DEPARTMENT OF PRIMARY INDUSTRIES

Food Retailing in Asia A focus on the China, Indonesia India, Malaysia Philippines, , and , markets

June 2009

Cover images: © Planet www.planetretail.net

Published by the Victorian Government Department of Primary Industries Melbourne, June 2009 Also published on www.dpi.vic.gov.au/agribusiness

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Produced by: Agribusiness Group Department of Primary Industries 1 Spring Street Melbourne Victoria 3000

Author: Lucy Ridley Project Officer, Strategic Market Analysis DPI Agribusiness Group

Editor: Clare Balmer Project Leader, Strategic Market Analysis DPI Agribusiness Group

Food Retailing in Asia DPI Agribusiness Group

EXECUTIVE SUMMARY

This report provides an overview of the retail food sector in seven Asian markets, China, Indonesia, India, Malaysia, Philippines, Singapore and Vietnam. The report examines the current structure of the retail food sector in each of these markets as well as consumer spending habits, to identify emerging trends that Victorian food producers and exporters may seek to capitalise on.

Food retailing in Asia comprises of many retail formats including wet and dry markets, street vendors, family owned grocery stores and . In the major cities, there is a growing trend towards a modern retail format, hypermarkets and convenience stores as they have been proven to be popular amongst middle class consumers for their low prices and one stop shopping convenience.

The modern retail format is becoming increasingly popular in the major cities of Asia and is growing at a fast rate. Strong economic growth has been a factor in the growth of the modern retail food sector in most Asian countries. Markets such as Singapore and Malaysia are well developed as are the major cities of China, particularly Shanghai and Guangzhou.

From a socio-economic perspective, the selected countries have a number of demographic changes in common, such as a growing middle class, a growing youth market, rapid urbanisation, busier lifestyles with women entering the workforce in large numbers, and an increasing exposure to western products. These changes will continue to drive the development of the modern retail sector. Increased spending on non-essential items could see food sales drop in the future; however, food still remains an important component of retail sales at present.

Despite this, the traditional wet and dry markets, sidewalk stalls and family owned grocery stores still dominate and cater for the majority of people, particularly those living in the rural areas and low income groups in urbanised areas. It is expected that these will decline in number as foreign investment and domestic chains compete for development sites.

Asian consumers are not generally brand loyal and are relatively price sensitive with consumer preferences for small and convenient packaged foods. Premium Western food products are gaining popularity with younger age groups and within the middle to high income segments.

Increased trade liberalisation with Singapore and has provided export opportunities for Victorian food companies. The recently signed Association of South East Asian Nations (ASEAN) - Australia-New Zealand Free Trade Agreement (AANZFTA) will assist the Australian agriculture and food industries through substantial tariff elimination for agriculture and food products with many South East Asian countries including Vietnam, Indonesia, Malaysia and the Philippines.

i

TABLE OF CONTENTS

Executive Summary ______i

Table of Contents______ii

List of Tables and Figures ______iv

1. Mainland China Retail Food Sector______1 1.1 Socioeconomic Overview ______1 1.2 Opportunities for Victoria ______2 1.3 Major urban retail centres ______2 1.4 Retail Environment______3 1.5 Retail Food Sector______3 1.6 Top 5 domestic and multinational grocery retailers ______4 1.7 Retail Distribution Channels______4 1.8 Consumer Spending______4 1.9 Consumer Trends______5 1.10 Future Outlook ______5

2. Indonesia Retail Food Sector______7 2.1 Socioeconomic Overview ______7 2.2 Opportunities for Victoria ______8 2.3 Retail Environment______8 2.4 Top 5 Grocery Retailers ______8 2.5 Foreign Ownership Restrictions______9 2.6 Consumer Spending______9 2.7 Future outlook ______10

3. India Retail Food Sector______11 3.1 Socioeconomic Overview ______11 3.2 Opportunities for Victoria ______12 3.3 Government restrictions ______12 3.4 Retail Environment______12 3.5 Consumer spending______14 3.6 Future outlook ______14

4. Malaysia Retail Food Sector ______15 4.1 Socioeconomic Overview ______15 4.2 Opportunities for Victoria ______15 4.3 Retail Environment______16 4.4 Retail Distribution Channels______17 4.5 Tariffs ______17 4.6 Halal Certification requirements______17 4.7 Consumer spending______17 4.8 Future Outlook ______17

Food Retailing in Asia DPI Agribusiness Group ii

5. Philippines Retail Food Sector ______18 5.1 Socioeconomic Overview ______18 5.2 Opportunities for Victoria ______19 5.3 Retail Environment______19 5.4 Retail Food Markets ______20 5.5 Market concentration ______20 5.6 Retail Distribution Channels______21 5.7 Consumer Trends______21 5.8 Future Outlook ______21

6. Singapore Retail Food Sector ______22 6.1 Socioeconomic Overview ______22 6.2 Opportunities for Victoria ______22 6.3 Retail Environment______23 6.4 Market Concentration______23 6.5 Mini-marts, convenience stores and petrol station stores ______24 6.6 Traditional Stores including dry markets, provision and sundry shops ______24 6.7 Retail Distribution Channels______25 6.8 Consumer Spending______25 6.9 Future outlook ______25

7. Vietnam Retail Food Sector ______26 7.1 Country Overview______26 7.2 Opportunities for Victoria ______27 7.3 Economic Reforms ______27 7.4 Retail Environment______27 7.5 Services offered by the modern retail sector ______28 7.6 Consumer Trends______29 7.7 Consumer Spending______29 7.8 Future Outlook ______30

8. References ______31 China ______31 Indonesia______31 India ______32 Malaysia ______33 Philippines ______33 Singapore ______34 Vietnam ______34

Food Retailing in Asia DPI Agribusiness Group iii

LIST OF TABLES AND FIGURE

Table 1. Chinese National Statistics ...... 2 Table 2. Leading food retailers in China 2007 ...... 4 Table 3. Indonesian National Statistics...... 7 Table 4. Number of Modern Retail Outlets, Indonesia………………………………………………..…….8 Table 5. Indonesia, top 5 grocery retailers...... 8 Table 6. India Statistics…………………………………………………………………………………………..11 Table 7. Top 5 grocery retailers, India 2008 ...... 13 Table 8. Malaysia National Statistic.……………………………...…………………………………………..15 Table 9. Top 5 Retail Grocery formats by company.………………………………………………….…...16 Table 10. Philippines Country Statistical Summary………………………………………………………..19 Table 11. Philippines major export destinations…………………………………………………………..19 Table 12. Philippines Supermarkets.………………………………………………………………………….20 Table 13. Singapore Statistics………………………………………………………………….………..…….23 Table 14. Top 3 grocery retailers………………………………………………………..……………….…..23 Table 15. Vietnam National Statistics……………………………………………………..………………....26 Table 16. Vietnam Top 5 Retailers 2008…………………………………………………………………….28 Table 17. Vietnam Sector……………………………………………………………….29 FIGURES

Figure 1. Map of China – provinces...... 1 Figure 2. China Total Food Spending...... 5 Figure 3. Shanghai…………………………………………………………………………………….6 Figure 4. Wal-Mart Nanjing ………………………………………………………………..……………..….…..6 Figure 5. Map of Indonesia………………………………………..……………………………………..……….7 Figure 6 Indonesia Food Spending……………………………………..……………………………….……10 Figure 7. Map of India…………………………………………………………………………………….……...11 Figure 8. Jubilant Hypermart in Bangalore…………………………………………………….………...…..13 Figure 9. Examples of retail outlets in India……………………………………………..…………….……14 Figure 10. Map of Malaysia…………………………………………………………………..…………………15 Figure 11. Giant , Kuala Lumpar……………………………………………………………….16 Figure 12. Map of the Philippines………………………………………………………………...……...……18 Figure 13. Supermarket: Mandaluyong City…………………………………………………………………20 Figure 14. Map of Singapore…………………………………………………………………………………...22 Figure 15. Map of Vietnam………………………………………………………………………………………26 Figure 16. Hapro Mar Vietnam…………………………………………………………….……………….…..29 Figure 17. Metro Vietnam……………………………………………………………………………………….29

Food Retailing in Asia DPI Agribusiness Group iv

1. MAINLAND CHINA RETAIL FOOD SECTOR

Figure 1: Map of China

Source: World Maps, 2008.

1.1 Socioeconomic Overview China is the most populous nation in the world and has the potential to become the world’s largest consumer market. For the past three decades China has experienced strong economic growth of around 10% per annum, bringing with it changes to per capita income and consumer consumption patterns. Just over one-third of the population is urbanised and this figure is growing. China’s middle class is growing rapidly, currently making up 19% of the national population or 49% of urban residents and is estimated to reach nearly 300 million by the year 2011 (USDA, 2007a). So far economic development has mainly benefited urban populations in the coastal cities and provinces of Shanghai, Jiangsu, Guangzhou, Fujian and Zhejiang (as shown above in figure 1) with income levels and living standard many times of rural populations (USDA, 2008a).

Food Retailing in Asia DPI Agribusiness Group 1 China Table 1: Chinese National Statistics

China national Statistics 2004 2005 2006 2007 2008

Inhabitants (mn) 1,299,880 1,307,560 1,314,480 1,321,052 1,327,658

GDP (AUD mn) 2,623,440 2,941,469 3,509,748 3,870,581 4,337,549

GDP/capita (AUD) 2,018 2,250 2,670 2,930 3,267

Consumer price inflation (%) 3.9 1.8 1.5 4.8 5.9

Consumer spending/capita ($AUD) 806 868 1,002 1,086 1,200

Grocery retail sales, net/capita ($AUD) 401 424 480 507 546

Foodservice sales, net/capita ($AUD) 96 104 122 134 150

Total food spending, net/capita ($AUD) 497 528 601 640 696

Source: Planet Retail Statistics, 2008a.

1.2 Opportunities for Victoria Victoria’s food exports to China with exports valued at $320 million in 2008 (DPI, 2009). China’s growing demand for imported foods will present enormous opportunities for Victoria particularly for fresh fruit, beef, cheeses, wine and fruit juices (USDA, 2008a).

1.3 Major urban retail centres

Shanghai has an estimated population of 20 million people with income levels among the highest in China. Shanghai has the strongest presence of international retailers including Carrefour, Wal-Mart and Lotus. Domestic players such as Lianhua, Hualian and Nonggongshang are mainly concentrated within the supermarket sector. Competition and land constraints mean that stores are generally smaller than elsewhere in China. The convenience store sector is considered to be over-saturated in Shanghai and is dominated by domestic players. Future development is likely to focus on the nearby cities such as Suzhou, Hangzhou and Wuxi. Other nearby cities such as Kunming (in Yunnan province) are already attracting foreign investment.

Guangzhou is one of the richest and most developed markets in China. The hypermarket sector is well developed and the nearby cities such as Dongguan offer opportunities for future expansion, as do key emerging cities in neighbouring Fujian province, such as Xiamen. The convenience store sector is not as saturated as in Shanghai, though well developed. Major domestic players such as Quik and Kedi are now expanding rapidly in the region.

Beijing ranks behind Shanghai and Guangzhou as a major retail centre, and unlike Shanghai and Guangzhou, there are few major cities nearby. Neighbouring Hubei province is primarily an agricultural region. Despite this, hypermarkets are important with a number of domestic players such as Beijing Hualian and Wu-Mart competing alongside the foreign giants. Supermarkets are significant in Beijing, although convenience store sector is not as highly developed (Planet Retail, 2007a).

Food Retailing in Asia DPI Agribusiness Group 2 China

1.4 Retail Environment China’s retail sales sector is the third largest in the world behind the USA and Japan and growing at a faster rate than these leading markets. However the retail food market is highly fragmented and the country as a whole is still dominated by small independent traditional family stores. In the major cities of Shanghai, Guangzhou and Beijing modern retail food outlets are well established and reaching saturation point. International retailers are now seizing opportunities for expansion in second and third tier cities such as Tianjin, Dalian and Hangzhou, Qingdao, Chengdu and Xi’an.

1.5 Retail Food Sector Supermarkets are the lead form of modern retail grocery distribution in China although they are increasingly under pressure from the emerging hypermarket sector. Supermarkets rarely import or buy directly from an importer and therefore imported food is rarely found in Chinese supermarkets. The supermarket sector is dominated by state-owned domestic retailers, the largest being the Shanghai-based companies Lianhua and Hualian (USDA, 2007a)

Hypermarkets are dominated by international retailers, including Carrefour, Wal-Mart, Metro, Auchan and . Their ability to offer low prices and an array of goods and services under one roof, are making them increasingly popular with consumers. Food tends to occupy around half of the total shop floor space and international brands are more likely to feature in a hypermart store than any other retail format. They have extensive dry goods and frozen goods sections, fresh and frozen meat and seafood, prepared foods, and foodservice counters. They also include restaurants, fashion and sporting goods outlets, and other specialty shops.

Convenience stores are concentrated in the larger cities of Shanghai, Beijing and Guangzhou where lifestyles are hectic and where high white collar and student populations are less price sensitive. Shanghai has more than half of the convenience stores in the country. These are mainly domestic companies with imported products not well known and therefore not featuring highly. The convenience store format is expected to continue to grow into the future.

Traditional markets are present throughout China, though they are no longer dominant in larger cities. Traditional markets fall into three categories: wet markets specialising in mainly fresh vegetables, meat, live poultry eggs, tofu and some fruit and staples; variety stores which are smaller family run shops and stock many products, and fruit stands which stock one or two types of fruit without refrigeration space (USDA, 2007a).

Food Retailing in Asia DPI Agribusiness Group 3 China

1.6 Top 5 domestic and multinational grocery retailers The major domestic grocery retailers are Lianhua, China Resources Enterprise (Hong Kong based) and Wu-Mart. The domestic players tend to concentrate on the supermarket and convenience store sectors. Foreign retailers include Carrefour and Auchan Wal-Mart and Metro Group. The foreign retailers tend to concentrate on hypermarkets, superstores and cash & carry as their preferred retail formats and therefore have fewer but larger stores (Planet Retail, 2008a).

Table 2: Leading food retailers in China 2007

Company Ownership, Headquarters Store Formats Domestic Companies:

Lianhua China SOE Super/Hypermkt/ Convenience Wumart China PVT Supermkt/ Convenience

Suguo China SOE Supermkt/ Convenience Nonggongshang China SOE SupermktHypermkt/ Convenience Shanghai Hualian China SOE Supermkt/Hypermkt/ Convenience Multinational Companies: Hong Kong JV Hypermarket Carrefour France Hypermarket Wal-Mart United States JV Hypermarket Trust-Mart Taiwan JV Hypermarket Metro Germany JV Hypermarket

Sales include food and non-food items. SOE= State-Owned Enterprise; JV= Joint venture; PVT Privately owned. Source: USDA, 2008b.

1.7 Retail Distribution Channels Although China has good nationwide road infrastructure, it lacks nationwide truck networks that can efficiently deliver supplies from the manufacturer or importer to the store shelf. Stores receive most imports through a local distributor and distribution tends to be handled on a store by store or city by city basis. Local distributors are still preferred for a number of reasons. They can offer highly favourable terms such as free return of unsold goods, credit terms and importantly, local distributors provide a network of business and government contacts essential for doing business in China. International retailers have also tended to expand nationwide rather than focussing on a single city or region making dedicated distribution networks less viable.

1.8 Consumer Spending Food sales account for over a third of the average Chinese urban household expenses. Spending has more than doubled since the mid 1990s. Spending has increased across all food and drink types with the largest growth foods being fruit, milk, cheese and eggs, bread and cereals. Non-alcoholic beverages have outperformed food, with growth rates at an incredible 174% versus food’s 75% between 1995 and 2007 (Euromonitor, 2008a).

Food Retailing in Asia DPI Agribusiness Group 4 China Figure 2: Total Food Spending.

Source: Planet Retail, 2008a.

The supermarket model has so far remained the most popular format due to the demographics and buying habits of Chinese shoppers. In the larger cities, smaller apartment sizes, small refrigerators and relatively low car ownership necessitates frequent shopping within walking distance. In addition, Chinese consider freshness and quality of food to be important and prefer to shop for small amounts of food on a daily basis.

1.9 Consumer Trends As incomes increase across China and large numbers of people move to the cities, demand for convenience and diverse food and non-alcoholic beverages has intensified. Freshness is one of the most important factors to Chinese grocery shoppers. Quality and competitive pricing is also important

As the retail sector continues to develop, consumers are expected to shift their spending to non essential categories such as leisure activities, white goods and communication products. Consumers will also be forced to spend more on health and education as the state owned enterprises, that previously provided these benefits under a socialist economic system, close down and the country shifts further into a market economy (Euromonitor, 2008a).

1.10 Future Outlook China’s retail food sector is expected to outgrow the USA and Japan to become the largest retail market in the world. International and domestic retailers are already expanding their operations into second and third tier cities such as Chengdu, Dalian, Hangzhou and Xi’an. The development of these interior cities is expected to reduce the massive income disparity that exists between urban and rural China. The development will also change consumer consumption patterns. It is estimated that by 2017, 75% of all food expenditure will come from second tier cities (USDA, 2007a); (Euromonitor, 2008a).

Food Retailing in Asia DPI Agribusiness Group 5 China

Figure 3: Carrefour Shanghai

Source: Retail Analysis photo gallery, 2008

Figure 4: Wal-Mart Nanjing

Source: Retail Analysis photo gallery, 2008

Food Retailing in Asia DPI Agribusiness Group 6

2. INDONESIA RETAIL FOOD SECTOR

Figure 5: Map of Indonesia

Source: CIA, 2007a

2.1 Socioeconomic Overview The Republic of Indonesia is world's largest archipelago, comprising of over 17,000 islands. The largest islands are Sumatra, Java, Kalimantan, Sulawesi and the Indonesian part of New Guinea known as Papua or Irian Jaya. A population of 240 million people makes it the third largest population in Asia & Oceania after China and India, and the fourth largest population in the world. The island of Java is home to the nation's capital city Jakarta.

Indonesia has a youthful population with around 30% population under 15 years of age and only 5% over the age of 65 years. Indonesia has undergone rapid urbanisation with Jakarta now classified as being 100% urbanised.

Strong economic growth in recent years has benefited Jakarta more so than the provinces. This has led to improved income and living standards resulting in increased consumer confidence and purchasing power. This purchasing power has led to lifestyle changes with access to white goods such as refrigerators and increasing ownership of microwave ovens, increasing the popularity of ‘ready meals’. In addition, the growing numbers of urban young are becoming increasingly westernised in their purchase preferences (Planet Retail, 2007a); (USDA, 2007c).

Table 3: Indonesian National Statistics

Indonesian National Statistics 2004 2005 2006 2007 2008 Inhabitants (mn) 216,382 219,205 222,051 224,905 227,829 GDP ($AUD mn) 348,988 374,504 483,084 517,665 597,651 GDP/capita ($AUD) 1,613 1,708 2,176 2,302 2,623 Consumer price inflation (%) 6.1 10.5 13.1 6.2 9.8 Consumer spending/capita ($AUD) 1,077 1,100 1,363 1,366 1,548 Grocery retail sales, net/capita ($AUD) 457 454 547 537 592 Foodservice sales, net/capita ($AUD) 64 66 83 84 97 Total food spending, net/capita ($AUD) 521 520 630 621 689

Source: Planet Retail, 2008b Food Retailing in Asia DPI Agribusiness Group 7 Indonesia

2.2 Opportunities for Victoria Indonesia is a rapidly growing market for Victorian exports. In 2008 Victorian food exports to Indonesia were valued at $326 million (DPI, 2009). Areas of opportunity include small goods catering to the developing supermarket and hypermarket sectors. Supply of ingredients to the food services sector, technology transfers, and consultancy services (Austrade, 2007a).

2.3 Retail Environment In urban centres, the modern retail food sector is growing due to strong shopping preferences of young middle class consumers. However, traditional wet markets and family run stores remain dominant in the retail food business with research suggesting that around 90% of Indonesians still visit wet markets for local produce and personal care products (Planet Retail, 2008b).

Modern retail formats such as supermarkets and department stores are well established with almost half of Indonesians shopping at supermarkets. The biggest threat to these established retail formats is emergence of convenience stores and hypermarkets which are expected to overtake supermarkets and department stores formats place further pressure on traditional markets (Planet Retail, 2008b).

Table 4: Number of Modern Retail Outlets, Indonesia

Type of outlet 2003 2004 2005 2006 Minimarts 4,038 5,604 6465 7356 Supermarket 896 956 1141 1311 Hypermarket 43 68 83 105

Source: USDA, 2007b.

2.4 Top 5 Grocery Retailers The top 5 players hold a market share of around 15%. Expansion plans from the top 5 should see them gaining an increasing share of the market in the future. Carrefour is the market leader as it continues to expand its hypermarket format. Matahari and Ramayana, are important players as is the local convenience store players and Alfa Mart.

Table 5: Top 5 grocery retailers, Indonesia

Company No of Stores Grocery Sales (AUD mn)

Carrefour 70 1,387 Indomaret 3,000 1,230 Alfa Mart 2,700 691 Dairy Farm 415 578 Matahari 297 572

Source: Planet Retail, 2008b.

Food Retailing in Asia DPI Agribusiness Group 8 Indonesia

Carrefour, Europe’s largest retailer and world’s second largest retailer has 52 stores in Indonesia (Carrefour, 2008). Almost all Carrefour hypermarkets are located in or around Jakarta which is a small region, geographically speaking, but the country's most important one. Carrefour is ranked as number four in Indonesia and is the largest hypermarket operator in the country (Planet Retail, 2008b).

Indomaret is the market leader in the Indonesian convenience/minimarket sector. It has expanded rapidly in recent years with the majority of stores located in Jakarta (Planet Retail, 2007b).

Dairy Farm Group caters to a broad customer base with a range of hypermarkets, supermarkets and specialty retail formats. The company operates in Indonesia under the ‘Giant’ and ‘Hero’ names particularly in Jakarta, Bandung and Surabaya. New outlets are proposed in Java, Sumatra and Kalimantan. Hero operates 105 Hero/Giant supermarkets throughout Indonesia and 17 Giant hypermarkets in Jakarta’s and key regional cities (Dairy Farm, 2008).

AlfaRetailindo operates 30 supermarkets throughout Java, Bali, Sumatra and Sulawesi. The company has begun to focus on the convenience store format with the Alfa Midi brand (Euromonitor, 2008b).

2.5 Foreign Ownership Restrictions Foreign Ownership Restrictions may prevent foreign retailers from entering certain districts or provinces. To protect traditional retailing, the government also plans to move hypermarket outlets which currently operate in city centres out to suburban areas. Since 2006, restrictions have applied to foreign ownership in local retailing limiting their share to no more than 49% (Planet Retail, 2008b).

2.6 Consumer Spending The average Indonesian spends 53% of total income on food; earns money on a daily basis; purchases food on a daily basis and is very price sensitive making purchase decisions largely based on value for money. Consumers are not brand loyal and promotions and discounted prices provide opportunities for foreign branded products to replace traditional brands. Important components of food spending include cereals 16%, fish 7%, and legumes 5%.

High income and expatriate consumers are not price sensitive and look for branded, gourmet and imported products. Younger middle class consumers look for variety and are not as price sensitive. Most of the medium and small income consumers still depend on traditional markets including small shops and kiosk located around the residential area (Planet Retail, 2008b).

Distributors and retailers have responded well to the shopping habits of the average consumer by reducing packaging sizes, and offering reduced prices and generic branding for food staples such as rice, sugar and cooking oils. Modern retail outlets offer many in-store services such as credit card payments and one stop shopping which is gaining popularity with middle and higher income earners.

Food Retailing in Asia DPI Agribusiness Group 9 Indonesia

Figure 6: Total Food Spending, Indonesia

Source: Planet Retail Statistics, 2008.

2.7 Future outlook The modern retail sector is expected to continue to expand in line with economic growth. Hypermarket expansion is expected to be concentrated in the larger cities of Java, Sumatra and Sulawesi. Supermarket, Hypermarket and minimarts in metropolitan Jakarta, Bogor, Tanggerang, Bekasi will continue to grow over the next decade.

Increased incomes and exposure to western food products will largely drive the changes to consumer shopping habits and dietary intake. Increased demand for ready- to-cook/ready-to-eat food in urban areas due to the growing pace of modern life. Variety and quality will become increasingly important (USDA 2007c).

Food Retailing in Asia DPI Agribusiness Group 10 India

3. INDIA RETAIL FOOD SECTOR

Figure 7: Map of India

Source: CIA, 2008.

3.1 Socioeconomic Overview The Republic of India is a federation of 28 states and seven union territories, occupying the central northern coast of the Indian Ocean, bounded in the west by Pakistan, in the north by Tibet (a region of China), Bhutan and Nepal, and in the east by Myanmar and Bangladesh.

India has the second largest population in the world after to China, representing 15% of the world’s total inhabitants. India’s population is growing at 1.6% per year annually, making it one of the world’s youngest populations with 58% under the age of 20 years (over 564 million people). Only about 30% of India’s population live in towns or cities and the remaining 70% live in villages, and substantial income disparities persist within between rural and urban dwellers (BuyUSA, 2008)

Table 6: India Statistics

Statistics 2006 2007 2008

Inhabitants (mn) 1,095,35 1,110,40 1,125,37 GDP (AUD mn) 1,160,347 1,309,202 1,482,896 Consumer spending (AUD mn) 682,251 771,633 870,337

Retail sales (AUD mn) 476,834 532,389 593,917 Grocery retail sales (AUD mn) 321,686 354,967 392,046 Foodservice sales (AUD mn) 37,095 42,493 48,453 EEO sales (AUD mn) 8,630 9,858 11,231

Source: Planet Retail Statistics, 2008.

Food Retailing in Asia DPI Agribusiness Group 11 India

In 2008, India’s GDP is grew at 8.7 %, making it one of the fastest growing economies in the world. With more than 300 million middle-class consumers a steadily growing economy, the organised food-retailing sector is expected to boom (BuyUSA 2008; Euromonitor, 2008c).

3.2 Opportunities for Victoria The Indian market with a population of over one billion people, presents opportunities for exporters though many challenges exist such as high tariffs, the need to establish a relationship with a good importer/distributor.

The recent re-opening of the Indian dairy import market will present good opportunities for Victoria. Victorian dairy exports to India were worth $6 million dollars in 2003, prior to the closure of dairy access. It is expected that dairy trade will grow to at least that figure, now that market access for dairy products has been granted. Other food exports from Victoria include nuts and pulses (DPI, 2009; DFAT, 2009).

3.3 Government restrictions Indian import tariff rates and trade barriers are among the highest in the world. These apply to food products such as meat, fruit and vegetables Trade barriers such as non transparent sanitary and phytosanitary regulations and labelling requirements also hamper imports. In 2009, India re-opened its dairy market to Australian dairy products. Commodities in short supply such as pulses, edible oil and dried fruits are comparatively easy to import as there are virtually no import restrictions and tariffs are low. Import tariffs on most consumer food products range from 30% to over 50%. Alcoholic beverages can attract import duties as high as 577%. (Austrade, 2007b; Euromonitor, 2008c; DFAT,2009).

3.4 Retail Environment India is a complex multi-tiered market, driven by changing consumer needs through increased purchasing power of India’s vast and growing middle-class seeking to shop from western style supermarkets.

The majority (97%) of retailers consist of small traditional independents and many markets, roadside vendors and hawkers. Independent grocers, often referred to as Kirana stores, account for over 66% of all forms of retail outlets. Consumer preference for shopping close to home will ensure the popularity of Kirana stores (Euromonitor, 2008c).

The expansion of the supermarket/hypermarket sector across India has increased consumers’ access to frozen processed foods. These large outlets offer a wide range of frozen processed food and increasingly have extensive frozen storage and display areas. This enabled frozen processed food players to expand their ranges and also offered smaller brands a chance to attract more consumers. In 2008, sales of frozen processed food via supermarkets/hypermarkets expanded by 13% in current value terms over the previous year (Euromonitor, 2008c).

Food Retailing in Asia DPI Agribusiness Group 12 India

Most hypermarkets in India offer a good proportion of food and non-food items. Pantaloon’s Big Bazaar hypermarket stores emerged as India’s number one retailer in terms of retail value sales. All formats of store based retailing have been growing at the rate of 9% in value terms with hypermarkets being the fastest growing, almost doubling in number in 2006 (Planet Retail, 2008c); (Euromonitor, 2008c).

Figure 8: Jubilant Hypermart in Bangalore India.

Source: Planet Retail, 2009.

Table 7: Top 5 grocery retailers, India 2008

Company No of Stores Sales Area (sq.m) Grocery Sales ($AU mn) Market Share (%)

Pantaloon 2,095 1,727,874 1,562 2.0 Reliance Retail 1,401 722,490 1,278 1.6 Subhiksha 1,800 252,000 1,042 1.3 Jubilant Retail 320 240,000 522 0.7 RPG Group 1,305 370,380 460 0.6 Total 6,921 3,312,744 4,864 6.2

Source: Planet Retail, 2008b

Convenience stores Almost all convenience stores are attached to fuel retail outlets. Many stores are located along major national highways appealing to the long distance traveller.

These are growing in popularity due to the multitude of services offered. Facilities such as ATMs, couriers, laundry and photo developing services are a means of generating extra revenue to off-set the administered pricing mechanism of fuel. The number of convenience stores grew strongly in 2006 (Euromonitor, 2008c).

Food Retailing in Asia DPI Agribusiness Group 13 India

3.5 Consumer spending The majority of Indian consumers still buy their produce, meat and fish from local wet markets and street stalls. Customers enjoy the freshness of the products and the vibrant market atmosphere despite the less than satisfactory hygiene standards.

A large chunk of consumer expenditure is on basic necessities, especially food related items. Around 51% of household spending is on food, largely basic staples such as grain, pulses, vegetables oils, and sugar. There is however, a growing market for high value food products such as milk, meat, eggs and fruits and vegetables. Lack of home refrigeration, necessitates daily shopping trips to small neighbourhood stores and roadside vendors. Quality and price are important. Most processed foods are sold in small containers due to customer’s limited purchasing power (USDA, 2006).

3.6 Future outlook Retailing in India is expected to be among the fastest growing both globally and in the Asia-Pacific region. Hypermarkets, convenience stores and supermarkets are expected to witness the fastest growth. Domestic retailers such as Pantaloon and Reliance, among others, are expected to continue with their aggressive expansion plans. International retailers are also expected in both grocery and non-grocery sectors (Euromonitor, 2008c).

Companies keen to capitalise in the Indian market must be quick to respond to the developments and prepare strategies which enable them to capitalise on the benefits whilst avoiding the pitfalls of this complex market (IGD Retail Analysis, 2008a).

Figure 9: Examples of retail in outlets India

Source: Planet Retail, 2007c.

Food Retailing in Asia DPI Agribusiness Group 14 Malaysia

4. MALAYSIA RETAIL FOOD SECTOR

Figure 10: Map of Malaysia.

Source: CIA maps, 2007c.

4.1 Socioeconomic Overview Malaysia has an estimated population of over 27 million, and is one of the most developed nations in Southeast Asia. Around 80% of the population is situated in West Malaysia even though it only accounts for 40% of the land mass. Over 61% of the population falls into the middle to upper income group of consumers (USDA, 2007d).

Table 8: Malaysia National Statistics

Statistics 2004 2005 2006 2007 2008

Inhabitants (mn) 25,467 25,951 26,392 26,841 27,297

GDP (AUD mn) 169,582 179,934 206,790 222,459 232,925

GDP/capita ($AUD) 6,659 6,934 7,835 8,288 8,533

Consumer spending ($AUD mn) 68,960 74,778 86,249 89,371 93,799

Consumer spending/capita ($AUD) 2,708 2,881 3,268 3,330 3,436

Grocery retail sales, net ($AUD mn) 20,984 22,291 25,242 25,791 26,730

Foodservice sales, net/capita ($AUD) 126 135 155 159 165

Total food spending, net/capita ($AUD) 950 994 1,111 1,120 1,144

Source: Planet Retail statistics, 2008c

4.2 Opportunities for Victoria Malaysia is a significant export market for Victoria. Food exports to Malaysia were valued at $280 million in 2008 and accounted for 4% of Victoria’s total food and fibre exports (DPI, 2009). Areas of opportunity include dried, chilled and frozen processed food (Austrade, 2008c).

Food Retailing in Asia DPI Agribusiness Group 15 Malaysia

4.3 Retail Environment Although highly fragmented, the modern grocery sector has grown in importance. The majority of modern retail formats are located in the country’s capital city, Kuala Lumpur and Johor Bahru which is situated close to the border of Singapore. Traditional stores dominate outside these areas (Planet Retail, 2008d). Foreign retailers include Tesco, Carrefour, Makro, Giant (Dairy Farm Group) and Jaya Jusco. Intense competition amongst these international retailers results in regular discount wars as they establish their presence as major players in the market (USDA, 2007d).

Figure 11: Giant supermarket, Kuala Lumpar

Source: Euromonitor, 2008d.

Table 9 Top 5 Retail Grocery formats by company

Company Market Share (%)

Dairy Farm 4.4% Tesco 3.6% AEON 2.6%

Carrefour 1.8% Seven & I 1.8%

Source: Planet Retail statistics, 2008c

Supermarkets and Hypermarkets Supermarkets and hypermarkets are becoming increasingly sophisticated with the introduction of in-store bakeries, food service areas, a range of ready to eat meals and improvements to fresh food areas. The modern retail food sector is seen as a threat to family run stores (Planet Retail, 2008d).

Food Retailing in Asia DPI Agribusiness Group 16 Malaysia

Convenience Stores

Convenience stores are a relatively new concept in Malaysia, gradually replacing the small independent family run stores. They are growing in popularity because they offer long opening hours, convenient locations, wide range of facilities such as ATMs, and range of branded products (Planet Retail, 2008d).

Traditional Stores and Wet Markets

Family owned grocery stores and wet markets account for the majority of retail food sales. These are prominent in residential areas of both urban and rural towns across Malaysia. Most of the goods sold by the grocery stores are canned foods, dried foods and snack foods, ice-cream and soft drinks. Wet markets sell mainly fresh fruit and vegetables and meat and fish (Planet Retail, 2008d).

4.4 Retail Distribution Channels The food distribution system is run through private distributors that place orders with foreign suppliers and distribute to supermarkets/grocery stores in the cities and rural areas. Some of the larger supermarkets and hypermarkets chains import directly from overseas. With seven international airports and well developed road and rail systems that link to most Malaysian towns, food distribution is able to move efficiently (USDA, 2007d).

4.5 Tariffs Applied tariffs for Australia are mostly low or zero. These include live animals, meat, cereals, most vegetables and some dairy products. Higher applied tariffs include rice at 40%, yoghurt at 25%, sauces, mixed condiments at 20% and alcoholic beverages which generally increase by 5-10% per year (ABARE, 2008; USDA, 2007d).

4.6 Halal Certification requirements All imported beef and poultry products (except turkey) must be from certified "halal" and must originate from slaughterhouses that follow Islamic slaughter practices. Exporters must obtain a permit through the importer. The permit is issued by the Malaysian Department of Veterinary Services, permitting the importation of meat and meat by products and poultry and poultry by products into Malaysia (USDA, 2007d).

4.7 Consumer spending Malaysian households spend an average of 24% of their household income on retail purchases of food. Malaysians frequently eat away from home at various low to high-end food service establishments across the county.

4.8 Future Outlook Shopping for foods at supermarkets and hypermarkets will become increasingly popular and more widespread in areas where there are significant populations of middle to high income consumers. Supermarkets and hypermarkets will increasingly providing greater market access for imported foods including chilled and frozen foods (Planet Retail, 2008d).

Food Retailing in Asia DPI Agribusiness Group 17

5. PHILIPPINES RETAIL FOOD SECTOR

Figure 12: Map of the Philippines

Source: Infoplease.com, 2008.

5.1 Socioeconomic Overview The Philippines lies 800km off the coast of Indo-China, north-east Papua New Guinea and north of Indonesia and is composed of 11 large islands and some 7,000 smaller islands and atolls (Euromonitor, 2008e).

The Philippines has one of the most youthful populations in the world, with one third of the population aged under 15 years of age. The Philippines also has one of the largest expatriate communities in the world with around 9% of the population working overseas (this figure excludes an estimated 3 million working illegally abroad). The economy is boosted by remittances of overseas workers who contribute significantly to the national income thereby boosting consumer purchasing power. Philippine remittances rank the third largest in the world next to China and India, totalling $15 billion dollars in 2007 (Euromonitor, 2008e; USDA, 2008b).

Food Retailing in Asia DPI Agribusiness Group 18 Philippines

Table 10: Philippines Country Statistical Summary

Philippines 2002 2003 2004 2005 2006 2007

Inflation (% change) 3.0 3.5 6.0 7.6 6.2 2.8 Exchange rate (per 51.60 54.20 56.04 55.09 51.31 46.15 US$) GDP (% real growth) 4.4 4.9 6.4 4.9 5.4 7.2 Population, mid-year 80,390,2 81,941,9 83,481,7 85,005,5 86,511,7 87,996,1 ('000) No. of households 16,009,8 16,391,5 16,758,8 17,125,2 17,477,1 17,841,9 ('000) Total exports (US$ 36,501,9 36,229,2 39,680,4 39,879,3 47,415,8 50,226,7 millions) Total imports (US$ 37,179,9 39,501,9 42,344,6 46,963,8 54,081,1 57,707,8 millions) Urban population 47,887,7 49,496,6 51,120,5 52,663,2 54,289,8 55,891,1 ('000) Urban population (%) 60.2 61.0 61.8 62.5 63.3 64.1

Source: Planet Retail, 2008e.

5.2 Opportunities for Victoria Increasing deregulation of the retail sector makes the Philippines an attractive export market for Victorian exporters. There are no special labelling requirements for products, as English is widely used and the language upon which business transactions are done. Filipinos are receptive to imported products. There are opportunities for value added food and beverages products. There are also opportunities for wine, cheese, and pet food exporters.

In 2008, Victorian food exports to the Philippines accounted for 2% of Victoria’s total food and fibre exports and were valued at $175 million (USDA, 2008b; DPI, 2009).

Table 11: Philippines major export destinations

Major Export Destinations 2007 Share (%) Major Import sources 2007 Share (%)

Asia-Pacific 69.3 Asia-Pacific 61.6 North America 14.7 North America 13.8 Europe 13.2 Europe 11.1

Australasia 1.2 Africa and Middle East 9.5 Africa and the Middle East 1.0 Australasia 2.2

Latin America 0.7 Latin America 1.6

Source: Euromonitor, 2008e.

5.3 Retail Environment Retail trade liberalisation has led to more efficient, modern and large scale supermarket chains. Grocery retailers outperformed non-grocery retailers in 2007 and small players performed particularly well, with consumers focused on basic needs (Planet Retail, 2008e).

Food Retailing in Asia DPI Agribusiness Group 19 Philippines

5.4 Retail Food Markets

Figure 13: Supermarket: Mandaluyong City SM Megamall

Source: Planet Retail, 2008e.

Table 12: Philippines Supermarkets Share by outlets/sites

Supermarket 2005 2006 2007 2008 Robinsons Supermarket 28.0 30.0 31.0 32.0 SM Supermarket - 21.0 22.0 25.0 Waltermart Supermarket 7.0 8.0 15.0 16.0 Save More Supermarket - 7.0 8.0 12.0 Rustan's Expresslane 14.0 13.0 11.0 11.0 Rustan's Supermarket Fresh 8.0 9.0 11.0 11.0 CVC Supermart 6.0 7.0 9.0 9.0

Source: Euromonitor, 2008e.

Traditional markets

Open-air wet markets are widespread and carry some imported goods. Sales of imported fresh fruit through these outlets are especially important. In the Philippines, the vast majority of fresh produce and meat sales take place at wet markets, while dry and canned goods are often purchased from supermarkets. However, a growing portion of the urban middle class is frequenting supermarkets for all their food needs (Planet Retail, 2008e).

5.5 Market concentration The Philippine retail sector is highly fragmented. Relatively few major chains exist and the top five retailers have a combined market share of less than 30%. Mercury Drug, SM Investment, Rustan, Robinsons and Uniwide are by far the largest domestic players, although foreign players SHV Makro and 7-Eleven are both important players.

Food Retailing in Asia DPI Agribusiness Group 20 Philippines 5.6 Retail Distribution Channels Importers and distributors deal direct with supermarkets and hypermarkets. Traditional family run stores, known as sari sari stores are handled by agents. In rural areas big distributors employ sub distributors.

Most imported consumer-ready food items are concentrated in urban centres and are handled by traders and importers who distribute to supermarkets, hotels, restaurants and other retail outlets. However, some larger supermarket chains and hotels are importing many of their products directly.

Fresh fruit is usually brought in by importers who distribute directly to supermarkets as well as to wholesalers and other retailers. Frozen foods and dairy products are imported by brokers and are increasingly bought directly by large end-users such as supermarkets and foodservice industries (FAS, 2005).

5.7 Consumer Trends

Meat, fish and organic foods are the most important fresh foods for Filipinos. Processed and microwaveable foods are growing in popularity as lifestyles become busier. Imports of food products are expected to continue to grow over the next eight years (2007-2015) due to continued growth and efficiency gains in the retail food sector, expanding popularity of fast food restaurants, a growing middle class, increased demand for convenience and the common perception that imported products equal high-quality products. Consumption of imported processed food products in the Christmas season can double or triple from November to December (Euromonitor, 2009a).

5.8 Future Outlook The Philippines has been affected by the impact of the global economic slowdown (although significantly less than other markets) which has slowed exports, tourism and consumer spending. However, the outlook for the modern retail food sector remains optimistic with growing pockets of affluent consumers and expansion of the modern retail format into the provinces (Euromonitor, 2009a).

Food Retailing in Asia DPI Agribusiness Group 21

6. SINGAPORE RETAIL FOOD SECTOR

Figure 3: Map of Singapore

Source: Lonely Planet 2007e.

6.1 Socioeconomic Overview Singapore has a population of 4.5 million people including 0.88 million non residents and has the second highest standard of living in Asia next to Japan. Over 95.5% of the working population is employed; around 91% of households own their property and over 55% of households are increasingly living well informed sophisticated lifestyles. With increased affluence and more emphasis on quality of life, demand for western style consumer products and services continues to grow (USDA, 2007e).

Three major ethnic groups make up Singapore’s residents; Chinese 77%; Malays 14%; Indians 8%; non residents 1.5% (DFAT, 2008a).

Singapore’s position as a regional transport hub and important tourist destination has helped contribute to the development of an extensive food service industry (DFAT, 2008a). In 2007, Singapore attracted over 10 million visitors (STB, 2008).

6.2 Opportunities for Victoria Victorian food exports to Singapore were valued at $321 million in 2008, with dairy exports accounting for over half of this value (DPI 2009). Victoria is able to compete on quality and price against US competitors due to relatively short shipping times. The Singapore-Australia FTA (SAFTA) which became operational in 2003 eliminated a range of tariffs providing a more open and predictable business environment across a range of areas including competition policy, government procurement, intellectual property, e-commerce, customs procedures and business travel (Austrade, 2007d).

Food Retailing in Asia DPI Agribusiness Group 22 Singapore

Table 13: Singapore Statistics

Singapore Statistics 2006 2007 2008 Inhabitants (mn) 4.5 4.5 4.5 GDP ($AU mn) 175,520 182,812 195,957 Consumer spend ($AU mn) 70,483 71,735 76,763 Retail sales ($AU mn) 25,525 25,773 27,399 Grocery retail sales ($AU mn) 10,730 10,757 11,368 Foodservice sales ($AU mn) 2,766 2,837 3,056

Source: Planet Retail, 2008f.

6.3 Retail Environment Singapore is highly dependent on imports for food and beverages; its retail sector is almost wholly supported by imported products. The retail food sector is extremely fragmented comprising of 80% small retailers operating in dry markets, provision shops and non air conditioned sundry shops (USDA, 2007e).

6.4 Market Concentration Supermarkets and hypermarkets dominate the retail food sector with around 75% of the total market share, growing at 4% per annum the past five years and likely to continue growing at around 5% per annum over the next three to five years.

The majority of supermarkets and hypermarkets are operated by NTUC FairPrice and Cold Storage Group (Dairy Farm Group). FairPrice is the market leader in food retailing and operates hypermarket supermarkets, conveniences stores and fuel station stores. Their stores are located throughout Singapore and target all income groups with some upmarket stores located in high end areas targeting high income Western and Asian expatriates (USDA, 2007e).

Table 14 Top 3 grocery retailers

Company Grocery Sales 2007 ($AU mn) Market Share (%) NTUC FairPrice 1,246 10.1

Cold Storage (Dairy 1,051 8.5 Farm group). 412 3.3

Source: Planet Retail, 2008f.

Cold Storage Group, a subsidiary of Dairy Farm Group is the second largest food retailer in Singapore and operates supermarkets, hypermarkets and convenience stores targeting middle to high income shoppers as well as high income expatriates residing in Singapore. The group also operate Shop N Save stores that target price sensitive shoppers and are generally located in the middle income neighbourhoods. Stores that cater for middle to high income groups and expatriates carry more varieties and higher volumes of imported products from western countries including Australia. Cold Storage and FairPrice also carry home brands which may be priced at around 15% lower in price. Wellness products are increasingly stocked by supermarkets, hypermarkets and other stores.

Food Retailing in Asia DPI Agribusiness Group 23 Singapore

Cold Storage’s Wellness 4 Life products include organic, dairy free, gluten free, low fat, low sugar and low salt products. Organic, health supplements and heath equipment are available through their Guardian Health & Beauty stores (USDA, 2007e).

Sheng Siong, a Singapore domestic company, operates 20 retail outlets and largely targets the price sensitive shopper. Stores are located in central locations and carry a large range of western food and drink products as well as Asian products that are sought after by locals.

Singapore also has a few department stores that contain very large food and beverage sections catering for expatriates, local consumers and tourists. Mustafa is the largest department store located in Little India and carries a wide range of local and imported food and drinks products largely from India as well as the rest of Asia, Australia, US, Europe, Canada and South Africa. Isetan has an outlet located in the main shopping street with a full scale supermarket carrying mainly Japanese food products as well as some imported western food products (USDA, 2007e).

6.5 Mini-marts, convenience stores and petrol station stores The majority of the mini-mart sector is franchise operated and makes up about 15% of the food retail sector. Mini marts are only operated by one major franchisor, PSC Corporation and are generally smaller versions of supermarkets and have similar opening hours to supermarkets.

The convenience sector is dominated by 7-Eleven stores operated under franchise by the Cold Storage Group. Only NTUC’s Cheers convenience stores provide an alternative to local consumers. This sector has grown at about 6% per annum over the past five years and the trend is likely to continue at around 5% per annum over the next three to five years. Convenience stores operate 24 hours a day and carry a popular range of processed package foods generally single serve or consumed “on the go” food and beverages. Many of their products are imported from within the Asia region such as Thailand, Malaysia and China. Only a small range of western products are carried by these stores (USDA, 2007e).

6.6 Traditional Stores including dry markets, provision and sundry shops Traditional stores are non-air-conditioned, small family run businesses that are located in the neighbourhoods. They are open fronted grocery stores offering local and Asian processed products and many unbranded products. They do not sell perishable produce and supply staples at low prices. Customers generally shop daily for small quantities and live within walking distance to these stores. The market share of this sector has been declining steadily over the years as shoppers switch to supermarkets, convenience stores and mini-marts (USDA, 2007e).

Food Retailing in Asia DPI Agribusiness Group 24 Singapore

6.7 Retail Distribution Channels Distribution channels are highly fragmented. The number of companies involved in Singapore’s distribution systems has grown along with the networks they support. The majority of distributors are controlled by local suppliers and their agents. Major suppliers such as NTUC FairPrice and Cold Storage tend to source their products directly. However smaller retailers tend to maintain links with their most trusted suppliers to get around the complexities (Austrade, 2007d).

6.8 Consumer Spending Increased affluence has led to non grocery item purchases. Over the past decade most consumer durables such as washing machines, TVs, refrigerators and phone lines can be found in most households. Singaporean’s still prefer fresh food products for preparation of daily meals. Market stalls that are located around the housing estates provide most of their daily food needs providing easy access to meat, seafood and fresh fruit. Modern air-conditioned shopping malls have also been established in neighbourhood housing estates so that wet markets and modern retail outlets exist side by side (USDA, 2007e).

Dairy products, sweets and confectionery, meat, and bread and cereals are rising in popularity. The trend towards healthy eating is gaining is also catching on as a result of the strong government emphasis on people adopting healthy lifestyle habits (Euromonitor, 2009).

6.9 Future outlook Singapore has enjoyed economic stability for over three decades and this has had a positive affect on the modern retail food sector which continues to expand. Youth are increasingly influenced by western culture through travel and study abroad and are becoming increasingly westernised in their food preferences, making western products an easy fit into the local food culture. The number of foreigners living and working in Singapore continues to grow and now stands at just under 1 million people. Imported food and beverage products are free from import duties and customs duties, except for alcoholic drinks. International franchise companies will continue to expand their operations over the foreseeable future. As the population ages, consumers are expected to demand more health and wellness products (USDA 2007e).

Food Retailing in Asia DPI Agribusiness Group 25

7. VIETNAM RETAIL FOOD SECTOR

7.1 Country Overview

Figure 15: Map of Vietnam

Vietnam’s population of over 85 million people makes it the second largest population in South East Asia and the sixth largest population in Asia. Vietnam has had consistent economic growth of around 7% over the past decade and since 2006 it has exceeded 8%, making it the second fastest growing economy in Asia.

Vietnam has the largest urban population in Asia with only 25% of the population classified as urban, however rural to urban migration will escalate along with economic growth.

The urban population is expected to increase by one million per year for the next twenty years. By 2024 it is estimated that the proportion of the population living in urban areas will be around 40%.

The two most significant cities in terms of population are Ho Chi Minh and Ha Noi. Both have populations of over one million people.

Vietnam has the benefit of a young educated population, half of which are under the age of 25 years of age (USDA

2007f). Source: CIA Maps, 2008d.

Table 15: Vietnam National Statistics

Vietnam National Statistics 2003 2004 2005 2006 2007

Inhabitants (mn) 81,791 82,663 83,536 84,403 85,262

GDP (AUD mn) 58,863 60,138 68,973 78,712 81,467

GDP / capita (AUD) 720 728 826 933 955

Retail sales, net / capita (AUD) 347 340 372 413 415

Grocery retail sales, net / capita (AUD) 243 235 254 279 276

Foodservice sales, net / capita (AUD) 22 22 25 28 29

Total food spending, net / capita (AUD) 265 258 279 307 306

Source: Planet Retail Statistics, 2007.

Food Retailing in Asia DPI Agribusiness Group 26 Vietnam

7.2 Opportunities for Victoria Food exports from Victoria were valued at $110 million. Grain and dairy products were the main commodities exported (DPI, 2009). Trade liberalisation has provided greater market opportunities for Victorian food companies in the growing modern retail food sector. Australian companies are generally well received in Vietnam. Australia is regarded as a modern, technologically advanced and friendly country located within Vietnam's immediate sphere of interest. The current rate of inflation, 25%, is a concern at present due to unprecedented growth in the economy. However this is likely to be only short term (DFAT, 2008b).

7.3 Economic Reforms The government of Vietnam is committed to global economic integration through its participation in Asia Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN) Free Trade area and membership of the World Trade Organisation (WTO). Since Vietnam’s accession to the WTO in January 2007, foreign service providers have been allowed to establish Joint Ventures with Vietnamese partners, and as of January 2009, totally foreign-owned retail outlets and franchises are allowed to set up, at the discretion of government. The government will also be undertaking a privatisation program to reduce the number of state-owned enterprises (DFAT, 2008b).

7.4 Retail Environment Vietnam’s retail sector is less developed than other countries in the region. Traditional family owned stores and wet markets continue to dominate the retail food sector. However, the modern retail sector is expanding at a very fast pace of over 20% per annum. Most supermarkets and hypermarkets and wholesale stores buy most of their imported products from importers/distributors or agents with the exception of fresh and frozen products which they tend to be direct imports (USDA, 2008c).

Ho Chi Minh and Ha Noi are the most important cities in terms of modern retail development. , with an estimated population of 8 million people, has the highest concentration of middle and upper class consumers and is considered the economic and commercial centre of Vietnam (Planet Retail, 2008g).

Local chains dominate the modern retail food market, but foreign-invested retailers are also expanding and creating a competitive environment. Key domestically owned supermarket chains are Saigon Coopmart, Maximark, Intimax Citimart. The four foreign owned chains are (French invested Casino group), Metro Group (German invested) Parkson (Malaysian invested) and Wellcome which is Singapore invested under Dairy Farm Group (USDA, 2008c).

Food Retailing in Asia DPI Agribusiness Group 27 Vietnam

7.5 Services offered by the modern retail sector Supermarkets tend to be located in shopping malls that contain fast food restaurants, entertainment and speciality shops. Major retail chains have been developing fresh, chilled and frozen sections as well as ready to cook and ready to eat sections. They also provide credit facilities, food courts and bakery corners in order to compete with open-air wet markets (USDA. 2007f).

Table 16: Vietnam Top 5 Retailers 2008g

Company No. of Sales Area (sq.m) Average Sales Area (sq.m) Market Share (%) Stores Metro Group 9 60,003 6,667 9.9 Saigon Co-op 36 90,000 2,500 3.5 Casino 14 74,662 5,333 3.0 G7 550 44,000 80 1.4 Citimart 23 23,000 1,000 1.2

Source: Planet Retail, 2008

Supermarkets

One of the largest domestic chains, based in Ho Chi Minh is Saigon Co-op, a state owned superstore chain with the most modern stores in the country. Further expansion is planned to keep ahead of the increasing numbers of foreign retailers present in the country. G7 another domestically owned chain has expanded rapidly in the past couple of years and now has a significant store base through rebranding and upgrading existing stores, which already have good locations and customer base.

Cash and Carry

Metro Group (100% German owned) currently owns 9 stores with plans to open 4 more stores. Under current regulations for foreign companies, Metro is not allowed to directly import commodities, and works with many local importers (Planet Retail 2008; Euromonitor, 2008g).

Hypermarkets

The only international Hypermart retailer is Casino Big C stores with presence in Ha Noi, Ho Chi Minh City, Hai Phong, Bien Hoa and Da Nang. Most products are sourced locally to suit local taste and remain price competitive.

Convenience stores & Minimarts

These are located in the major cities of Ho Chi Minh City, Ha Noi and Da Nang and have been slow at gaining acceptance by consumers who perceive these as expensive, preferring to shop from the numerous traditional family stores (Planet Retail, 2008f). In 2007, convenience stores in the major cities increased by 200 new outlets. The number of foreign visitors to Vietnam is growing significantly, and in part, has helped to increase sales in this sector (Euromonitor, 2008g).

Food Retailing in Asia DPI Agribusiness Group 28 Vietnam

Table 17: Vietnam Convenience Store Sector

Convenience Stores % by company 2004 2005 2006 2007 G7 Trading & Service Co Ltd - - 85.4 76.2 Hanoi General Trade JSC - - - 12.9 Saigon Union of Trading Cooperatives 84.1 80.0 10.7 8.0 Pham Trang Co Ltd - - 0.7 0.5 Hoang Corp - - 1.1 0.4 Others 15.9 20.0 1.9 2.0

Source: Euromonitor, 2008g.

Figure 16: Hapro Mar Vietnam Figure 17: Metro Vietnam

Source: Planet Retail, 2008g.

7.6 Consumer Trends Up to 45% of total food consumption is spent on basic food staples. Consumption of high value products such as dairy, eggs, vegetables, confectionary and snack foods is increasing. Vietnamese consumers tend to shop daily for food items, as only a small percentage of householders own refrigerators, and prefer fresh products (UDSA 2007f).

7.7 Consumer Spending

Vietnamese prefer fresh food products, and most supermarkets have a large fresh produce section. Consumption of imported ready foods is expanding in urban areas as income per capita increases. Remittances from overseas relatives account for $4.5 billion annually, much of which is spent on consumer goods. These remittances as well as parcels of western food products sent to relatives, has contributed to the acceptance and demand for western style packaged foods (UDSA 2008c).

Increasing numbers of consumers prefer the supermarket shopping experience that offers discounted prices, quality, air conditioning and other entertainment (USDA, 2008c). Despite this, Vietnam is a low per capita income country and consumer buying decisions are largely based on price. (Euromonitor, 2008g).

Food Retailing in Asia DPI Agribusiness Group 29 Vietnam

7.8 Future Outlook Vietnam has enjoyed strong economic growth and rising international tourist arrivals, with Vietnam forecast to be among the world's top ten tourist destinations by 2016. An estimated 4.2 million foreign tourists visited the Vietnam in 2007 (Euromonitor, 2008f). The modern retail sector is expected to expand at the rate of 20% per annum over the next five years. With the modern grocery retail sector still developing, further reforms will see an increase in totally foreign-owned retail outlets and franchises being established. This will lead to more formats, aggressive sales and an increase in imported foods. Strong economic growth, rising income levels and a young consumer base will be the driving force of the modern retail sector in urban areas over the next five years. The tourist industry is also growing at an average 10% per annum (USDA, 2008c).

Food Retailing in Asia DPI Agribusiness Group 30

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Food Retailing in Asia DPI Agribusiness Group 31

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Food Retailing in Asia DPI Agribusiness Group 32

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Euromonitor International 2009a ‘Consumer Trends in the Philippines accessed 30 April 2009’ http://www.portal.euromonitor.com/passport/Magazine.aspx

DPI, 2009, ‘Victorian Food and Fibre Export Performance 2008, Department of Primary Industries. The State of Victoria.

FAS Worldwide, 2005 ‘The Philippines: A Stout Market with Room to Grow’ accessed 17 July 2008, http://www.fas.usda.gov/info/fasworldwide/2005/09-2005/Philippinesfood&bev.pdf

Infoplease.com 2008 ‘Map of the Philippines’ accessed on 16 July 2008 http://www.infoplease.com/atlas/country/philippines.html

Planet Retail 2008e ‘Grocery Retailing in Philippines accessed 17 July 2008, http://www.planetretail.net/

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USDA 2008b ‘Philippines Exporter Guide Annual, 2008’ accessed 20 July 2008, http://www.fas.usda.gov/scriptsw/AttacheRep/attache_lout.asp

Singapore

Austrade 2007d ‘Food and Beverage to Singapore’ accessed 12 December 2007 www.austrade.gov.au/food-and-beverage-to-Singapore/default.aspx

Business Victoria, 2008 ‘Free Trade Agreements: Singapore Australia FTA’. accessed 22 July 2008, http://www.business.vic.gov.au/BUSVIC/STANDARD//pc=PC_60941.html#IntNav3

DFAT, 2008a ‘Singapore Country Brief’ accessed 22 July 2008, http://www.dfat.gov.au/geo/singapore/singapore_country_brief.html

DPI 2009 ‘Victorian Food and Fibre Export Performance 2008, The Department of Primary Industries. The State of Victoria.

Euromonitor International 2009 ‘Consumer lifestyles in Singapore, accessed 15 April 2009, http://www.portal.euromonitor.com/passport/ResultsList.aspx

Lonely Planet 2008 ‘Map of Singapore’ accessed 22 July 2008, http://www.lonelyplanet.com/maps/asia/singapore

Planet Retail 2008f ‘Grocery Retailing in Singapore accessed 17 July 2008, http://www.planetretail.net/

STB 2008 ‘Singapore Tourism Annual Report 2007-08’ accessed 15 December 2008, http://app.stb.gov.sg/asp/new/new03a.asp?id=8203

USDA 2007e ‘Singapore Retail Food Sector 2007’ Gain Report No. SN7012 accessed 12 December 2007 http://www.fas.usda.gov/scriptsw/attacherep/attache_lout.asp

Vietnam

CIA Maps 2008d, The World Fact Book, accessed https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html

DFAT 2008b ‘Vietnam Economic and Trade Information’ accessed 15 December 2008, http://www.dfat.gov.au/geo/vietnam/vietnam_brief.html

DPI, 2009, ‘Victorian Food and Fibre Export Performance 2008, Department of Primary Industries. The State of Victoria.

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Euromonitor International 2008f ‘ Tourist Industry’, accessed 15 December 2008, http://www.portal.euromonitor.com/passport/ResultsList.aspx

Euromonitor International 2008g ‘Retailing Vietnam’, accessed 15 December 2008, http://www.portal.euromonitor.com/portal/server.pt?control=SetCommunity&Communit yID=210&PageID=726&cached=false&space=CommunityPage

Planet Retail 2008g ‘Grocery Retailing in Vietnam’, e-intelligence on global retailing, accessed 15 December 2008, http://www.Planetretail.net/markets

USDA 2007f ‘Vietnam Retail Food Sector Report, 2007’, Gain Report Number VM7086, USDA GAIN Report VM7086, accessed 25 November 2008, http://www.fas.usda.gov/gainfiles/200711/146293084.pdf

USDA 2008c ‘Vietnam Retail Food Sector 2008’ Gain Report No. VM8083, accessed 25 November 2008, http://www.fas.usda.gov/scriptsw/attacherep/attache_lout.asp

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