Will the F&B industry be “immune” to volatility?17/02/2023
According to Rong Viet Securities Company (VDSC), due to the non-cyclical nature of food and beverage (F&B) products that consumers cannot cut down regardless of financial situation, the industry Vietnamese food and beverage is expected to show an upward trend in sales despite the difficulties in 2023, including high interest rates, rising unemployment rate or weak purchasing power. “We believe that the total sales of the industry will not be too volatile in 2023,” VDSC acknowledged.
Vietnam’s retail sales in the third quarter of 2022 reached VND 1,137 trillion, not only 40% higher than the third quarter of 2021 but also higher than the pre-pandemic level. In addition, this index also increased slightly in November 2022 to reach 397 trillion dong (or 16 billion USD; up 4.7% over the previous month; up 18.1% over the same period last year). The peak shopping season of the F&B industry falls in the fourth quarter and the first quarter is around Christmas and New Year holidays. Therefore, VDSC thinks that food and beverage consumption will increase.
Another advantage for the F&B industry is the expectation of a recovery from foreign tourists. In 2022, global tourism activity has not yet fully recovered due to the COVID-19 pandemic (blockade policy in China for example) and Ukraine-Russia tensions. VDSC believes that these problems will ease in the second quarter of 2023, boosting global tourism to increase again. The recovery of foreign tourist traffic, especially China, will boost sales.
Selling price will be a big influence on purchasing decisions in 2023
According to Kantar Worldpanel, the average selling price of FMCG products has started to increase since the first quarter of 2022, with the strongest increase in the second and third quarters of 2022. As consumption demand is expected to be stable, selling price will be the driving force for growth in 2023.
Although the price increase in rural areas is higher than in urban areas, the increase in consumption output is also higher.
VDSC believes that rising selling prices will limit spending on high-end products in the context of tight spending. Vietnamese consumers will continue to spend on essential F&B products, but some of them will prefer more popular brands like Vinamilk or Kinh Do. Therefore, companies with diverse product portfolios from affordable to high-end segments will have better business performance.
Besides, an unusual development is occurring: although the price increase in rural areas is higher than in urban areas, the increase in consumption output is also higher. Therefore, VDSC considers that rural people are less sensitive to price increases than urban residents. This could be a result of tourism activities or a wave of people moving back to live in the countryside after COVID-19. Therefore, companies with large distribution networks will gain more profits.
Source: Nhip Cau Dau Tu