Vietnam’s cold chain market is expected to expand considerably in the next few years, offering investors ample business opportunities in the field.

The cold chain market has witnessed a boom over the past five years, as people have started to care about food quality, according to Ngo Quang Trung, general director of Australian-invested Swire Cold Storage.

“There is a surging demand for refrigerated deliveries and warehouses near major population centres”, said Trung at the Vietnam Fresh & Cold Supply Chain Conference 2017, held in Ho Chi Minh last week.

Trung said that Vietnam’s cold chain market was initially driven by the development of the seafood industry. Many chilled warehouses have been developed to serve the seafood industry, which has an annual export turnover of US$8 billion.

In recent years, many department stores, fast food chains, and mini-marts have sprung up in big cities. And more chilled distribution networks have been established to fulfil their needs.

The growth potential of Vietnam’s fresh and cold supply chain ranked 17th globally, according to Vietnam Supply Chain.

Agricultural products in Vietnam have an average loss rate of 25%-30% during harvesting, processing, storage, and transportation due to a lack of cold chain infrastructure in the country.

Growth opportunities for cold chains in Vietnam, have enticed foreign investors, an area where there has already been significant international investment.

Swire Cold Storage is one of the first foreign-invested companies to tap into the Vietnamese cold storage market. The company currently operates the largest and most advanced temperature-controlled warehousing facility in the country. Its major customers are Big C and MM Mega Market Vietnam.

Another investor, Yamato Holdings Co., Ltd., plans to launch a refrigerated transport service in Vietnam this September for delivering perishable foods from Japan to Japanese restaurants and speciality supermarkets in Vietnam, as reported by Nikkei Asia Review.

A joint venture will be set up with local logistics company Ba Sau Nam Trading Logistics (365 Express) and Yamato, through a joint-owned Singaporean unit. The Japanese parcel delivery giant will provide know-how to help 365 Express introduce and operate refrigerated vehicles.

In July last year, Japan’s CLK Cold Storage inaugurated a cold storage warehouse covering a total area of 9,300 square metres in the southern province of Binh Duong, with the investment capital of around US$18 million. It is the first facility in Vietnam to provide deep-freeze storage, at temperatures ranging from 25 degrees to-50-degress Celsius.

Vietnamese-based ABA Corporation is also active in the cold storage industry, and received a healthy investment sum from the Mekong Enterprise Fund III Ltd last year.

Luong Quang Thi, ABA’s general director, told VIR that Vietnam’s cold chain market is predicted to blossom by 2020. The improved food safety and product quality they provide will stimulate the development of the agriculture and animal husbandry sectors in Vietnam.

But at present, Thi said, the cold chain market is still disorganised and fragmented. Supermarkets and restaurant operators have been using their own chilled delivery services.

“Meanwhile, most cold chain service providers are small-and medium-sized enterprises, and none provide a whole service chain in Vietnam. This, the supply chain is likely to be broken if the complicated network is not properly managed”, he added.

Another challenge for cold chain operators in Vietnam is that most customers only focus on low cost. As a result, logistics companies cut concerns, which leads to losses in both the value and quality of goods.

Along with the growth of modern retail channels, there has been a trend towards purchasing groceries and food products online. This may represent a great opportunity for cold chain service providers.

But this change will need to be worked at David Elsner, head of supply chain at Lazada Vietnam, said that more changes should be made to serve the growing e-commerce sector. 

He stressed that Lazada Vietnam needs more third-party logistics providers to join the market and create changes on a micro-scale.

VIR