inflation.
• Further development of healthy and innovative products is a • Households will increasingly have to allocate disposable
long-term opportunity, even if the audience for such goods is income towards debt financing, placing downward pressure on
currently small. consumer spending going forward.
• Further substantial potential for the Phuc Long coffee and tea • Despite having an established nationwide distribution network,
chain, both domestically and internationally. the movement of goods remains a problem given the country's
• Masan has received investment from a number of underdeveloped infrastructure.
multinationals, providing funds for product launches, marketing • The arrival of multinationals focused on branded food sales will
campaigns and expansion. jeopardise Masan's market share.
• The company has confirmed it will consider mergers and • Volatile input costs could threaten margins as these costs
acquisitions to accelerate growth. remain difficult to pass on to consumers in what remains a
price-sensitive environment.

Company Overview

Masan Consumer Corporation is a Vietnam-based company primarily engaged in the food processing sector, with major
undertakings in the manufacture and wholesale of diversified condiments and processed food. The company's leading products
include convenience food such as instant noodles, porridges and sausages; sauces, dressings and seasonings including soy sauces,
fish sauces and chili sauces; and beverages, namely soft drinks, energy drinks, bottled water and coffee concentrates. Masan
Consumer is also involved in the leasing of warehouses and storage facilities as well as the provision of consultancy services.

Strategy

Masan has been a key local player in terms of Vietnam's transition from non-branded to branded foodstuffs. If it is to maintain
healthy growth rates in the long term, it may look to further diversify its portfolio. Increased investment from international food and
drink companies with powerhouse brands along with immense marketing resources will create additional competitive pressure for
Masan. The company does have the advantage of an existing distribution reach and an established domestic name.

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Masan's significant capital investments will help facilitate its move into non-food consumer products including beverages, home
and personal care. To aid its diversification, Masan will seek to establish umbrella brands to leverage its existing strong brand name.
This is an advisable strategy if it is under pressure from Western powerhouse brands. The company is also likely to pursue increased
manufacturing efficiency, a priority that must be balanced against expansionary investments during such a period of volatile input
costs. Demonstrating its diversification ambitions, Masan has acquired a 50.1% stake, valued at around VND1.1trn (USD51.0mn), in
Vietnamese coffee producer VinaCafé Bien Hoa Joint Stock Company.

A dynamic consumer story continues to take shape in Vietnam, and Masan's investment underlines its confidence in the country's
consumer outlook. By acquiring a controlling stake in VinaCafé, Masan has put itself in a strong position to benefit from the exciting
demand dynamics of the Vietnamese coffee sector. According to the Vietnam Coffee and Cocoa Association, VinaCafé is the
country's second-largest coffee exporter, and Masan could tap into the company's expertise and brand name to increase its
presence in the domestic coffee sector.

In April 2023, at the group’s annual general meeting, Masan management stated that the group has a clear growth road map in
place for the 2023-2025 period, with a continued focus on its three core growth engines: network growth, member growth and
wallet share growth. The 2023 plans presented to shareholders expect consolidated net revenues of VNĐ90trn-VND100trn,
representing growth of 18% to 31%. The CrownX, Masan’s integrated consumer-retail platform that consolidates WinCommerce
and Masan Consumer Holdings, is expected to remain the key driver of revenue growth in 2023, with more than 70%.

Recent Developments

2023

In April, at the group’s annual general meeting, Masan management stated that the group has a clear growth road map in place for
the 2023-2025 period, with a continued focus on its three core growth engines: network growth, member growth and wallet share
growth. The 2023 plans presented to shareholders expect consolidated net revenues of VNĐ90trn-VND100trn, representing
growth of 18% to 31%. The CrownX, Masan’s integrated consumer-retail platform that consolidates WinCommerce and Masan
Consumer Holdings, is expected to remain the key driver of revenue growth in 2023, with more than 70%.

In February, Masan announced the acquisition of a 25% stake in Singapore-based software developer Trust IQ. This will help the
company accelerate the application of artificial intelligence in retail and consumption, part of the strategy of creating a consumer,
retail and technology ecosystem capable of meeting 80% of the essential needs of the Vietnamese people.

In February, Masan Group reported FY2022 results showing revenues up 2.6% to VND76.2trn. Net profit decreased by 58.3% to
nearly VND3.6trn. Masan Consumer Holdings achieved VND28.1trn in net revenues and VND6.56trn in EBITDA.

In February, Masan Group announced that it is targeting international expansion for Phuc Long Coffee & Tea during 2024 and is
looking for the brand to become the largest coffee and tea chain in Vietnam 'within a few years'. Based on the current level of
growth, Masan Group expects the coffee chain to become Vietnam's second largest in terms of outlets by the end of June 2023.

2022

In September, Masan launched the WINLife concept store. Dubbed as a new 'retail ecosystem'. WINLife stores are a catch-all store
with many existing Masan businesses incorporate such as the Winmart+ convenience store, coffee chain Phuc Long Coffee & Tea,
financial services firm Techcombank, pharmacy Dr.Win and telecommunication services provider Reddi. The company has opened
27 WINLife stores in Hanoi and Ho Chi Minh City by September and aims to expand to 100 stores by the end of 2022.

In April, the company invested USD65.0mn in Vietnam-based fintech firm Trusting Social. The investment aims to develop an AI-
based consumer tech platform which will offer customised retail and consumer financial products in Vietnam. The investment will
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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also help Masan leverage Trusting Social’s AI system for retail store selection, demand and supply planning, and product assortment
and development.

WinMart+, a business unit of Masan's Wincommerce General Commercial Services JSC, opened its first two franchised grocery store
locations in in Hanoi and Bắc Giang in Q122. Masan Group plans to have 20,000 franchised stores and 10,000 company-owned
grocery stores by 2025.

In January, the company published its Q421 financials, noting that revenue came in at VND9.7trn, up from VND7.5trn in Q421. Net
profits after tax for the three months ending in December 2021 came in at VND2.0trn, up from VND1.5trn a year earlier.
Furthermore, for the 12 months ending in December 2021, the total revenue came in at VND28.0trn, up from VND23.9trn in 2020.
Net profits for FY21 were posted at VND5.5trn, up from VND4.6trn a year earlier.

2021

In November, South Korea's SK Group announced that it will invest USD340.0mn in Crown X, a consumer retail platform within
Vietnam’s Masan Group, in an effort to expand its strategic partnerships in South East Asia.

In August, Masan Group announced that revenues for H121 rose 16.4% y-o-y to VND41.2trn, due to a double-digit growth in retail
and meat businesses.

In May, a Bloomberg report found that Masan Group company is planning an IPO for its subsidiary Masan MEATLife in 2022-2023.
The company hopes to achieve a 10.0% market share of the local USD10.2bn meat market and earn USD2.0bn in revenue by 2022.

In January, Masan Group announced its 2020 financial results, with consolidated revenue across the group totalling VND77,218.0bn.
Masan Consumer Corporation and VinCommerce, which are both subsidiaries of the newly founded CrownX Corporation, achieved
18.0% y-o-y growth in total revenue to VND54,227.0bn, making it the second-largest consumer company in terms of revenue in
Vietnam.

Nguyen Dang Quang, chairman of Masan Group, stated that Masan Group aims to transform Vincommerce from a 'pure shopping
point' to a 'platform serving essential needs', providing consumers with a seamless online-to-offline experience.

2020

During the year, Masan closed 421 VinMart+ convenience stores and 12 VinMart supermarkets as it re-structures the retail business
it acquired during the year from VinGroup. Most of the closed stores were located within Ho Chi Minh City. Despite the closures,
Masan opened 57 new VinMart+ outlets and one new VinMart supermarket within the year, while launching three new concept
VinMart+ store formats in Ho Chi Minh City and Hanoi with an improved layout to understand consumer behaviour.

In June, Masan announced that it was set to buy the remaining 1.5% stake in VinaCafé Bien Hoa to raise its ownership to 100%.

In Q1, revenues of Masan Group Corporation more than doubled, with its retail platform well on the way to breaking even. This was
driven by 59.7% growth in convenience foods, 300.0% growth in processed meats and 75.0% growth in sales through modern
distribution channels.

In April, Masan Consumer accompanied the Center for Social Work - Vocational Training in Ho Chi Minh City to organise 10,000
meals with full nutrition and 300 gifts to labourers in eight districts in Ho Chi Minh City, and to organised gifts for 10,000 young
workers in difficult circumstances due to the impact of Covid-19.

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In April, Masan Group Corporation reported consolidated net revenues of VND17.6trn (USD753.08mn) in the first quarter of financial
year 2020, a y-o-y increase of 116.1%. VinCommerce delivered revenue growth of 40.3% over the same period last year to
VND8.7trn (USD372.6mn).

In February, Masan HPC, a wholly-owned subsidiary of Masan Consumer Corporation, successfully acquired a 52.0% stake of Net
Detergent JSC at an average price of VND48,000.0 (USD2.07) per share.

Masan's acquisition of a majority stake in Vingroup's minimart chain is its first step in breaking into consumer retail, as well as a way
to bring added value to MEAT Deli, Masan's clean meat brand.

After purchasing the retail chain from Vingroup's VinCommerce in January, Masan Group plans to close hundreds of ineffective
VinMart and VinMart+ stores, while planning to open between 300 and 500 new Vinmart supermarkets and Vinmart+ convenience
stores this year.

Financial Data

Financial year ending December 31

Total Revenue Masan Consumer Holdings

• 2022: VND28.1trn
• 2021: VND28.0trn
• 2020: VND23.3trn
• 2019: VND18.5trn
• 2018: VND17.0trn

Net Profits

• 2022: VND6.5trn
• 2021: VND5.5trn
• 2020: VND4.6trn
• 2019: VND4.0trn
• 2018: VND3.4trn

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Nestlé Vietnam
Strengths Weaknesses
• Nestlé Vietnam has a large market share. • Nestlé has struggled to turn a profit in Vietnam since entering
• Strong brand appeal increases its reach to young, aspirational the country.
Vietnamese consumers. • Domestic and multinational competition is high, even in this
• Its commitment to health and wellness will appeal to an fragmented marketplace. The company will have to continue
increasingly affluent middle class. adding capital investment to secure its market share.
• Strong price propositions will appeal to emerging consumers, • Non-organised retailers account for the majority of grocery
especially in light of the effects of the Covid-19 pandemic. sales.
• Disposable incomes are still very low and necessity remains a
far more important purchasing determinant than health.

Opportunities Threats
• High birth rates create strong sales opportunities for Nestlé's • We expect real household spending growth to be inhibited in
infant nutrition products. 2023 due to the effects of increased inflation.
• Urbanisation and middle-class growth could dramatically • Households will increasingly have to allocate disposable
increase the company's existing consumer base. income towards debt financing, placing downward pressure on
• Rising incomes could increase the demand for non-essential consumer spending going forward.
consumer items. • Local company Intimex is a key challenger to Nestlé, as it
• Relative sector immaturity provides massive long-term growth entered the instant coffee market and aims to expand
opportunities. production rapidly.
• Further expansion in Nestlé's core dairy sector will necessitate
significant supply chain investments to improve distribution
infrastructure.
• Input cost volatility cannot easily be passed on to consumers in
such a price-sensitive environment.

Company Overview

Nestlé Vietnam is a wholly owned subsidiary of Switzerland-based food and beverage major Nestlé. The subsidiary manufactures
beverages, dairy products, prepared meals and cooking ingredients in three Vietnamese production plants. The company also
distributes imported pharmaceuticals in Vietnam. In terms of food and beverage brands, the company markets Nescafé, La Vie, Gau,
Milo, Nestea and Maggi in Vietnam.

Strategy

Given Nestlé's enormous global product portfolio, its Vietnamese product offerings are fairly limited. The company has not turned a
consistent profit in the country despite being one of Vietnam's leading consumer goods players.

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Recent Developments

2023

In May, it was announced that Vietnam is one of the markets that Nestlé is pioneering in applying digital transformation in logistics
activities in order to optimise the transportation/distribution of goods in the domestic market.

In January, Nestlé unveiled the Nescafé Plan 2030 which aims to help drive regenerative agriculture, reduce gas emissions and
improve farmer livelihoods. The company is investing more than USD1bn in the plan.

2022

In November, Nestlé Vietnam announced that it would be signing a cooperation agreement with the Vietnam Women's Union to
continue the 'Nestlé accompanies women' program. The program, which would last between 2022 to 2027, aims to promote
gender equality and women’s empowerment, contributing to supporting women’s comprehensive development, especially those in
rural areas. By October 2022, existing partnerships have seen at least 20 Vietnamese provinces and cities implement the program,
allowing 1.2mn households to access nutritional knowledge and helping 3,000 program members start and grow their business.

In July, Nestlé introduced the Starbucks At Home instant coffee range and the We Proudly Serve Starbucks Coffee programme in
Vietnam. The Starbucks At Home range, which includes instant coffee serving sticks of Dark Roast, Caramel Latte, Caffè Mocha and
Caffè Latte flavours, is available online from Singaporean digital retailer Lazada and from several Vietnamese supermarkets,
including Topsmarket, CoopXtra and Vinmart.

2021

In Q421, the CEO of Nestlé Vietnam noted that the company would invest an additional USD132.0mn to boost its high quality
coffee production capacities and double them due to surging demand.

In 2021, Nestlé Vietnam released a QR code in its Milo Teen Protein drinks, becoming the first company to utilise SIG's QR code
closure in its packaging. The food manufacturer aims to appeal to Gen Z consumers and to strengthen brand loyalty via a
differentiated reward program that runs until September 2021.

2020

In August, the company announced that it was committing to using 100% recycled and re-used packaging by 2025. Nestlé Milo, a
subsidiary of Nestlé Vietnam, has also pledged to put to use more than 16mn paper straws in 2020, contributing to a reduction of
6.7tonnes of plastic waste.

In April, Nestlé Vietnam implemented assistance and supply activities for foodstuffs and nutritious drinks in the amount of more
than VND5.0bn to frontline personnel in the fight against Covid-19. This includes doctors, health workers, military and police forces
and volunteers, and people quarantined in several cities and provinces of the country were also beneficiaries of these assistance
activities. Nestlé Vietnam will continue to devote around VND7bn to assist in pandemic prevention and management activities.

In March, Nestlé Vietnam entered the popcorn category with its new Air Popcorn products targeted at the growing number of
younger consumers who snack.

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In March 2020, Nestlé Vietnam introduced Nescafé Aromatico and Nescafé Excellente - the two latest products made of premium-
quality coffee beans sourced from the Central Highlands region, and made at the state-of-the-art Nestlé Trị An factory in the
southern province of Đồng Nai.

In March 2020, Nestlé Milo announced it will put to use more than 16mn paper straws this year, contributing to a reduction of 6.7
tonnes of plastic waste.

Ho Chi Minh City-based Intimex, which was a state-owned company before being sold to private investors in 2006, aims to overtake
Nestlé as Vietnam's biggest pure instant-coffee supplier in the next five years by expanding annual capacity fivefold to 20,000
tonnes.

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Saigon Alcohol Beer And Beverages Corporation (Sabeco)

Strengths Weaknesses
• Dominance in one of the world's highest-potential beer • In 2020, a tough law enacted and closely enforced by the
markets provides strong growth opportunities. government to reduce driving under the influence may
• Strong economy beer brands Saigon Beer and Beer 333 are permanently slow growth of beer companies including Sabeco.
popular in the south. • A predominantly economy portfolio reduces Sabeco's
• Its economy-heavy portfolio means that Sabeco brands tend to competitiveness in wealthy urban centres and its ability to
perform well even during periods of low consumer confidence. utilise the tourist dollar.

Opportunities Threats
• A multinational corporation partnership would improve its • Households will increasingly have to allocate disposable
brand portfolio and boost the availability of capital. income towards debt financing, placing downward pressure on
• Tourism represents an excellent opportunity for Sabeco to consumer spending going forward.
enter the premium brand segment. • We expect real household spending growth to be inhibited in
• Regional diversity allows for easy expansion in what remains an 2023 due to the effects of increased inflation.
immature market despite investment levels. • expansion pace of market leaders has raised concerns that the
• With the government looking to sell off its remaining stake in beer industry is now over-supplied, particularly when
Sabeco, full private ownership of Sabeco may allow the firm's considering that much of the country's population have limited
controllers to increase efficiency and innovation. incomes.
• Significant expansion plans from Carlsberg, APB and Habeco
could threaten Sabeco's market share.

Company Overview

Saigon Alcohol Beer and Beverages Corporation (Sabeco) is Vietnam's leading brewer, controlling around 40.0% of total beer sales
in the country. Privatisation began when Thai Beverage (ThaiBev) acquired a 54.0% ownership stake in 2017, with the government
continuing to offload its shares in the company since.

Strategy

Sabeco's initial public offering (IPO) was used to raise funds to support continued expansion - a vital requirement if it is to continue
to dominate the market amid intense local and international competition. Although short of initial targets, IPO funds are likely to
drive further expansion, with regional diversity thought to be a priority.

As well as expansion, brand diversification remains a key element of the company's strategy as it looks to complement its popular
local economy brands with some premium, potentially international, products. Finding a multinational partner could contribute
enormously towards this and it should not be a difficult objective for such an attractive firm.

Sabeco's main competitors are Habeco (also owned by the Ministry of Industry and Trade), with a market share of 14.0%, and
Vietnam Brewery Limited, with a market share of 23.0%. Vietnam Brewery Limited is a joint venture of Singapore's Asia Pacific
Breweries and Saigon Trading Group, which brews and sells Heineken, Tiger Beer and Larue Beer in Vietnam.

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Recent Developments

2023

In February, Sabeco reported a 33% jump in revenues for FY22 to VND35.2trn as consumption bounced back since the Covid-19
pandemic. Profits surged by almost 40% to VND5.5trn. Higher input costs impacting on price have been minimised by
improvements in production efficiency and in cost-saving measures.

2022

In October, the company was the main sponsor and partner of the Vietnam Culture and Tourism Festival in Korea. This marks the
latest in a series of partnership between Sabeco and the Vietnamese authorities aimed at promoting culture and tourism.

In April, the company announced that it was setting its 2022 revenue target at VND34.8trn (USD1.7bn) and after-tax profit of
VND4.6trn (USD199.0mn), a 32.0% and 17.0% y-o-y increase respectively.

In March, the company revealed a new taste, packaging and positioning for Bia Saigon Special, a Sabeco brand. Bia Saigon Special
has been a popular beer from the company for over 20 years and the revamp is meant to target the changing demands of
consumers.

In January, the company stated that revenue for 12M21 came in at VND6.5bn, down from VND28.1bn in 2020 due to the prolonged
lockdowns and social restrictions in the country. That said, Q421 revenue was posted at VND9.0trn, up from VND7.9trn in Q420 as
some restrictions eased in late H221. Net profits were down in both Q421 and FY21 y-o-y.

2021

In October, Sabeco announced revenue of VND4.3trn for Q321, decreasing by 47.0% y-o-y. The manufacturer still actively spent on
advertising and promotions with more than VND1.6trn, up 34.0% over the same period.

In July, Sabeco announced revenue of VND13.1trn for H121, a growth of 9.0% y-o-y.

In January, Sabeco announced its financial performance for full year 2020. For the financial year 2020, Sabeco sales revenue saw a y-
o-y decline of 26.2%, whilst sales revenue for Q4 y-o-y saw a 19.4% decline.

2020

In September, the Vietnamese Ministry of Trade & Industry transferred the 36.0% holding in Sabeco to a government-owned
investment company. The holding company, State Capital Investment Corp, will be responsible for selling the stake to new owners.

In July, the Vietnamese government announced that it will sell its remaining 36.0% stake in Sabeco. By the end of August, the
Ministry of Industry and Trade will complete the transfer of the stake to the state-owned State Capital Investment Corp to pave the
way for the sale.

In May, Sabeco's post-tax profit in Q1 nearly halved y-o-y to less than VND720.0bn (USD31.0mn), the lowest since 2013. The brewer
confirmed a net revenue of VND4.9trn (USD210.0mn), down 47.0% y-o-y. Beer still accounts for an overwhelming proportion of
revenue at 88.0%, the rest stemming from packaging, other beverages and wine. This decline has been attributed to the impact of
Covid-19 and the new alcohol laws enacted in January 2020, which have dampened demand.

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In April, Sabeco actively worked with agencies to implement an essential item support programme for more than 20,000 individuals,
including health workers, logistics staff and those in isolation at isolation centres nationwide. It sent 2.5 tonnes of rice, 572,288
bottles of pure water and other drinks, as well as 40,460 bottles of hand sanitiser.

In January, Vietnam enforced a crackdown on public drinking, which lowered alcohol sales across the country. Beer sales in the
country have dropped by at least 25.0% anecdotally since strict penalties on inebriated drivers took effect on January 1, while the
police issued more than 6,200 fines.

ThaiBev, the new owner of Sabeco, indicated an ambition to expand its overseas (non-Thailand) business from 40.0% of annual
revenues to 50.0% by 2020.

Financial Data

Financial year ending December 31

Total Revenue

• 2022: VND35.2trn
• 2021: VND26.5trn
• 2020: VND28.1trn
• 2019: VND37.9trn
• 2018: VND35.9trn

Net Profits

• 2022: VND5.5trn
• 2021: VND3.9trn
• 2020: VND4.9trn
• 2019: VND5.4trn
• 2018: VND4.2trn

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Saigon Co-Op
Strengths Weaknesses
• Saigon Co-op has a very strong brand in the south, where its • For Saigon Co-op to remain competitive, it will have to make
name is synonymous with low prices. enormous costly scale-building investments.
• Operating in both the supermarket and convenience sectors • Unlike its potential rivals, the company cannot make high-risk
diversifies its audience. investments as it needs immediate returns in order to remain
• With a focus on low-cost and, increasingly, private label goods, afloat.
the company is well positioned for strong performance during • Being a domestic operator does not give it a major advantage
periods of low consumer confidence. over its foreign counterparts, unlike in many other markets in
the region.

Opportunities Threats
• Saigon Co-op is focusing on improving customer service • Households will increasingly have to allocate disposable
introducing e-vouchers for example. income towards debt financing, placing downward pressure on
• As consumers remain price-conscious, Saigon Co-op's consumer spending going forward.
reputation as a price-friendly retailer is attractive to consumers. • We expect real household spending growth to be inhibited in
• Saigon Co-op's low-profit markup will give it a strong edge over 2023 due to the effects of increased inflation.
its multinational rivals, if they enter Vietnam. • Rising incomes mean that consumers, especially from the
• Price-cutting promotions are an excellent means of generating growing middle class, might be looking for a more premium
customer loyalty, although they are becoming increasingly hard shopping experience provided by competitors.
to offer. • The imminent arrival of international retailers poses a real
• Seeking partnerships is a wise means of building scale in a low- threat to Saigon Co-op's market leadership, as it is far less
risk manner. experienced than the entrants.
• Planned fresh food and convenience offerings are strong long- • Its Vietnamese brand focus could backfire as Western brands
term growth prospects. boom.
• The retailer has announced plans to launch an outlet in
neighbouring Cambodia, which has a far less developed MGR
sector, giving it a first-mover advantage.

Company Overview

Saigon Co-op is Vietnam's leading retailer. The firm has around 200 convenience stores and almost 75 supermarkets. The majority
of its stores are located in Ho Chi Minh City, in which Co-op controls 50.0% of the supermarket sector. It has also launched a chain of
convenience stores called Co-op Food. Its network is oriented towards low-income consumers, though it increasingly resembles the
modern retail concept which is thriving in the country.

Strategy

Saigon Co-op targets Vietnam's low-income population, providing choices at affordable prices. Its strategy includes the
maintenance of this image. Since it had to raise prices in 2008 due to high wholesale costs, it has promoted a five-pronged
approach to keeping prices low: requesting suppliers to justify price increases, building stockpiles of basic items, improving
distribution to ensure supply and reduce panic-buying, accepting lower profit margins and looking for further cost-cuts through
efficiency. The company is targeting new supermarkets, logistical improvements, and further joint ventures (JVs) and partnerships to
help meet its store-opening aims, particularly in cities where it lacks expertise or infrastructure.

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The company's slim margin markup is likely to help it in the face of multinational competition. It has responded to the trend towards
private label goods, recently developing its Co-Op Mart brand for frozen and dried goods and its SGC brand for clothing. It has also
launched a chain of small-scale convenience stores, Co-Op Food. Bringing convenience to the residential areas of Ho Chi Minh City,
along with further supermarket openings, is part of the company's strategy for preparing for the arrival of multinational competition.
The firm has also announced plans to build its first ever overseas supermarket in Cambodia.

Saigon Co-op's partnership with Singapore's MGR operator NTUC FairPrice will also give it a strong boost in the Vietnamese MGR
market. NTUC and Saigon Co-op signed a JV agreement to establish a chain of hypermarkets in Vietnam, looking to capitalise on the
emerging market's demand that is expected to play out over the next decade. For Saigon Co-op, the partnership deal makes clear
strategic sense as it would be able to leverage NTUC's expertise in the hypermarket sector to build and grow its domestic presence.
An enlarged scale of operations would also raise its bargaining power and strengthen its competitive position in this price-
competitive retail environment.

By 2025, Saigon Co-op plans to expand its network to at least 2,000 stores. it will give priority to improving the investment efficiency
of Co-op Mart stores and Co-op Food stores as well as to developing large-scale outlets to sharpen its competitiveness.

Recent Developments

2023

In May, Saigon Co-op and Urbox signed a cooperation agreement under which they will jointly launch Co-opmart e-vouchers to
continue improving customer service. In the short term, the e-vouchers will be accepted for use at the retailer’s supermarkets and
hypermarkets nationwide, with the programme then extended to other Saigon Co-op banners and outlets.

2022

In October, Saigon Co-op announced that it would be partnering with Giftee Mekong, a digital vouchers solutions company, to offer
vouchers for Saigon Co-op businesses on the Giftee platform.

In May, Saigon Co-op announced that it has gone live on the Oracle Cloud Infrastructure to transform its data management
platform. The aim is to have an integrated data and analytics platform to collect, store, manage and analyse data from various
touchpoints which would increase productivity and build an analytics-driven culture.

2021

In August, Saigon Co-op announced that they will provide price discounts for more than 2,000 essential products including seafood,
vegetables, fruits, dairy products and personal hygiene products with discount rates varying from 15% to 50%. This comes amid the
surge of Covid-19 cases across the nation, resulting in lockdowns and panic buying.

In February, Saigon Co-op opened its fourth store in Ho Chi Minh City’s District 7. The store stocks local and imported organic
products such as fresh and processed foods, cosmetics, deli foods, fruits, vegetables, beverages and more.

2020

In September, Saigon Co-op partnered with Vietcombank to launch a gift card that can be used for everyday purchases. The card
can be loaded with several different denominations, ranging from VND1.0mn to VND5.0mn.

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In August, the retailer reduced prices for several products for 21 days to support households that were under financial pressure as a
result of the Covid-19 pandemic.

In July, Saigon Co-op announced that it had sufficiently increased its reserves of essential goods and made a road map to gradually
re-start preventive measures in supermarkets and shops, should the country see a spike in Covid-19 infections.

In May, Saigon Co-op opened Co-op Mart and Co-opXtra. Food supermarkets saw an increase of 30% in orders in the two days of
April 30 and May 1 compared to the period before social distancing was imposed. On May 1 alone, the number of orders via phones
and the Zalo app spiked, mainly orders of seafood, vegetables and fruits, soft drinks, face masks and kitchen and cooking items with
promotions.

In April, Saigon Co-op renewed its participation in Vietnam's price stabilisation programme. It had stockpiled 30%-40% more goods
than usual and could meet the demand for three to six months at unchanged prices. Saigon Co-op was also designated the main
distributor of face masks and hand sanitisers by the Department of Industry and Trade.

In March, Saigon Co-op had seen orders by phone increase, including by 10 times the normal number in some areas, as a result of
demand on the back of the Covid-19 pandemic as consumers choose to eat at home to reduce their exposure to the virus.

In January, Saigon Co-op launched a new supermarket concept, Finelife, in Ho Chi Minh City. Located in the upmarket Ha Do
Residential Area in District 10, Finelife occupies a 660sq m area featuring more than 4,000 premium items including organic food,
cosmetics, utensils, garments and imported beverages.

Due to the growing threat of the coronavirus, Co-op mart supermarkets posted a sales growth of 44.0%, of which face mask and
hand wash were the most consumed products from the second to the fifth day of the Lunar New Year.

In January, Saigon Co-op and mobile wallet MoMo signed a strategic cooperation agreement to boost digitalisation across the
retailer's stores. With the partnership, MoMo became the official e-wallet of over 800 supermarkets, shopping centres and stores
operated by Saigon Co-op nationwide. More developments from the MoMo Saigon Co-op partnership are expected. In particular,
the two planned to deploy a series of new digital services and products including vouchers and prepaid cards. MoMo was also to
team up with Saigon Co-op to build electronic stores and introduce money transfer services to the retailer's customers. MoMo
additionally partnered with PetroVietnam Oil Corporation (PVOIL) to allow customers to pay for petroleum using the mobile wallet at
stations of PVOIL and COMECO nationwide.

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San Miguel Pure Foods Vietnam

Strengths Weaknesses
• Its parent company, San Miguel Corporation, is South East Asia's • Questions have been raised about Pure Foods's ability to
largest publicly-listed food, beverage and packaging company, balance meat farming, feed manufacture and branded food
with significant financial power behind it. operations, with product focus tending to be the industry
• It has a strong tradition in health food production, which places buzzword during periods of high operating costs.
it in good stead as the global health trend catches on in • It has faced significant negative publicity in recent years with
emerging Asia. accusations that its plant has allegedly caused serious
• The company has a diverse portfolio of goods. environmental and health issues.

Opportunities Threats
• High feed prices are likely to help supplement Pure Foods's • We expect real household spending growth to be inhibited in
profits as long as grain demand from the alternative energy 2023 due to the effects of increased inflation.
sector remains strong. • Households will increasingly have to allocate disposable
• Branded consumer food products represent an important long- income towards debt financing, placing downward pressure on
term growth channel for the company. consumer spending going forward.
• Processed meat products, which meet the emerging demand • Regional food hygiene scares have served to undermine
for convenience, are likely to be the next logical step for Pure consumer confidence in local meat producers.
Foods. • Growing competition from international food manufacturers
• Kirin owns 48.0% of its beverages arm, putting it in good stead could undermine any competitive advantage Pure Foods
for expansion. possesses from being a regional player.
• Just as higher animal feed costs will benefit Pure Foods in its
feed division, they could make life more challenging in the
company's meat-farming sector.

Company Overview

Pure Foods is a leading Vietnamese food and beverage company. It is part of the Philippines-based San Miguel Corporation, which
owns 97.0% of the company after purchasing Hormel's 49.0% stake in 2015. In 2003, Pure Foods acquired a pig farming and
feeding mill facility from Taiwan Tea Corporation. It was the food division's first acquisition, now contributing around 15.0% to the
group's revenue. In Vietnam, 80.0% of the unit's output is used directly by the business, while the remainder is sold to customers in
the country.

Strategy

Pure Foods is focused on increasing revenues and improving profit margins by boosting operating efficiencies across all divisions.
Accordingly, it embraces and attempts to use the most up-to-date technologies in its business activities. In terms of specific
strategies, the company intends to increase the size of its hog farm by 19.0% as the division has contributed significantly to profits.
The company has recently opened five Monterey Meatshops in southern Vietnam: three are in major supermarkets in Ho Chi Minh
City, while the remaining two are in Bình Dương.

San Miguel has interests in a range of businesses in Vietnam including a glass production plant, a non-alcoholic beverage
production plant, a feed mill, a processed meat plant and six hog farms. The company is well diversified in Vietnam, as is its parent
company in the Philippines.

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San Miguel is looking to sell up to 49.0% of Pure Foods in order to finance its diversification into other sectors. Such a capital
injection could benefit the Vietnamese subsidiary. The parent company's diversification strategy has meant that Pure Foods has not
received significant expansionary investments in recent years. A renewed focus, triggered by a new partner, could be beneficial.

Recent Developments

2020

Despite the economic effects of the Covid-19 pandemic, San Miguel reported that Vietnam was one of its more favourable markets
over H120.

In September, San Miguel partnered with the Chinese e-commerce giant JD.com to list branded fruit products on its platforms.

2019

In September, the company assured customers that its bacon and canned products were safe to eat and were not affected by an
African Swine Fever outbreak.

In August, the company was eyeing exports to the Gulf Arab states after two of its facilities received halal certification. Pure Foods
Hormel's facilities for the production of Pure Foods Corned Beef and Tender Juicy Chicken Franks have been halal-certified by UAE-
based Prime Group.

Financial Data

Financial year ending in December 2020

Total Revenue

• 2022: PHP358.8bn
• 2021: PHP309.7bn
• 2020: PHP279.3bn
• 2019: PHP310.8bn
• 2018: PHP286.4bn

Net Profits

• 2022: PHP34.6bn
• 2021: PHP31.4bn
• 2020: PHP12.2bn
• 2019: PHP18.3bn
• 2018: PHP18.2bn

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Unilever Vietnam
Strengths Weaknesses
• A focus on developing in emerging markets with high growth • Limited food product offerings compared with other food and
potential should yield greater revenue and profits in the coming drink multinationals limits further sales opportunities.
years. • The absence of a local partner could affect its ability to respond
• A strong showing in the personal care department. to changing local preferences.
• Strong brand appeal facilitates its reach to Vietnamese • Supply-chain investment may be needed for food sector
consumers. expansion, owing to the underdeveloped infrastructure.
• Its diverse product portfolio with multiple-price entry points • Weak distribution infrastructure makes it difficult to reach
allows the company to capitalise on varying demand from consumers.
different income groups.
• Complete ownership of its local subsidiary means that it has full
operational control.
• Focusing on affordability ensures that the company has access
to a wide lower-income consumer base.

Opportunities Threats
• Urbanisation and middle-class growth could dramatically • We expect real household spending growth to be inhibited in
increase Unilever Vietnam's existing consumer base. 2023 due to the effects of increased inflation.
• Rising incomes could increase the demand for non-essential • Households will increasingly have to allocate disposable
consumer items. income towards debt financing, placing downward pressure on
• The relative immaturity of the sector provides long-term consumer spending going forward.
growth opportunities. • Increased competition from rival multinationals and
• Vietnam's favourable demographic profile is well suited to expansionary local and regional players could undermine the
Unilever's fast-moving consumer goods portfolio. company's strong market share position.
• Input cost volatility cannot be easily passed on in such a price-
sensitive environment.

Company Overview

Unilever Vietnam is a wholly owned subsidiary of Anglo-Dutch fast-moving consumer goods (FMCGs) leader Unilever. The parent
company took full control of the subsidiary in mid-2009, buying the 33.3% stake it had not already owned from its local partner.
Personal care products account for the largest section of Unilever's portfolio in Vietnam by far. The company also has a large
number of home care brands. Its presence in the food sector is smaller than that of its other consumer products, but it does have
some notable brands in Knorr, Lipton and Wall's.

Strategy

Reaching Vietnam's rural consumer base has not been particularly easy for consumer goods manufacturers, whether local or
multinational. Lower-income, rural consumers have a smaller discretionary appetite for higher-value consumer goods, which has
made it tougher for Unilever to sell some of its products. In rural areas, weak distribution infrastructure frustrates the expansion
efforts of consumer goods producers, while the dominance of traditional retail makes it even harder to reach would-be consumers
efficiently.

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However, these challenges have not deterred Unilever from setting up shop in the Vietnamese rural consumer market, clearly
underlining the immense potential in this market. According to Kantar Worldpanel's Brand Footprint ranking, Unilever is the most
bought brand in Vietnam's rural areas, reflecting the company's successful expansion in these areas. Unilever is offering some of its
products, such as shampoo and fabric softener, in cheaper, small sachets which cost around VND500.00 (USD0.02) to familiarise
consumers with its products.

Rising incomes, sector immaturity, the spread of organised retail and a plethora of macroeconomic driving factors make the
Vietnamese consumer goods sector a high-growth prospect. The rural consumer market stands to benefit strongly from these
dynamics. Rural sales make up half of this, revealing strong growth prospects in the rural consumer market. These dynamics mean
that multinationals and local consumer goods players have been keen to position themselves early. They will continue expanding in
rural markets in order to reap exciting rewards.

According to Chief Executive Officer Alan Jope, Vietnam along with Bangladesh, Pakistan and Myanmar will be the top growth
markets for consumer goods giant Unilever over the next few years, as a rapidly growing population and an emerging middle class
drive demand for FMCGs. In early 2023 Jope, whilst visiting Vietnam, stated that the company will continue to invest in the country,
in terms of production, brand and people development. In South East Asia, Vietnam and Indonesia are the most attractive markets
for Unilever with their large populations and well-managed economies According to Jope, since per capita consumption of
consumer products in Vietnam is still quite low, there is much room for growth. Unilever has ambitions for the Vietnamese market,
and expects its market to double in the next five to 10 years.

Recent Developments

2023

In February, the CEO of Unilever, Alan Jope, whilst visiting Vietnam, stated that the company will continue to invest in the country, in
terms of production, brand and people development. In South East Asia, Vietnam and Indonesia are the most attractive markets for
Unilever with their large populations and well-managed economies According to Jope, since per capita consumption of consumer
products in Vietnam is still quite low, there is much room for growth. Unilever has ambitions for the Vietnamese market, and expects
its market to double in the next five to 10 years.

2022

In December 2022, it was announced that Unilever has started a range of programs and initiatives for a net zero value chain by
2039, contributing to Vietnam government's net zero carbon emissions vision by 2050.

In May, the company announced that it wants to reduce emissions arising from Unilever's internal operations by 70.0% by 2025 as
part of its company-wide sustainability initiative.

2021

In December 2021, the company stated that Unilever and Unilever Vietnam both remained committed to the long-term sustainable
development strategy with multiple initiatives aimed at reducing emissions, working towards climate change responsibilities,
improving waste management strategies and tree planting efforts.

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2020

As part of the company's recently announced EUR1.0bn 'nature and climate fund', Unilever will partner with the 2030 Water
Resources Group and the Alliance for Water Stewardship on several projects, supporting water management resilience in key water-
stressed countries including Vietnam.

In April 2020, Unilever announced that its Vietnam and Indonesia business performed strongly despite the Covid-19 outbreak.

In April 2020, Unilever Food Solutions partnered with Carousell, the Southeast Asian marketplace platform, on #SupportLocal, an
initiative that enables 180,000 food and beverage (F&B) businesses in Southeast Asia to connect with local diners. This initiative
helps F&B businesses in Singapore, Malaysia, Vietnam and the Philippines to reach customers directly by being listed on Carousell's
newly-created local F&B category for free.

In April 2020, Unilever Vietnam announced its 'Stay Strong Vietnam' initiative, a wide-ranging set of measures to support the
community and people in the fight against Covid-19, committing VND50.0bn (USD2.2mn) to partner with the Ministry of Health and
the Ministry of Education and Training to implement initiatives that will protect people through hand-washing and hygiene habit
education programmes.

In March 2020, Unilever Vietnam pledged to donate 550 tonnes of products to more than 1.6mn people in need in 3,000 schools,
hospitals and isolated areas, especially frontliners such as doctors, nurses, teachers and volunteers. The donation includes personal
care and hygiene items, home cleaning and sanitisation products, and food products.

Financial Data

Financial year ending December 31

Note: Unilever does not publish country-specific performance data. Vietnam is included within the Asia, Africa, and Central and
Eastern Europe operating regions.

Total Revenue (Asia, Africa, And Central And Eastern Europe)

• 2022: EUR27.5bn
• 2021: EUR24.3bn
• 2020: EUR23.4bn
• 2019: EUR24.1bn
• 2018: EUR22.9bn

Net Profits

• 2022: n/a
• 2021: EUR4.5bn
• 2020: EUR4.1bn
• 2019: EUR4.4bn
• 2018: EUR4.3bn

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Vietnam Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. The total population and demographic
profile of a market are key variables in consumer demand and are essential to understanding issues ranging from future population
trends to productivity growth and government spending requirements.

The accompanying charts detail the population pyramid for 2022, the change in the structure of the population between 2022 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.

Population
Vietnam - Population, mn (1990-2050)

f = BMI forecast. Source: World Bank, UN, BMI

Population Pyramid
Vietnam – 2022 Male vs Female Population, '000 (LHC) & 2022 vs 2050 Population, '000 (RHC)

Source: World Bank, UN, BMI

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POPULATION HEADLINE INDICATORS (VIETNAM 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020 2025f

Population, total, '000 66,912.6 79,001.1 83,142.1 87,411.0 92,191.4 96,648.7 100,104.0

Population, % y-o-y 1.12 1.01 1.07 1.05 0.91 0.61

Population, total, male, '000 32,660.5 38,652.1 40,824.1 43,048.3 45,481.5 47,726.2 49,492.9

Population, total, female, '000 34,252.1 40,349.1 42,318.0 44,362.7 46,709.9 48,922.5 50,611.1
f = BMI forecast. Source: World Bank, UN, BMI
KEY POPULATION RATIOS (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f

Active population, total, '000 37,501.8 49,317.4 55,058.8 60,511.5 64,125.6 66,571.1 67,896.6

Active population, % of total population 56.0 62.4 66.2 69.2 69.6 68.9 67.8

Dependent population, total, '000 29,410.8 29,683.7 28,083.3 26,899.5 28,065.8 30,077.6 32,207.4

Dependent ratio, % of total working age 78.4 60.2 51.0 44.5 43.8 45.2 47.4

Youth population, total, '000 25,647.4 24,785.6 22,758.3 21,230.5 21,590.5 21,932.6 21,787.3

Youth population, % of total working age 68.4 50.3 41.3 35.1 33.7 32.9 32.1

Pensionable population, '000 3,763.4 4,898.1 5,325.0 5,669.1 6,475.3 8,145.0 10,420.1

Pensionable population, % of total working age 10.0 9.9 9.7 9.4 10.1 12.2 15.3
f = BMI forecast. Source: World Bank, UN, BMI
URBAN/RURAL POPULATION AND LIFE EXPECTANCY (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f

Urban population, '000 13,554.5 19,255.7 22,682.0 26,587.8 31,169.0 36,088.6 40,951.5

Urban population, % of total 20.3 24.4 27.3 30.4 33.8 37.3 40.9

Rural population, '000 53,358.1 59,745.4 60,460.1 60,823.2 61,022.4 60,560.1 59,152.4

Rural population, % of total 79.7 75.6 72.7 69.6 66.2 62.7 59.1

Life expectancy at birth, male, years 64.8 67.8 68.5 68.8 69.1 70.8 70.5

Life expectancy at birth, female, years 73.7 77.1 78.0 78.3 78.7 79.9 79.7

Life expectancy at birth, average, years 69.2 72.5 73.3 73.5 73.9 75.4 75.1
f = BMI forecast. Source: World Bank, UN, BMI
POPULATION BY AGE GROUP (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f

Population, 0-4 yrs, total, '000 9,119.4 7,161.4 7,095.3 7,129.4 7,485.3 7,429.6 7,035.5

Population, 5-9 yrs, total, '000 8,725.7 8,669.0 7,106.9 7,047.5 7,088.1 7,443.8 7,391.0

Population, 10-14 yrs, total, '000 7,802.2 8,955.2 8,556.1 7,053.5 7,017.2 7,059.2 7,360.8

Population, 15-19 yrs, total, '000 6,883.5 8,598.9 8,516.7 8,312.3 7,012.8 6,979.8 6,909.7

Population, 20-24 yrs, total, '000 5,736.9 7,694.3 8,105.2 8,185.4 8,242.8 6,955.4 6,866.9

Population, 25-29 yrs, total, '000 5,484.3 6,788.9 7,494.9 7,940.4 8,120.0 8,177.0 6,985.7

Population, 30-34 yrs, total, '000 5,098.4 5,649.6 6,733.7 7,427.1 7,873.1 8,052.6 8,188.5

Population, 35-39 yrs, total, '000 3,982.5 5,386.3 5,616.5 6,676.2 7,350.3 7,795.1 7,978.4

Population, 40-44 yrs, total, '000 2,747.9 4,985.8 5,360.3 5,568.1 6,589.7 7,258.1 7,677.3

Population, 45-49 yrs, total, '000 2,033.4 3,870.6 4,966.6 5,308.0 5,475.6 6,483.8 7,111.1

Population, 50-54 yrs, total, '000 1,946.5 2,642.5 3,842.2 4,888.4 5,183.0 5,350.9 6,299.1
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

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Indicator 1990 2000 2005 2010 2015 2020 2025f

Population, 55-59 yrs, total, '000 1,979.5 1,916.9 2,585.1 3,733.5 4,722.8 5,014.0 5,127.5

Population, 60-64 yrs, total, '000 1,608.9 1,783.7 1,837.5 2,471.9 3,555.5 4,504.3 4,752.3

Population, 65-69 yrs, total, '000 1,366.5 1,726.6 1,653.3 1,703.7 2,288.8 3,294.4 4,171.5

Population, 70-74 yrs, total, '000 1,003.2 1,289.0 1,516.5 1,454.7 1,503.1 2,029.4 2,921.0

Population, 75-79 yrs, total, '000 736.4 951.1 1,041.3 1,230.2 1,182.4 1,228.8 1,668.8

Population, 80-84 yrs, total, '000 407.6 550.3 667.7 737.3 875.0 846.0 883.0

Population, 85-89 yrs, total, '000 191.6 275.3 308.8 380.5 424.3 510.3 492.4

Population, 90-94 yrs, total, '000 50.1 86.3 112.2 128.7 161.2 183.9 221.9

Population, 95-99 yrs, total, '000 7.5 18.0 22.7 30.4 35.7 46.1 53.4

Population, 100+ yrs, total, '000 0.5 1.5 2.7 3.5 4.9 6.0 8.2
f = BMI forecast. Source: World Bank, UN, BMI
POPULATION BY AGE GROUP, % (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f

Population, 0-4 yrs, % total 13.63 9.06 8.53 8.16 8.12 7.69 7.03

Population, 5-9 yrs, % total 13.04 10.97 8.55 8.06 7.69 7.70 7.38

Population, 10-14 yrs, % total 11.66 11.34 10.29 8.07 7.61 7.30 7.35

Population, 15-19 yrs, % total 10.29 10.88 10.24 9.51 7.61 7.22 6.90

Population, 20-24 yrs, % total 8.57 9.74 9.75 9.36 8.94 7.20 6.86

Population, 25-29 yrs, % total 8.20 8.59 9.01 9.08 8.81 8.46 6.98

Population, 30-34 yrs, % total 7.62 7.15 8.10 8.50 8.54 8.33 8.18

Population, 35-39 yrs, % total 5.95 6.82 6.76 7.64 7.97 8.07 7.97

Population, 40-44 yrs, % total 4.11 6.31 6.45 6.37 7.15 7.51 7.67

Population, 45-49 yrs, % total 3.04 4.90 5.97 6.07 5.94 6.71 7.10

Population, 50-54 yrs, % total 2.91 3.34 4.62 5.59 5.62 5.54 6.29

Population, 55-59 yrs, % total 2.96 2.43 3.11 4.27 5.12 5.19 5.12

Population, 60-64 yrs, % total 2.40 2.26 2.21 2.83 3.86 4.66 4.75

Population, 65-69 yrs, % total 2.04 2.19 1.99 1.95 2.48 3.41 4.17

Population, 70-74 yrs, % total 1.50 1.63 1.82 1.66 1.63 2.10 2.92

Population, 75-79 yrs, % total 1.10 1.20 1.25 1.41 1.28 1.27 1.67

Population, 80-84 yrs, % total 0.61 0.70 0.80 0.84 0.95 0.88 0.88

Population, 85-89 yrs, % total 0.29 0.35 0.37 0.44 0.46 0.53 0.49

Population, 90-94 yrs, % total 0.07 0.11 0.13 0.15 0.17 0.19 0.22

Population, 95-99 yrs, % total 0.01 0.02 0.03 0.03 0.04 0.05 0.05

Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.01 0.01 0.01
f = BMI forecast. Source: World Bank, UN, BMI

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Food & Drink Glossary

Food & Drink

Food Consumption: All four food consumption indicators (food consumption in local currency, food consumption in US dollar
terms, per capita food consumption and food consumption as a percentage of GDP) relate to off-trade food and non-alcoholic
drinks consumption, unless stated in the relevant table/section.

Off-trade: Relates to an item consumed away from the premises on which it was purchased. For example, a bottle of water bought
in a supermarket would count as off-trade, while a bottle of water purchased as part of a meal in a restaurant would count as on-
trade.

Canned Food: Relates to the sale of food products preserved by canning. This is inclusive of canned meat and fish, canned ready
meals, canned desserts and canned fruits and vegetables. Volume sales are measured in tonnes as opposed to on a unit basis to
allow for cross-market comparisons.

Confectionery: Refers to retail sales of chocolate, sugar confectionery and gum products. Chocolate sales include chocolate bars
and boxed chocolates; gum sales incorporate both bubble gum and chewing gum; and sugar confectionery sales include hard-
boiled sweets, mints, jellies and medicated sweets.

Trade: In the majority of BMI's Food & Drink reports, we use the UN Standard International Trade Classification, using categories
Food and Live Animals, Beverages and Tobacco, Animal and Vegetable Oils, Fats and Waxes and Oil-seeds and Oleaginous Fruits.
Where an alternative classification is used due to data availability, this is clearly stated.

Drinks Sales: Soft drinks sales (including carbonates, fruit juices, energy drinks, bottled water, functional beverages and ready-to-
drink tea and coffee), alcoholic drinks sales (including beer, wine and spirits) and tea and coffee sales (excluding ready-to-drink tea
and coffee products that are incorporated under our soft drinks banner) are all off-trade only, unless stated.

Mass Grocery Retail

Mass Grocery Retail: We classify mass grocery retail (MGR) as organised retail, performed by companies with a network of modern
grocery retail stores and modern distribution networks. MGR differs from independent or traditional retail, which relates to informal,
independent-owned grocery stores or traditional market retailing. MGR incorporates hypermarket, supermarket, convenience and
discount retailing, and in unique cases cooperative retailing. Where supermarkets are independently owned and not classified as
MGR, we will state so clearly within the relevant report.

Hypermarket: We classify hypermarkets as retail outlets selling both groceries and a large range of general merchandise goods
(non-food items) and typically more than 2,500sq m in size. Traditionally only found on the outskirts of towns, hypermarkets are
increasingly appearing in urban locations.

Supermarket: Supermarkets are the original and still most globally prevalent form of self-service grocery retail outlet. We classify
supermarkets as more than 300sq m, up to the size of a hypermarket. The typical supermarket carries both fresh and processed
food and will stock a range of non-food items, most commonly household and beauty goods. The average supermarket will
increasingly offer some added-value services, such as dry cleaning or in-store ATMs.

Discount Stores: Although most commonly between 500sq m and 1,500sq m in size, similar to supermarkets, discount stores will
typically have a smaller floor space than their supermarket counterparts. Other distinguishing features include the prevalence of
low-priced and private label goods, an absence of added-value services, often called a no-frills environment, and a high product
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 90
Vietnam Food And Drink Report | Q3 2023

turnover rate.

Convenience Stores: Our classification of convenience stores includes small outlets typically less than 300sq m in size, with long
opening hours and located in high footfall areas. These stores mainly sell fast-moving food and drink products (such as
confectionery, beverages and snack foods) and non-food items, typically stocking only two or three brand choices per item and
often carrying higher prices than other forms of grocery store.

Cooperatives: We classify cooperatives as retail stores that are independently owned but club together to form buying groups
under a cooperative arrangement, trading under the same banner, although each is privately owned. The arrangement is similar to a
franchise system, although all profits are returned to members. The term is becoming more archaic, with fewer cooperatives
remaining that conform to this model. Most cooperative groups now have a more centralised management structure, operate more
like normal supermarkets, and are thus classified as such in our reports.

Food & Drink Methodology

Connected Thinking

BMI employs a unique methodology known as 'Connected Thinking'. This means that our analysis captures the inter-relatedness of
the global economy, and takes into account all of the relevant political, macroeconomic, financial market and industry factors that
underpin a forecast and view. We then integrate them so as to explain how they interact and affect each other. Our Connected
Thinking approach provides our customers with unique and valuable insight on all relevant macroeconomic, political and industry
risk factors that will impact their operations and revenue-generating potential in the industry/industries within which they operate.

We use a transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert judgement to
ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe analyst
expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our customers.

Food & Drink Methodology

BMI's Food & Drink Forecasting And Sourcing

For the Food & Drink industry we have historical data and five-year forecasts for 101 market-level core industry variables.

We use household spending figures that show spending on food and drink, for consumption at home via retail purchases. We divide
food and drink into two categories: (i) spending on food & non-alcoholic drinks, and (ii) alcoholic drinks.

For the alcoholic drinks sub-categories, we use volume (in litres) consumption by household and per capita in each market; this is
measured via both on and off trade.

Our forecasts are a combination of regression modelling, time series analysis and analyst expert judgement.

Our Food & Drink analysts interact with other analytical teams in BMI, including Country Risk, Agribusiness and Consumer & Retail.
This is to ensure they have a comprehensive understanding of external factors that may impact the food and drink industry outlook
either on a market, regional or global level.

There is a constant rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will use their expert
judgement outside of these cycles to implement forecasts changes when necessary.
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 91
Vietnam Food And Drink Report | Q3 2023

Food & Non-Alcoholic Drinks

Spending on food & non-alcoholic drinks is expressed in nominal terms.

We define spending on food & non-alcoholic drinks as the amount households spend on food for domestic consumption only. This
reflects items bought through retail sales channels, based on the UN classification of individual consumption by purpose (COICOP).

Historical figures for spending on food & non-alcoholic drinks are based on household survey data, following the UN COICOP
classifications.

Where spending data is not readily allocated into the COICOP format, we apply a rigorous and logical approach in allocating data to
align with these categories, and if needed, apply aggregation methods or other techniques to achieve category level data.

Our food & non-alcoholic drinks forecasts are based on regression model and other time series analysis models, using a market’s
own historical time series and key macroeconomic explanatory variables from our Country Risk and Consumer & Retail services. In
addition, we also apply analyst expert judgement to refine and finalise the food & non-alcoholic drinks spending forecast based on
exogenous and endogenous variables or events, not captured by our regression model.

Alcoholic Drinks

Spending on alcoholic drinks is expressed in nominal terms and volume terms.

We define spending on alcoholic drinks as the amount households spend on alcohol for domestic consumption only. This reflects
items bought through all sales channels, based on the UN classification of individual consumption by purpose (COICOP).

Historical figures for spending on alcoholic drinks are based on household survey data, following the UN COICOP classification.

Alcoholic drink consumption is defined as the total recorded volume of alcohol drinks consumed in a market. Data is presented in
volumes consumed as opposed to pure alcoholic volume. It refers to consumption by people aged 15 and older and all sales
channels of consumption, including out-of-home consumption, such as bars, restaurants etc.

We divide the alcoholic drinks category into beer, wine and spirits, as well as further breakdowns, where data is available, into sub-
categories of these segments.

Our alcoholic drinks forecasts are based on a regression model, using a market's own historical time series. In addition, we also apply
analyst expert judgement to refine and finalise the alcoholic drinks spending forecast based on exogenous and endogenous
variables or events, not captured by our regression model.

Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index

Our Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of
the food & non-alcoholic drinks industry, based on the balance between the Risks and Rewards of entering and operating in
different markets.

We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of first the balance between opportunities and risk and second between industry-
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 92
Vietnam Food And Drink Report | Q3 2023

specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.

The index uses a combination of our proprietary forecasts and analyst assessments of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.

The Food & Drink (Non-Alcoholic Drinks) RRI universe comprises 106 markets.

Benefits Of Using Our Food & Drink (Non-Alcoholic Drinks) RRI

• Global Rankings: One global table, ranking all the markets in our universe for food & drink (non-alcoholic drinks) from least
(closest to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of the global, regional or sub-regional risk/reward profiles.
• Comparability: Identical methodology across 106 markets for food & drink (non-alcoholic drinks) allows users to build lists of
markets they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the food & drink (non-alcoholic drinks) industry in different
markets around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the food & drink (non-alcoholic drinks) industry, from which users can
dive into more granular forecasts and analyses to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology: The index is a combination of proprietary BMI forecasts, analyst insights and globally acceptable benchmark
indicators.

fitchsolutions.com/bmi 93
Vietnam Food And Drink Report | Q3 2023

Weightings Of Categories And Indicators

Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index

Source: BMI

The RRI matrix is divided into two distinct categories:

Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro industry and/or market
characteristics that directly impact the size of business opportunities in a specific industry (Country Rewards).

Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).

Assessing Our Weightings

Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of the final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry
size and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour
statistics and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging
and frontier markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in
markets where regulatory frameworks are not as developed and industry sizes are not as big as in developed markets, but where we
know there is a strong desire to invest.

fitchsolutions.com/bmi 94
Vietnam Food And Drink Report | Q3 2023

FOOD & DRINK (NON-ALCOHOLIC DRINKS) RRI INDICATORS - EXPLANATION AND SOURCES
Source Rationale

Rewards

Industry Rewards

Denotes per capita spending on food & non-alcoholic drinks in USD.

F&D Spending Per Capita BMI Forecast
Wealthier populations spend more on F&D products.

Denotes food & non-alcoholic drinks industry dynamism as a percentage.

F&D Five-Year Growth Rate BMI Forecast Scores based on annual average growth over our five-year forecast
period.

Denotes total household spending on food & non-alcoholic drinks in

Total F&D Expenditure BMI Forecast
USDbn. Large markets score higher than smaller ones.

Country Rewards

Size of the population in millions as a measure for the total addressable

Population BMI Forecast
market.

Proportion of households with an income that exceeds USD10,000.

Mass Affluent Class BMI Forecast Excludes those in poverty but demonstrates potential demand for
branded products.

Size of the urban population in millions. Higher urban population size is a

Urban Population BMI Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.

Proportion of the population between 20-39 years old as a percentage.

Spending Population BMI Forecast This is typically the range that companies target as a high spending/
trendsetting generation.

Risks

Industry Risks

Uses Operational Risk's Economic Openness as a proxy for determining

Regulatory Environment BMI Operational Risk Index
the ease of entering and doing business in a market.

Uses our urban/rural split (%) data as a proxy for determining the level of
F&D Formalisation BMI Forecast retail/hospitality formalisation in the market. Highly urbanised markets
allow companies to easily serve more consumers.

Uses Operational Risk's Logistics Risk to determine the risks and costs
associated with moving products around a market. Higher scores
Logistics Risk BMI Operational Risk Index
indicate quality transport, cheap fuel/electricity and high levels of tech
adoption

Country Risks

Takes into account the structural characteristics of economic growth, the

Long-Term Economic Risk labour market, price stability, exchange rate stability and the
BMI Country Risk Index
Index sustainability of the balance of payments, as well as fiscal and external
debt outlooks for the coming decade.

Seeks to define current vulnerabilities and assess real GDP growth,

Short-Term Economic Risk inflation, unemployment, exchange rate fluctuation, balance of
BMI Country Risk Index
Index payments dynamics, as well as fiscal and external debt credentials over
the coming two years

Long-Term Political Risk BMI Country Risk Index Assesses structural political characteristics based on our assumption that
This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent
sources. Fitch Ratings analysts do not share data or information with BMI.

fitchsolutions.com/bmi 95
Vietnam Food And Drink Report | Q3 2023

Source Rationale

liberal, democratic markets with no sectarian tensions and broad-based

Index income equality exhibit the strongest characteristics in favour of political
stability, over a multi-year time frame.

Short-Term Political Risk Assesses pertinent political risks to investment climate stability over a
BMI Country Risk Index
Index shorter time frame, up to 24 months forward.

Focuses on existing conditions relating to four main risk areas: Labour

Operational Risk Index BMI Operational Risk Index
Market, Trade & Investment, Logistics, and Crime & Security.

Source: BMI

Food & Drink (Alcoholic Drinks) Risk/Reward Index

Our Food & Drink (Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of the
food & drink (alcoholic drinks) industry, based on the balance between the Risks and Rewards of entering and operating in
different markets.

We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of first the balance between opportunities and risk and second between industry-
specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.

The Food & Drink (Alcoholic Drinks) RRI universe comprises 95 markets.

Benefits Of Using Our Food & Drink (Alcoholic Drinks) RRI

• Global Rankings: One global table, ranking all the markets in our universe for food & drink (alcoholic drinks) from least (closest
to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of the global, regional or sub-regional risk/reward profiles.
• Comparability: Identical methodology across 95 markets for food & drink (alcoholic drinks) allows users to build lists of markets
they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the food & drink (alcoholic drinks) industry in different
markets around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the food & drink (alcoholic drinks) industry, from which users can dive into
more granular forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology: The index is a combination of proprietary BMI forecasts, analyst insights and globally acceptable benchmark
indicators.

fitchsolutions.com/bmi 96
Vietnam Food And Drink Report | Q3 2023

Weightings Of Categories And Indicators

Food & Drink (Alcoholic Drinks) Risk/Reward Index

Source: BMI

The RRI matrix is divided into two distinct categories:

Assessing Our Weightings

fitchsolutions.com/bmi 97
Vietnam Food And Drink Report | Q3 2023

FOOD & DRINK (ALCOHOLIC DRINKS) RRI INDICATORS - EXPLANATION AND SOURCES
Source Rationale

Rewards

Industry Rewards

Denotes per capita consumption of alcoholic drinks in litres. Measures which

Alcohol Consumption Per
BMI Forecast populations consume more on alcohol products at the individual level rather
Capita
than total size.

Alcohol 5-Year Growth Denotes alcoholic drinks industry dynamism as a percentage. Scores based
BMI Forecast
Rate on annual average growth over our five-year forecast period.

Total Alcohol Denotes total consumption of alcoholic drinks in millions of litres. Large
BMI Forecast
Consumption markets score higher than smaller ones.

Denotes per capita spending of alcoholic drinks in USD. Measures which

Alcohol Spending Per
BMI Forecast populations spend more on alcohol products at the individual level rather
Capita
than total size.

Alcohol Spending Growth Denotes alcoholic drinks spending dynamism as a %. Scores based on
BMI Forecast
Rate annual average growth over our five-year forecast period.

Denotes total spending of alcoholic drinks in USD. Large markets score

Alcohol Spending Total BMI Forecast
higher than smaller ones.

Country Rewards

Size of the population in millions as a measure for the total addressable

Population BMI Forecast
market.

Proportion of households with an income that exceeds USD10,000. Excludes

Mass Affluent Class BMI Forecast those in poverty but demonstrates potential demand for branded alcohol
products.

Size of the urban population in millions. Higher urban population size is a

Urban Population BMI Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.

Proportion of the population between 20-39 years old as a percentage. This

Spending Population BMI Forecast is typically the range that companies target as a high spending/trendsetting
generation and are generally over the legal drinking age.

International Tourism Represents the total spend of international visitors. Provides another
BMI Tourism Forecast
Receipts Total potential market opportunity for the alcoholic drinks industry.

Represents the total spend of international visitors on a per capita basis.

International Tourism
BMI Tourism Forecast Measures economic potential of the alcohol drinks market at the individual
Receipts Per Visitor
level rather than total size.

fitchsolutions.com/bmi 98
Vietnam Food And Drink Report | Q3 2023

Source Rationale

Risks

Industry Risks

Uses Operational Risk's Economic Openness as a proxy for determining the

Regulatory Environment BMI Operational Risk Index
ease of entering and doing business in a market.

Uses Operational Risk's Logistics Risk to determine the risks and costs
Logistics Risk BMI Operational Risk Index associated with moving products around a market. Higher scores indicate
quality transport, cheap fuel/electricity and high levels of tech adoption

Country Risks

Takes into account the structural characteristics of economic growth, the

Long-Term Economic Risk labour market, price stability, exchange rate stability and the sustainability of
BMI Country Risk Index
Index the balance of payments, as well as fiscal and external debt outlooks for the
coming decade.

Seeks to define current vulnerabilities and assess real GDP growth, inflation,
Short-Term Economic Risk
BMI Country Risk Index unemployment, exchange rate fluctuation, balance of payments dynamics,
Index
as well as fiscal and external debt credentials over the coming two years

Assesses structural political characteristics based on our assumption that

Long-Term Political Risk liberal, democratic markets with no sectarian tensions and broad-based
BMI Country Risk Index
Index income equality exhibit the strongest characteristics in favour of political
stability, over a multi-year time frame.

Short-Term Political Risk Assesses pertinent political risks to investment climate stability over a
BMI Country Risk Index
Index shorter time frame, up to 24 months forward.

Focuses on existing conditions relating to four main risk areas: Labour

Operational Risk Index BMI Operational Risk Index
Market, Trade & Investment, Logistics, and Crime & Security.

Source: BMI

fitchsolutions.com/bmi 99
Fit
Fitch
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olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
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Web: www.fitchsolutions.com/bmi

IS SN: 1749-3072
ISSN:

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