In conversation with Mr.Lương Ngọc Dũng, Board Member at ABA Cooltrans, Ho Chi Minh City, we tried to understand the Cold Chain Industry in Vietnam. We also discussed the effect of pandemic and the future going forward.
“The Vietnam Cold Chain market is now the most alluring area for investment in the logistics sector due to the growing awareness of the need of using the cold chain to protect perishable food items”
Q1. How would you like to describe the Cold chain industry in Vietnam?
The Vietnam cold chain industry is still in its early stages of development; the transition period was from 1998 to 2015, but since then it has grown significantly. The usage of cold chain is continuously increasing due to the increased awareness to protect the perishable food items in order minimize food wastage and losses. The market is quite fragmented due to the presence of a lot of cold storage and transport players, thereby increasing the competition in the cold chain market.
Q2. What are the major market demand factors for cold chains that are shaping the Vietnamese industry?
Vietnam seafood stands third in export volume in the world, accounting for the largest area of cold storage in the country. Since the sea food business is consciously growing in the country, it is a major factor in Vietnam's cold chain's occupancy rate. The modernization of retail and trade is also a major factor fuelling the demand of the cold chain services in Vietnam.
Q3. I believe there are approximately 50 cold storage warehouses in the country. Do you agree? Can you provide me an estimation for the number of pallets too?
In my opinion, there were 48 cold storages three years ago; however, currently there are 50 to 52 cold storages in the country. There may be additional storages but it cannot be accounted for since they are owned by small unorganized players having one room cold storage warehouses with limited capacity. The current cold storage shortfall will be resolved by the second quarter of 2023 as new competitors enter the cold chain industry.
Q4. Which of the three categories frozen, chillers, and ambient make up the majority of the total pallets in your opinion?
The market is driven by the frozen and chilled pallets and contributes approximately 80-90% of the overall pallet capacity in Vietnam. Frozen pallets dominate the market in terms of pallets size owing to the rising demand of processed frozen food and other similar products in the country.
Q5. Who are the major end users of the cold chain in Vietnam?
Meat and seafood, fruits and vegetables and bakeries are the main end users of cold chain in Vietnam, however the structure is changing. In addition to seafood, other items like fruits and vegetables and other frozen products are rising, which may reduce the share of seafood in the future. Pharmaceuticals make up a relatively small portion of all pallets since they need specialised services and companies usually have captive warehouses to store the same.
Q6. What are some of the most important developments and crucial government decisions for the cold chain disruption in Vietnam?
The need for cold chain storage is even more pressing given that Vietnam government intends to execute significant infrastructure development on seaports (Master plan in Vietnamese) and airports over the next ten years with a focus on 2050. (Master plan in Vietnamese).
Q7. What effects has the COVID 19 outbreak had on the Vietnamese cold chain industry?
The growth of e-commerce, particularly after Covid 19, has shifted the retail market toward organisation in an effort to stop any similar viral outbreaks. These factors created a shift towards storing household essentials, and as e-commerce usage increased, e-commerce players stocked up on the product in warehouses, thereby increasing the need for cold chain storage. One of the main factors contributing to the expansion of the cold chain in the food business is the rising adoption rate of packaged food and beverage goods post COVID.
Q8. Is the cold storage business still seeing a rapid growth rate because of the requirement for COVID vaccines?
As the vaccine product needs to be refrigerated or frozen for storage, massive cold chain facilities were needed in the nation for the safe delivery of vaccinations for mass vaccination against Covid-19. Vietnam took between one and two years to fully immunise against COVID-19. As a result, private cold chain companies will have ongoing business opportunities to store, transport, and distribute the Covid-19 vaccination product.
Q9. What do you think is the future outlook of the Vietnam Cold Chain Industry?
The cold chain industry will eventually move toward automation of operations with the use of remote temperature sensors, RFID devices, and other tools that help to ensure the security, reliability, and effectiveness of the cold chain systems. Moreover, the continuous research and developmental activities performed by the major market players to develop advanced cold chain systems will remarkably impact the growth of the cold chain market in the near future.
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