Vietnam-UK agricultural trade potential to be unlocked

While Norwegian salmon has long been favored by Vietnamese customers when it comes to imported seafood, a culinary gem from across the North Sea remains relatively unknown: the UK’s Scottish salmon. Renowned worldwide for its exceptional quality and taste, Scottish salmon has yet to make a significant impact on Vietnamese palates. Given that salmon is the UK’s primary seafood export, it’s perplexing why the premium product hasn’t penetrated into the country’s major supermarket chains.

Swimming in opportunities

New data from the General Department of Vietnam Customs reveals that exports from the UK to Vietnam were valued at $80.91 million this year as of August, including $3.15 million worth of seafood. In contrast, Vietnam’s exports to the UK during the period amounted to $740.19 million, underscoring the trade imbalance between the two countries.

Mr. Matthew Albon-Crouch, the UK’s Agriculture, Food, and Drink Attaché to Vietnam, expressed optimism about the growing trade relationship. While Vietnam currently exports a significant amount of food products to the UK, he acknowledged that the UK’s agricultural exports to Vietnam have room for expansion.

“The UK is very fortunate to have a strong trading relationship with Vietnam already,” he said. “In terms of the trade landscape between the two countries, it’s very robust. Vietnam does export a lot more to the UK, particularly food such as seafood and fruit. I recognize that the UK doesn’t have the same trade profiles as other large agricultural exporters around the world, but we are certainly working on it, trying to raise our profile in Vietnam. I am working with ministries both in Vietnam and in the UK to meet the growing demand for British products in Vietnam.”

The UK’s primary food and beverage exports to Vietnam include renowned Scottish whisky, essential animal feed, nutritious milk powder, and high-quality seafood. Vietnam’s position as the third-largest destination for UK agricultural exports underscores its growing importance in the global market, Mr. Albon-Crouch remarked.

With the UK on track to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) at the end of 2024, it stands to benefit from significantly-reduced tariffs on most exports to Vietnam. The UK’s seafood industry has also experienced notable growth in exports to CPTPP markets, particularly Vietnam. According to Seafish, a public body supporting the UK seafood sector, the value of whelk, clam, and cuttlefish exports to the bloc surged by 124.9 per cent in the fourth quarter of 2023, with Vietnam witnessing a remarkable increase of 143.3 per cent. These figures highlight the growing demand for British seafood products in the region and reinforce the UK’s strategic focus on expanding its agricultural exports to Vietnam and other CPTPP countries.

According to Ms. Bui Cam Ha, Managing Director of Edelman Global Advisory Vietnam, in 2023, for the first time, the total value of UK goods exported to Vietnam reached a record-breaking $1 billion. It took the UK a decade to achieve this milestone from a figure of over $500 million in 2013, but less than five years, from 2019, to double its food and beverage exports, thanks to the impact of the UK-Vietnam Free Trade Agreement (UKVFTA). Despite this progress, the UK maintains a substantial trade deficit with Vietnam, importing six dollars for every dollar exported. This imbalance is comparable to the US but is twice the average of the 27 EU countries. While catching up to European leaders like Germany, Ireland, France, and Italy, the UK still lags behind in terms of overall export value to Vietnam.

The food and beverage sector plays a pivotal role, contributing over 10 per cent to total UK exports to Vietnam. Notably, beverages rank among the top 5 most exported products with the highest value.

Vietnam is the UK’s second-largest Southeast Asian market for agricultural and food products, trailing closely behind Thailand. The UK’s impending accession to the CPTPP is poised to unlock significant opportunities for increased trade in these sectors, with Vietnam well-positioned to become the region’s leading importer of UK food and beverages. Ms. Ha expressed confidence in the future of UK-Vietnam agricultural trade, anticipating substantial growth as the full benefits of the UKVFTA and CPTPP are realized.

Space to grow

“The trend that we are seeing between the UK and Vietnam in agricultural trade is certainly growth,” Mr. Albon-Crouch said.

The UK Government and the Embassy of the UK in Vietnam are trying to raise awareness about the UKVFTA and the CPTPP. The Embassy recently conducted a successful mission to the central highlands’ Lam Dong province to foster agricultural collaboration between the two countries. During the visit, Mr. Albon-Crouch and his delegation engaged in productive discussions with local government departments, exploring avenues for enhanced bilateral trade and cooperation in agriculture.

Furthermore, the delegation toured renowned Vietnamese agricultural enterprises such as Dalat Hasfarm and Lang Biang Farm, known for their high-quality, GAP-certified products. Additionally, a visit to Orlar Farm, a UK Government-funded project showcasing innovative hydroponic technology, provided valuable insights into sustainable agricultural practices. A visit to Vinamilk’s organic dairy farm also offered opportunities to discuss expanding dairy exports between Vietnam and the UK while promoting animal welfare standards.

A survey conducted by Edelman, in collaboration with the British Embassy, on over 1,000 consumers in Hanoi and Ho Chi Minh City revealed that 22 per cent of respondents reported having purchased products and food imported from the UK, especially seafood such as salmon, crab, and oysters. This is comparable to the 28 per cent who buy European goods and the 30 per cent who buy American products, indicating a strong market presence.

Mr. Paul Le, Vice President of Central Retail Vietnam, highlighted the success of UK seafood products like crab and snails in the company’s tier 4 supermarkets. He emphasized that Vietnam’s burgeoning market, characterized by modern trade and a growing middle class, offers significant opportunities for imported products. However, he stressed the importance of product democratization to cater to the diverse needs of the Vietnamese population. “Vietnam is an emerging country with the power of modern trade and holds a lot of opportunities,” Mr. Le remarked. “In 2038, Central Retail imagines that Vietnam will rank 21st among the richest countries in the world. So, the potential is here; businesses need to work on their offers and democratize products to fit the needs of the Vietnamese - not only premium or organic products but also mass products.”

His insights underscore the need for businesses to adapt their strategies by offering a range of products to meet the evolving demands of the Vietnamese market, ensuring that their products are accessible and appealing to a wide range of consumers.

As a market entry consultant, Ms. Ha observed that import procedures, taxes, and customs have not been fully digitalized. Many documents and certificates still need to be submitted manually, and procedures remain time-consuming, leading to long storage times and unpredictable additional costs for businesses. She identified the lack of approval for certain UK phytosanitary certificates, including those for meat imports, as a significant barrier.

“There are some products that the UK cannot export to Vietnam, like beef, lamb, duck, goose, and some fruit and vegetables,” Mr. Albon-Crouch said. “But that’s just because we haven’t been able to negotiate health certificates with Vietnam at the moment. Those health certificates can take years to negotiate, and it’s quite a long process. We will see a change in that in the not-too-distant future.”

In a significant development, the first shipment of UK poultry arrived in Vietnam in mid-August, following over five years of negotiations and rigorous inspections of UK poultry producers. This milestone marks a promising future for Vietnam - UK trade, particularly in agricultural products.

Vietnamese importers and distributors, with their deep understanding of local markets, consumer preferences, and retail dynamics, are well-positioned to serve as invaluable partners for UK exporters. Their flexibility and adaptability make them ideal consultants for tailoring distribution strategies to the Vietnamese market, demonstrating the success of localized approaches to exporting UK products.

However, not all brands can successfully enter the market based solely on the multinational capabilities of large corporations. Edelman research reveals that 97 per cent of UK food and beverage manufacturers are small and medium-sized enterprises (SMEs) heavily reliant on smaller Vietnamese importers. Ms. Ha emphasized the need for Vietnamese importers to strengthen their marketing, branding, and trade expertise, particularly in navigating customs, taxes, and specialized regulations.

While the growing agricultural and food trade between Vietnam and the UK presents a promising opportunity for both nations, challenges remain, such as regulatory hurdles and market entry barriers. However, the potential benefits are significant. By fostering stronger collaboration, investing in infrastructure, and promoting knowledge exchange, Vietnam and the UK can unlock the full potential of their agricultural trade relationship and benefit consumers on both sides.