Food and beverage: retail + food service
Sales in the retail space is starting to experience a plateau now that panic buying is over. Some retailers are now offering food boxes to consumers to provide options for daily fresh and nutritional shopping. This concept has generated quite a bit of interest in the market, especially in online shopping channels and on Facebook. New Zealand companies should watch this space with check with the retailers they currently work with to be involved and be part of this new offer.
Bach Hoa Xanh (BHX) opened over 1,000 stores with revenue growth of 22% year-on-year. In March 2020 alone, BHX sold more than 40,000 tonnes of fresh food (up 48% over the same period), reaching nearly 17 million consumers in store.
The average revenue per store increased to more than 1.6 billion dong, partly due to COVID-19 bulk-buying effects prior to the Government's social distance request. Online, the number of orders in March continued to increase approximately 17% compared to February and was 1.5 times higher than January 2020.
NZTE developed a collaborative relationship with BHX in early 2019 and invited the CEO of BHX to visit New Zealand in March that year. New Zealand exporters who want to establish direct export relationships with BHX can contact NZTE Vietnam for more insights.
In Q1 2020, Vinmart reported a 40% increase in revenue, yet the business still lost 900 billion Viet Nam Dong. Modern Trade retail remains a tough business to run in Viet Nam despite the shifting in consumer shopping behaviour and trends.
An Australian owned importer, Meatworks, with its own B2B and B2C channels, adapted to the new situation by making a deal with Big C supermarkets to establish a shop-in-shop in targeted premium Big C stores to penetrate sales and gain better access to shoppers.
Premium New Zealand meat exporters could consider working with Meatworks as a potential partner with omni channels to market.
NZTE's BDM met with the Deputy CEO of Vinmart, Viet Nam's biggest retailer with over 3,000 stores (132 supermarkets and 2,900 minimart and CVS). Vinmart reported that their supermarkets located inside department buildings are negatively affected by the lockdown, but their standalone supermarkets have increased business significantly.
Vietnamese consumers prefer Modern Trade supermarkets now as safe, convenient, and stocked with all essential items. Going forward, Vinmart, after being consulted by BCG, have defined "fresh" products and "online" are their main strategic and focus areas. Vinmart will apply a mixed business model of 50% direct import and 50% in-direct purchasing via local distributors to reduce their risks. Vinmart are also exploring online business models like Hema China to compete with fresh-delivery made available by the other platforms like Lazada and Tiki.
Vinmart is also going ahead with a New Zealand week promotion in the third week of June, led by Vinmart with New Zealand companies' support.
Among big retailers, Big C has achieved the strong performance, driven by both increasing footfall and spending per trip. MM Mega market (a cash-and-carry retail model) also picked up during this time, despite a downturn in recent years.
Meanwhile, shopping places most frequented for daily needs are losing traffic as shoppers preferring less physical contact make fewer shopping trips but with larger spending per trip. As such, street shops – another key shopping channel – and convenience stores are seeing short-term impacts caused by COVID-19.
Second and third-tier mass distribution beverages in beer and carbonated drinks have changed their business model to use one nationwide B2B exclusive distributor instead of sub-distributing their products to different provincial distributors. This signals a downsizing in this category as it is one of those hit strongest by the COVID-19 outbreak.
Lotte Mart Vietnam has stopped all fresh produce direct imports and switched back to buying from local distributors to reduce risk.
Chilean apples have gained market access and will arrive in the market for the first time this season, with the same timing as New Zealand apples in April. The NZTE business development manager is closely monitoring this space as Chile has the same climate, season, and variety as New Zealand for their fruits.
Retailers are putting pressure on fresh fruit suppliers to reduce their prices to help retailers support their customers during the epidemic.
New Zealand suppliers may receive requests to provide pre-packaged bags of around 2-3kg, versus providing boxes of loose fruit. Some importers and suppliers are responding quickly to this request to increase their footprint and volume of sales with selected retailers. New Zealand suppliers are advised to stay in close contact with retailers and their distributors to understand the changing needs of retailers' need to meet increasing cost pressures and consumer trends to buy bigger baskets less frequently.
There has been a trend for retailers to prefer to buy direct, and as a result, many NZTE clients developed stronger relationships and new contracts for direct supply to large retailers, and moved away from a total reliance on wholesalers and traders. This has helped contribute to good results so far this season.
Kantar has detected a high increase in cooking aids sales online, as Vietnamese consumers are practising or learning to prepare meals at home. Kantar also forecasts that brands associated with food safety, time spent at home, and in-home activities will gain better consumer engagement post COVID-19, as in-home activities become a new normal.
New Zealand food and beverage companies are facing challenges in establishing their brand profile with Vietnamese consumers. In-market network partners are doing the best they can, but an effective digital marketing strategy that can achieve brand visibility and enhance sales is important for growth in a market like Viet Nam.
Recent research reveals a 32% increase in online shopping across the market over the past two months as consumers avoid crowded supermarkets or use e-commerce channels to get their hands on items that are out of stock in physical stores.
By contrast, shopping in retail outlets has reduced 35% over the same period. Research also points out that retention of new shoppers online will be high going forward, making shopping online the new normal post COVID-19. Companies need to capitalise on this trend and get products listed online if they are not already. The best practice in the market is to deal with e-commerce platforms to establish flagship stores and not simply 'get listed', since shoppers trust the flagship stores' authenticity.
Restaurant business is coming back very slowly after restrictions have eased. Some high-end restaurants are continuing to offer RTE (Ready to Eat) or RTH (Ready to Heat) nutritious meals. New Zealand companies who have restaurants or other food service partners as their main channel to market should think about how they might explore and capture this market development opportunity. Some experts predict restaurant business will not be back to full capacity for 18 months after a vaccine for COVID-19 has been developed and approved.
Some other ideas New Zealand companies might consider is hosting educational webinars for end-consumers to increase demand, designing menus incorporating their ingredients to sell through to the restaurant owner and chef.
Diversification with digital platforms offering subscription food services to increase sales in another possibility.
Food service distributors are adapting by switching their business models to home delivery to end-users with a US$25 minimum order, and using Grab Delivery for logistics.
Food delivery still decreased by 30% for the year to date, due to consumers' preference for preparing their own meals for safety.
Small and medium-sized restaurants are working with business associations like AmCham, and EuroCham to design COVID-19 menus, catering to virtual meetings delivered to attendees' homes. End-users have a chance to experience offered items on the menu like: Go Green Quarantine, Lockdown Lemonade, Painkiller Quesadilla, etc. It seems SME in food service is becoming more flexible and stretching their innovations to keep business going.
From 4 May, various food service distributors are co-hosting online workshop seminars with supplier sponsored chefs to demonstrate how to prepare delicious meals at home with their product ingredients. COVID-19 has created a whole stay-at-home economy. This new way of reaching customers may be something exporters could consider as part of their promotions at this time.