Vietnam: bakery on the rise

A growing number of high-end shops, restaurants and hotels is expected to contribute to the growth of the bakery sectory in Vietnam

Vietnam’s bakery, cereal products and confectionery markets are expected to grow, with imported palm oil used as an ingredient in these sectors Muhammad Kharibi, Rina Mariati

Vietnam’s bakery, cereal products and confectionery market is one of the most robust in the Asia Pacific region.

According to Statista, revenue in the country’s bread and cereal products sector reached US$6,838M in 2020, surging by 34.4% from US$5,088M in 2019. In terms of volume, the sector registered 3,848M kg in 2020, an increase of 31.1% from the 2019 figure of 2,934M kg.

The COVID-19 pandemic was the main reason behind the huge increase in the sector’s revenue and volume.

The normal annual average growth for the segment’s revenue and volume is 3.3% and 2.5% respectively.

However, during the pandemic, the Vietnamese preferred to dine at home and, due to their convenience, bakery products became a popular choice.

The country’s bread and cereal products segment is expected to grow in the future, although not at the pace of 2020. The projected revenue and volume in 2021 are US$6,885M and 3,779M kg respectively.

Palm oil imports

With a population of 97.3M people, Vietnam’s consumption of oils and fats stood at 1.6M tonnes in 2020, a rise of 8.6% or 130,000 tonnes compared with 2019.

The country is one of the most important markets for palm oil in the Association of Southeast Asian Nations (ASEAN) region and palm is the main oil consumed in Vietnam, with a share of 61.2% or 976,000 tonnes out of the country’s total oils and fats consumption last year.

The demand for palm oil is expected to show an upward trend in the future with the food industry and the hotel, restaurant and catering (HORECA) sector representing major consumers. The bakery and confectionery sector is one area of the food industry which offers growth potential for palm oil.

Most of the finished palm products imported by Vietnam are used in the bakery and confectionery sectors (see Table 2, following page).

The country imports palm oil from both Indonesia and Malaysia, with imports recording strong growth in the past five years at an average annual growth of 7.3%.

In 2020, Vietnam imported 1.04M tonnes of palm oil, a 9.4% or 89,000 tonnes increase compared with 2019.

The country is the second largest importer of Malaysian palm oil in the ASEAN region after the Philippines.

However, Malaysian palm oil imports into Vietnam registered a decline of 158,427 tonnes or 26.61% in 2020, mainly due to an increase in imports from Indonesia and a high volume of soyabean coming from the USA.

Competitive pricing led to Vietnam increasing its Indonesian palm oil imports in 2020 by 259,000 tonnes or 75.7% compared to 2019.

Last year, the country’s soyabean imports also rose as its pig herd began to recover from the 2019 African swine fever (ASF) outbreak, leading to increased demand for feed.

According to Oil World data, US soyabean exports to Vietnam rose by 330,200 tonnes or 58.42% to total 895,400 tonnes for the January to November 2020 period, compared with the same period in 2019.

The surge in domestic crushing also led to increased availability of soyabean oil for local consumption, translating into slower imports of palm oil into Vietnam. u

Figure 1: Refining process of crude palm oil (CPO) and finished products

Figure 2: Refining process of crude palm kernel oil (CPKO) and finished products

PKO products 2016 2017 2018 2019

HRBD palm kernel olein HRBD palm kernel oil HRBD palm kernel stearin RBD palm kernel oil Others

TOTAL

3,034 1,635 415 459 2,482

8,024

3,398 1,117 1,217 419 2,447

8,598

5,653 1,295 1,304 406 445

9,102

8,371 5,487 1,996 312 226

16,393 Table 1: Import of Malaysian palm kernel (PKO) products by Vietnam (tonnes) 2020

11,124 3,871 2,026 355 600

17,977

Finished products 2016 2017 2018 2019

Vegetable fat Butter oil substitute Shortening Cocoa butter replacer Others

TOTAL

1,110 2,443 1,587 900 1,678

7,718

352 2,410 1,827 809 1,819 7,217

1,914 4,102 1,813 496 1,687 10,013

2,725 3,906 2,066 131 1,561

10,390 Table 2: Import of Malaysian finished palm products by Vietnam (tonnes) 2020

3,285 2,956 1,299 509 1,034

9,083

u

Source: Malaysian Palm Oil Council (MPOC)

Source: Malaysian Palm Oil Council (MPOC)

Source: Malaysian Palm Oil Board

Palm products for confectionery

Refined, bleached and deodorised (RBD) palm olein, RBD palm oil and RBD palm stearin are the main imported palm oil products into Vietnam, with a share of 75.5%, 18.6% and 5.1% respectively.

Fractionation of RBD palm olein produces palm mid-fractions and super olein (see Figure 1, left). The palm midfraction can be used as a frying oil, and for biscuit and confectionery fillings, whereas super olein usages are for snacks and frying oil.

Fractionation of RBD palm stearin produces mid-stearin and super-stearin (see Figure 1, left). Mid stearin can be used as a hard stock for margarine and super stearin can be used to produce dry soup mixes and dry cake mixes.

The import of palm kernel oil (PKO) products shows positive growth with a CAGR of 17.5% from 2016.

Hydrogenated, refined, bleached and deodorised (HRBD) palm kernel olein imports rose significantly by 266.7% or 8,091 tonnes to reach 11,124 tonnes in 2020 compared to 2016 (see Table 1, left). It is widely used for coffee whiteners and margarine. There was also an increase in the import of HRBD palm kernel stearin, which is mainly used for confectionery, cream biscuits and chocolate coatings.

The increase in the import of these products shows the positive development of the bakery and confectionery sector in Vietnam, with the government recognising the bakery sector as one of the important GDP contributors to the country.

The demand drivers which contribute to the growth of this sector include: • A growing youth and middle-class population with rapid urbanisation leading to more demand for bakery products. • Growing numbers of high-end shops, restaurants, hotels, resorts and shopping malls that offer a wide selection of bakery products. • Rising numbers of food chains serving bakery products. • Increased interest and demand for organic and healthy foods, with bakery products considered a healthy food in

Vietnam.

Source: Malaysian Palm Oil Board Based on data and projections, the bakery and confectionery sector promises strong growth for the future in Vietnam.

This growth will spur demand for palm oil in the country, with Vietnam continuing to depend on imported palm oil from Malaysia and Indonesia. ● This article is based on a Malaysian Palm Oil Council (MPOC) report by Muhammad Kharibi and Rina Mariati