Beef Shortage, Surging Consumption Bring More Imports to Vietnam

USMEF estimates that Vietnam consumed a record amount of imported beef in 2013 and all indicators suggest utilization will grow again this year. Official statistics just released by Vietnamese agricultural authorities show that domestic cattle and buffalo meat production slipped last year, while surging demand from overall economic growth and changes in Vietnam’s foodservice industry provided a strong impetus for beef importers and distributors.

Quantifying domestic usage has been difficult, because a significant volume of beef imported into Vietnam is re-exported. USMEF staff traveled to Vietnam last week to assess the current situation in the market and attempt to gauge shifts in the structure of demand. They found that imported beef – mainly from eligible supplying countries Australia, India and the United States – is on a strong uptick at the moment due mainly to the growth in beef-centric chain restaurants and growing sophistication and competition among Vietnam’s importers. For example, Australia’s exports, which benefit from lower duties through a free trade agreement* with Vietnam, increased more than 50 percent in 2013 to more than 3,000 metric tons (mt).

“Vietnam is at a take-off stage for beef imports,” said Joel Haggard, USMEF senior vice president for the Asia Pacific region. “Restaurant infrastructure is developing rapidly and this is reflected in the surge in orders for imported beef.”

Just a few years ago, most U.S. beef shipped to Vietnam ended up in Korean and Japanese restaurants operated by expatriates who established these outlets as family businesses. More recently, local Vietnamese operators like RedSun have entered the picture, opening dozens of outlets under different brands, but with clear corporate growth strategies and modern systems of operation.

“RedSun’s King BBQ is an example of the new model,” explained Sabrina Yin, USMEF ASEAN director. “Its nine outlets cater to a growing middle class domestic urban consumer who can afford to spend $15 for Korean-style barbecue featuring mostly U.S. beef cuts.”

Some restaurant chains have grown to the point at which they can purchase full container loads of beef directly from U.S. exporters. Most of this growth to date has focused on the Ho Chi Minh City and Hanoi markets, but operators are now looking at other urban areas such as Da Nang and Haiphong.

Vietnam’s modern retail sector is also expanding. On Jan. 11, Japanese retail giant Aeon opened its first Vietnamese mall and supermarket in Ho Chi Minh City, with U.S. beef prominently featured. Other modern retail outlets carrying U.S. beef items include Metro Cash and Carry, Lotte Mart and the fast-growing, large format Ocean Mart, which is part of the Vietnamese financial conglomerate Ocean Group.

“U.S. beef has been available in retail stores in Vietnam for a number of years, but competition is heating up from local groups and we are seeing more points of sale for U.S. beef and pork,” said Yin.

There are several distinct markets for imported beef in Vietnam. Product from the U.S. and Australia competes at the higher end, including hotels, western restaurants, and Asian-themed chain restaurants such as King BBQ. India supplies the largest share of Vietnam’s imported frozen beef, which USMEF estimates at about 14,000 mt in 2013. Most of this product is utilized in factory canteens and other mass institutional settings. In 2013, Vietnam also imported more than 54,000 head of live cattle from Australia, with most heading directly to local small-scale slaughter plants for fabrication into fresh beef. Last year’s imports of Australian live cattle increased more than 1,500 percent over 2012, with trade in the final few weeks of 2013 exceeding the full-year totals from 2012. Several factors contributed to these results, including Australia’s widespread drought and its efforts to diversify live cattle exports away from Indonesia. Vietnam’s low duty (5 percent) on live imports also assisted this growth. According to local traders, beef derived from imported Australian cattle sold for lower prices than domestic beef in local wet markets.

According to 2013 statistics released by Vietnam’s Ministry of Agriculture and Rural Development (MARD), domestic beef (285,400 mt, -2.9 percent) and buffalo meat (85,300 mt, -3.5 percent) production both declined compared to 2012. Although lower production and higher domestic prices partially explain the import surge, strong demand is well-illustrated by the increase in import utilization despite a recent depreciation in the local currency. Vietnam’s GDP growth also accelerated to 6 percent in the fourth quarter of 2013, and direct foreign investment last year was much higher than initial estimates. Analysts predict a stable exchange rate in 2014, and USMEF expects a decline in interest rates to provide relief for local meat importers, many of whom have been operating under challenging cash flow conditions.

U.S. red meat exporters continue to face barriers in Vietnam, including high duties on muscle cuts and a ban on offals, which have commercial potential in this market. U.S. beef exports are also restricted to product derived from cattle less than thirty months of age. Although Trans-Pacific Partnership (TPP) negotiations are ongoing, MARD’s head of livestock development Hoang Thanh Van issued a call last week for Vietnam’s livestock producers to ready themselves for increasing foreign competition as a result of TPP. Market players are hopeful that the trade pact will offer relief from current tariff and non-tariff barriers. Vietnamese traders are particularly focused on lower duties, since demand is extremely price-sensitive.

* Under the ASEAN-Australia-New Zealand Free Trade Agreement, imports of Australian and New Zealand beef are subject to duties of 7 percent, compared to 20 percent on imports from the U.S. and other suppliers.