Sep 30, 2010
10:55 AMOut of the Orchard
Vietnam: A Land of Mopeds and Growing Cherry Consumption
Keith Hu discusses merchandising strategy with Metro Fruit Category Manager Vu Thi Thu Huang.
The cherry crop in the Northwest continues to expand and growers will continue to need new markets and new segments in order to remain viable. With this fact in mind, I was able to spend the past eight days on a market development trip to Vietnam. Northwest Cherry Growers Director of International Business Development, Keith Hu, and I felt the time was right to look at Vietnam as a potential market for NWCG promotional activity. Prior to the 2010 cherry season, we have been monitoring the quickly evolving middle class situation in Vietnam and the steady growth of the Washington Apple market there. Of course, these indicators are two of several that are required to be in place for a market to expand … others being a cold chain that can accommodate the highly perishable sweet cherry, and a consumer’s desire to make expensive sweet fresh fruit a part of their diet. Throw in potential competition from production regions in China and Turkey … and there are a lot of questions that must be answered before implementing promotion programs in an emerging market.
In meetings with U.S. Department of Commerce and the USDA Foreign Agricultural Service (both in Vietnam), we learned that Vietnam’s population grew to over 80 million people in 2009, 65 percent of the population is 25 years of age and younger, and that there are an amazing 30-million mopeds speeding around the streets of the country. Going into the market, we knew that for the 80-million potential consumers in Vietnam … only a small percentage of the population would be able to afford Northwest Cherries … which is common in most Asian NW Cherry markets where the “Diamond of Fruit” is considered a status symbol of comfortable and healthy living. Likewise, sales in Vietnam had averaged about 1,000 boxes the previous several years, but took a noticeable jump to 10,000 boxes in 2010. The primary questions we asked ourselves going into the trip were 1) Can the market grow past 10,000 or so boxes? 2) What can the Northwest Cherry growers do to aid retailers and importers to increase distribution and consumption?
The two primary cities in Vietnam are Hanoi (the capitol of Vietnam) and Ho Chi Minh City formerly known as Saigon. Our meetings began in Hanoi, a city of about 8 million citizens, and ended in Ho Chi Minh City where over 11 million people take up residence. During the trip, we met with the largest retailers in Vietnam as well as most of the larger fresh-fruit importers. Primary retailers in Vietnam include Metro, Fivimart, and Phu Thai. The supermarket retail sector is not as evolved as those found in North America or Europe. However, the grocery stores are modern, air conditioned, and offer adequate amounts of both cold box and freezer space throughout the stores. Metro is the most advanced of the supermarket chains and even offers shaded area in the parking lots to off-set the 100 percent humidity found in the oppressively warm Vietnam climate.
As for the importers, there are some who saw great success with cherries this past year … and more that have seen the success of their competitors and are in the process of putting together strategy to get into the cherry business. Likewise, the fresh fruit importers sell most of their incoming fruit to the terminal markets but also work as handlers and suppliers for the retail sector. Most Vietnamese consumers still shop the terminal markets for their fruit and vegetables. However, as the huge 25 years of age and younger consumer group evolves, it is expected that more and more consumers will shop at grocery stores. Currently, importers are focused on buying 10 row and larger cherries … and many mentioned the phrase “9 row is number 1”.
On paper, Vietnam remains a communist country. In reality, Vietnam has evolved as a fast paced and bustling economy based on commerce and trade. The rewards of capitalism are seen in the modern vehicles, including Mercedes Benz, BMW, and Bentley automobiles seen at every stoplight. The hotels are modern, the restaurants and wine bars are trendy and full of consumers each night. The Vietnamese business model is driven by cash and much of the country’s stored wealth is spread between banks and gold kept in homes and safe deposit boxes. In short, there is an emerging modern cold chain, a fairly sophisticated retail market, a consumer appreciation for the status of fresh specialty fruit, and desire by importers to take on the risk that cherries bring. It is clear that there is opportunity to sell more cherries into Vietnam. The market itself exceeded our expectations for projected growth … and with the right promotion strategy could become a 50,000-box market within the near term. Long term market potential could exceed other Southeast Asian markets of Thailand, Malaysia, and Singapore, resulting in a market that could arguably consume over 100,000 20-pound-equivalent boxes.